Market, Energy, Political Page, Part 4, T+61 -- April 30, 2018

Just plain wrong: if the Iranians are desperate to save the deal, it tells you how bad the deal really is. And remember, the deal was made by Obama. Scott Adams has a great periscope on the Iran deal. From CNBC:

• French President Emmanuel Macron and Iranian President Hassan Rouhani spoke by telephone on Sunday and agreed to work save the 2015 Iran nuclear agreement
• Macron and German Chancellor Angela Merkel were in Washington last week, tyring (sic) to persuade President Trump not to pull out of the Iran deal.
• Trump sees three defects in the agreement, and he's repeatedly threatened to tear up the 2015 accord. 

Things heating up in the Mideast. That's what the pundits say. How does one really know? Check the spot price of WTI. It's up 19 cents. Ho-hum.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or what you think you may have read here. If this is important to you, go to the source.

Disclaimer: I make a lot of simple arithmetic errors. I often see things that do not exist; I read quickly and miss important points. Sometimes it takes me days (maybe even weeks) to see where I was wrong.

Honduran caravan: already off the Drudge Report banner. Short-lived. If anyone has ever been through TSA at Chicago's O'Hare, one knows the ICE will manage the southern border just fine. But had it been me, I would have removed ICE from along the San Diego-Tijuana border; let Jerry Brown manage it. A few hundred additional Central Americans in southern California would hardly be a problem.

Wow, wow, wow! How many times have I discussed this on the blog. No matter how much or how little oil the Saudi's produce, their reserves have never changed. Until now. An international independent auditor says:

... the oil reserves of Saudi Aramco has more than confirmed the official figures released by Riyadh for three decades, putting the number at 270 billion barrels.

The figure may come as something of a surprise because for thirty years, Aramco has been reporting unchanged reserves of about 261 billion barrels despite active production. Yet barrels are not the only factor considered in an oil company’s valuation as Bloomberg Gadfly’s Liam Denning noted in an analysis earlier this year, even though they are an important indicator of the company’s long-term viability and profitability.

Comment: 270 is a nice round number. Easy to remember. But the number would have been more believable had the reserves come in at 274.3 billion bbls or maybe even 269.75 billion bbls.

Uruguay not invited to the dance: Uruguay's first oil auction in seven years failed to attract any bids.

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The "studio version" is available, but I wanted to "see" Emmylou. The video is of poor quality, but until I find a better version, here it is:

Save The Last Dance For Me, Emmylou Harris

I have no idea if there is any connection between New Mexico and Emmylou Harris but whenever I see her, she reminds me of New Mexico. Linda Ronstadt? Arizona, of course.

From wiki:

Harris is from a career military family. Her father, Walter Harris (1921-1993), was a Marine Corps officer, and her mother, Eugenia (1921-2014), was a wartime military wife. Her father was reported missing in action in Korea in 1952 and spent ten months as a prisoner of war.

Hmmm. 1952. Sixty-six years later. 

The Market, Energy, Political Page, Part 2, T+61 -- April 30, 2018

EOG update, Filloon: FWIW -- Mike Filloon updates EOG's well results in the Permian. Let's see how they compare to those in the Bakken, shall we? Summary:

• EOG's oil production improvements per well from 2016 to 2017 are muted when compared to other Delaware operators
• EOG's results are still better than most other operators, and decreased improvement could be due to the high bar set in 2016
• EOG still has the best well design in the industry, and results should be watched closely as it best provides insight into where the industry is headed

These results are simply incredible:

We pulled the data on 199 EOG Delaware Basin locations completed in 2017. This was done as a comparison to provide an idea of whether it has seen an improvement per location. It's best performing location was in Loving County. It produced 413 MBO in the first 6 months of well life. Over 20 locations model to more than 300 MBO in the first year of well life. These results are excellent, especially when we consider only 34 have a lateral length above 9,000 feet.

EOG: wow, back up to $118. 

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or what you think you may have read here. If this is important to you, go to the source.

Disclaimer: I make a lot of simple arithmetic errors. I often see things that do not exist; I read quickly and miss important points. Sometimes it takes me days (maybe even weeks) to see where I was wrong.

We'll sort this out later:

Here's the WSJ story: says it's a $23 billion deal. Deal values Andeavor at $152/share; roughly 25% premium.


And huge:

For long term investors: don't get hung up on individual "plays" you may have missed -- follow the story lines.  Do you really think that MPC is the only one that sees the future?

The Market, Energy, Political Page, Part 3, T+61 -- April 30, 2018

Road to New England: Bostonians see the light? Potential closure of Boston power plant raises new concerns. From The Concord Monitor.

The threat by the owner of a huge gas-fired power plant near Boston to shut down unless it can make more money selling its power has added more urgency to a long debate about how to maintain the stability of the region’s power grid during winter, and how to get the six New England states to share the expense.

“The big elephant in the room is cost allocation. We’ve already said that we think this is a cost that is regional in nature. ... This is an energy shortage problem during the winter, that will affect the whole region,” said Gordon van Welie, president of ISO New England, the quasi-governmental group that oversees the region’s electric transmission system. “No one’s going to escape the effects of the problem, and so therefore we think the region as a whole should pay for this problem.”

To ensure reliable fuel supplies for Units 8 and 9, plant owner and Exelon subsidiary Exelon Generation Co. LLC is also buying ENGIE North America Inc.'s Distrigas liquefied natural gas import terminal in Boston during the rest of their operations.

Comment: I thought wind and solar had solved all of the energy problems for New England.

Comment: Reality sucks.

Comment: the problem is not whether there will be enough energy for New England; it's a matter of how much the middle class will be squeezed by incredibly high utility rates going forward. But, no, Beacon Street won't go dark. And Bostonians won't freeze -- but they will pay dearly for heat and light.

Crazy:

Crazy, Gnarls Barkley

OPEC. Unable to strategize successfully? Bloomberg Gadfly makes the case.

OPEC's multi-year attempt to steer the oil market by focusing on inventory levels was always like trying to drive a car while looking only in the rear view mirror. The inventory data is historical and reflects what the market was like a month or more ago. By the time OPEC gets the data, the world has already moved on.

If you thought that was a bad idea, wait until you hear this. 

The most important metric for OPEC and its friends, according to Saudi oil minister Khalid Al-Falih, is the level of investment in future oil production capacity. Speaking after the group’s gathering in Jeddah on April 20, he said they all need to promote confidence in the long-term market in order to attract capital, not to target price.

The world needs to add 4 million to 5 million barrels a day of new production capacity each year to meet rising demand and offset declines, he said. The industry is far from reaching that goal.

Comment: the big story in that article -- The world needs to add 4 million to 5 million barrels a day of new production capacity each year to meet rising demand and offset declines. If that's accurate, that speaks volumes. 

$300 oil. So scary, the tweet was deleted:

The Market, Energy, Political Page, T+61 -- April 30, 2018 -- This Is An Incredible Amount Of Red

Wow, wow, wow. The market is incredible. Too much stuff going on. Again, only some very quick notes.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or what you think you may have read here. If this is important to you, go to the source.

Disclaimer: I make a lot of simple arithmetic errors. I often see things that do not exist; I read quickly and miss important points. Sometimes it takes me days (maybe even weeks) to see where I was wrong.

Biggest energy story of the week (so far): MPC (error corrected; reader noted error; thank you) buying Endeavor. The latter is a refining company. Used to be known as Tesoro. Pacific Northwest look more and more like a loser in the 21st century global economy.

Pending: Apple could make huge announcement tomorrow. This is what I posted January 20, 2018. From CNBC today:

• Apple's plan on how it will repatriate its cash hoard of $285 billion to America is expected to be revealed on the May 1 earnings call.
• the company will start buying back even more of its shares as a first step, analysts say. It's already purchased 22 percent of its outstanding shares since 2012.
• bringing Apple funds back stateside could result in a big boost to the company's dividend.

CAFE: EPA will try to thwart Obama's rules, California's rules on gas mileage. We've talked about this before. Will end up in court. Won't be resolved until after Trump's first (only?) term. Could be argued before the court just as gasoline prices spiking (again). Ford, Gm making strategic decisions now that could be fatal. Or incredibly rewarding.

Honda has "car of the year." Can't sell it to Americans -- don't want it. Americans want SUVs and pickup trucks. Tesla? Has lots and lots of sedans for sale S&3. No pickups yet, and the crossover is not doing well.

Sales of the Accord are down 12% in the first three months of the year compared with the corresponding period last year, when dealers were selling the old model. Meanwhile sales of its main competitor, Toyota Motor Corp.’s Camry, are up around 9%. That endangers Honda’s strategy of trying to grab a larger share of the shrinking sedan market and offset its inability to make enough sport-utility vehicles.

Comment: I see why: the Honda Civic competes directly with the Honda Accord, and in that arena, the Civic is better bang for the buck. Counter-intuitive.  Disclaimer: I love our Honda Civic.

Quality is not Job #1 for Tesla. If I remember, I will get back to this with a screenshot.

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Updates

May 2, 2018: chart at original post has been updated based on estimate from an analyst's estimate after the conference call:

The analyst's estimate:

The graph:

May 2, 2018: chart at original post has been updated based on information from letter released by Tesla when it released its 1Q18 earnings:

According to the letter:

Cash outflow from operating activities in Q1 2018 was $398 million primarily due to an increase in inventory and accounts receivable balances as a result of the timing of deliveries. Higher number of Model S and Model X vehicles in transit at the end of Q1 2018 compared to Q4 2017 had a negative impact of about $120 million on our working capital. Additionally, due to a substantial increase in our deliveries in the last few days of the quarter, our accounts receivables negatively impacted our operating cash flow by $169 million in Q1. Both of these factors provided cash inflows during April. 

Apparently the company has about $2.5 billion cash on hand, and is burning about $1 billion / quarter.

Original Post

Speaking of Tesla: burns cash, not fuel. Anyone following this story closely is amazed that Musk Melon has not yet announced another capital raise. The company needs $2 to $4 billion. Yesterday. Why has Musk not announced a new capital raise. The twitter folks think that the SEC won't allow the company to issue more common shares -- standard practice when a company is under SEC investigation. Don't know but it certainly makes sense. There's a story out there (if I find it again, I will link it) -- that Tesla doesn't have enough cash on hand to outlast the year (2018). Also, if true about SEC investigation, it explains why CFO, others jumped ship earlier this year. From Bloomberg:

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Nissan Rogue: speaking of cars, the Nissan Rogue may surprise folks this year.

Relativity: Korean peninsula is "old news" but photo op in June will be top story for the month. But the real story, now? The Mideast. Trump moves at speed of light -- relative to Congress, media, alt-left. The first country Trump visited after taking office -- Saudi Arabia. Saudi is facing an existential crisis. The prince listened carefully to what the Trumps wanted (Jared and Donald). #1 supporter for the Palestinians? Saudi Arabia. Now this: Palestinians need to take what the US offers -- Saudi Crown Prince.

Monday, April 30, 2018

Quick takes:

• Nobel: SoKo's Moon says Trump deserves the Nobel Peace Prize. The three that will share it -- Kim-Xi Moon. Pies.

• Korean summit: listening to NPR this morning, it's very clear the left (not just the alt-left) in our country will do what they can to derail the summit; scuttle success. It will be interesting if Scott Adams picks up on this.
• Mideast: everyone is focused on Iran. The story being missed: Palestinians. Trump, Israel and Saudi Arabia seem to be on same page. 
• Price of oil: forecasts all over the place -- some now saying oil will easily hit $100; could hit $300 (that tweet has been deleted, but a screenshot captured it). Others says price could collapse. 
• Oil supply / demand; the story for months -- too much supply; now, the story has changed -- too much demand; investors being played by the chatter.
• WHCD: will it play in Peoria? Nope. WHCD dead. Lack of civility -- reached new depths. It will be interesting if Scott Adams picks up on this. This is not how you persuade middle-of-the-roaders looking for reasons to vote against Trump. 
• Auto: environment changing fast. Ford, GM shutting down entire lines of sedans. Tesla is pretty much limited to sedans right now. 
• Most expensive driving season -- ever? Some are saying so. That may or may not be, but it will be close, and certainly makes no sense. All of a sudden folks are concerned about $68 oil when a) under previous administrations, oil hit $140/bbl or thereabouts; and, b) at one time, it was said that US shale couldn't survive on anything less than $70-oil.

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Back to the Bakken

Where Fracking Is Always In Fashion

Active rigs:

$67.34↓	4/30/2018	04/30/2017	04/30/2016	04/30/2015	04/30/2014
Active Rigs	62	49	29	86	187

RBN Energy: everything is UP! Crude oil prices up; crude oil and natural gas production up; but more midstream infrastructure needed.

Seems like just about everything to do with energy markets is up these days.  Crude oil prices are back to the levels of late 2014.  Crude production hit a 10.6 MMb/d record volume last week, while lower-48 natural gas has been bouncing around an 80 Bcf/d record level. Exports of crude, gas and NGLs are at all-time highs.  But all those hydrocarbon molecules must find their way from the wellhead to market.