Notes From All Over -- Early Morning Edition -- January 21, 2021

Early trading. 

AA: oh-oh. Down almost 10% day after new CEO/CIC for the US is sworn in. Repeat: down almost 10% one day later. Wasn't Alcoa a bellwether some years ago? I wonder who uses a lot of aluminum these days? I know I flew back from Portland, OR, to DFW, two nights ago in what appeared to be an aluminum tube.

BKR: has changed its ticker symbol so often in the past few years, I assume a lot of folks have lost track of it. Baker Hughes, then Baker-GE, now just Baker. Who knows? Maybe soon WBKR: "where's Baker?" But it's on a tear today. Was up even more earlier this morning, but now up 1.34%.

UNP: investors not happy with earnings report provided this morning. Down a whopping $8/share -- about 3.5%. Buying opportunity.

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

Pipelines: sort of a mixed bag. Investors are weighing impact of killing the Keystone XL.

Airlines: I think they are in deeper trouble than we are being told. CNBC's analyst on airlines puts up a good front, but this a.m. seems a bit more sanguine on airlines. Look at UAL. This is not good at all. All airlines down this morning. Capacity in 1Q20 being reported at 50 - 60%. Even if Covid went away today, a lot of folks would prefer virtual meetings. 

UAL: not unexpected. Posted a $2.1 billion 4Q20 loss, its fourth-in-a-row; issued a tepid near-term forecast. Down another 5% today. Trading at $42.75. 

TGT: up $5.10; up almost 3%.

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Remote Learning And Banana Bread

In a few minutes Sophia will begin her "remote learning" day with me (her school mornings are at her house with her mom and older sisters; from 11:00 a.m. to 7:00 p.m. she is at our little apartment).

She will do remote learning on her Webex and Seesaw, and periodically she will turn off the Webex video (so she can't be seen) so she can prepare and bake her banana bread. The ingredients have been set out for her. 

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Crawdad Season

It's only January, but I'm already looking for crawdad season ... I think it begins in March. Two years ago, I went to the seafood restaurant and had crawdads ... twice. Last year, due to Covid-19, I ordered crawdads from two different restaurants and had crawdads eight times. This year, I hope to double that. I got started late last year. So, yes, Covid-19 has changed my habits, and even when Covid-19 goes away and life gets back to normal, I will do the same. I save about 50% on total lunch of crawdads because I order only crawdads from the restaurants. Sides and drinks are already here at the house and are essentially "free" compared to what those sides and drinks would cost me at the restaurant. Plus the dollars in tips saved. It's quite amazing. And since most folks in my extended family doesn't care for crawdads, they don't have to come to the restaurant, order something else, while I have crawdads. I have crawdads at home and they have their dinner. 

And no haircut in the past year. At $20/haircut, twice a month .... well, do the math ...

And gasoline? The last time I filled up with gasoline for my little Honda Civic was December 13th, 2020. 

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The Next Best Big Thing
From The Perspective Of A Six Year Old

Sophia asked me to write this note and give it to her director at TutorTime. After "remote learning," Sophia goes to TutorTime for her after-school program, 3:00 p.m. to 5:00 p.m. I telephone Sophia before I pick her up each day about 5:00 p.m. to see when she wants to be picked up. When I call the center, the director transfers the call directly to Sophia's room and her teacher hands the telephone to Sophia. It's complicated. 

So, Sophia had a better idea, until she's allowed to have her own Apple Watch:

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Bad News, Good News, Really Bad News

Bad news: yesterday, US set a new record for number of Covid-19 related deaths. This will improve once the administration issues new criteria defining "Covid-19-related" deaths. Of course, the best thing the government could do would be to impose a $35,000 administration-compliance fee on any physician who lists cause of death as "Covid-related."

Good news: yesterday, number of new cases below 200,000, continuing that trend set in the previous administration. Expect this number to fall precipitously as government mandates less sensitive testing. 

Really bad news: Dr Fauci will take on a bigger role in policy development. Look for:

• TM: triple masking; with quadruple masking for GOP in the US Senate
  
• MMIP: mandated masks in public
• BBB: masks must carry "Bring Back Better" logo
• Slow down the vaccination rollout; need to get it right; bureaucracies need to be in control; avoid pushing vaccination too quickly; could lead to unforeseen problems
• establish new cabinet-level agency: Department of Pandemic Affairs, patterned after the VA 
  

Whoo-Hoo! Enbridge To Benefit From Keystone XL Decision -- January 21, 2021

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

Link here.

Summary: 

• Biden is set to cancel the Keystone XL Presidential Permit, killing the entire project.
• TC Energy and the Canadian government tried to appeal, promising billions in renewable development and American jobs. Odds still appear low.
• Meanwhile, Enbridge is waiting from a corner, anxiously awaiting results. Its Mainline system is perhaps the largest beneficiary of Keystone XL cancellation.
• Because of this, it might not be a surprise to see management back off its request to shift to longer-term contracts on Mainline, instead sticking with spot shipments.

Narrative:

Enbridge, the owner of the Enbridge Mainline, is likely observing all of this with great interest. Its pipelines that cross the border, for all intents and purposes, have as close to a monopoly as one can manage to get. The majority of crude oil barrels that are sent south for use in US refineries - many of which require these heavier, sour grades to function - flow on Enbridge lines. Further, the Line 3 Replacement project effectively would increase that capacity and at this point, with all permits in hand, Enbridge should have smooth sailing ahead to completing all work, albeit all accomplished just mere months before the Trump - Biden transition. The firm is setting pretty.

The Line 3 Replacement, alongside Keystone XL and the Trans Mountain Expansion, have been key projects pitched to solve wide differentials. Competing pipelines have been an Enbridge worry for some time, and with the spectre of competition looming, Enbridge had begun to engage in some shenanigans.

To explain, for the entirety of its 70 years of operation, the Enbridge Mainline has operated in the spot market. Fully 100% of the network's capacity is available under monthly shipment contracts. If over allotted (as it has been quite often), prospective shippers receive a pro-rated allocation. These spot contracts give producers flexibility to secure volumes without locking themselves into expensive long-term commitments.

Those expensive long-term commitments are exactly what Enbridge wanted to shift to in recent years. Enbridge appealed to the Canada Energy Regulator ("CER") to do just that, conveniently when Keystone XL and the Trans Mountain Expansion prospects were looking great. In its defense, Enbridge has stated that it simply wants to mirror the contracts backing other projects and key long haul pipelines across North America, but investors should not kid themselves. Management is pursuing this change because it was in its best economic interest. Rather than see future Mainline volumes fluctuate (and thus cash flows as well), it wanted to get ahead of the upcoming competition, locking shippers into contracts now while there is a dearth of capacity. Canadian oil producers, including Canadian Natural Resources and countless others, rightly challenged the proposal.

Photos Per Reader's Request -- January 21, 2021

https://www.aljazeera.com/news/2021/1/20/graphics-trump-and-biden-inaugurations-compared.

 

Per a reader's request:

 

One Day Later; Completely Unexpected -- The Sun "Came Up" As Usual -- January 21, 2021

First things first: housing numbers came in a whole lot better than expected. The market apparently didn't care. In early morning trading the S&P 500 and Dow are down slightly; NASDAQ is up a bit. 

Most fun: listening to the narrative on the Chinese flu changing. Even CNBC is starting to tell us what we already knew. Over at twitter, folks are starting to say the pandemic is quickly coming to an end.  Link here.

Operation All Clear: all that chatter about 100 million vaccinations in his first 100 days. LOL. Trump was already averaging one million vaccinations/day over each of the five days prior to the inauguration. In fact, if they only achieve 100 million vaccinations in 100 days it will be a "FAIL." They set the bar so low a cave man could do it.

Jobless claims: did anyone really get up early to see those numbers? LOL.

Portland: more protests overnight. Apparently sad to see Trump leave. Hard to believe that Portland used tear gas in a long, long time -- first night of Biden's administration. 

UNP: most important news that we will get today. At opening, UNP falls 2%, falls over $4/share. Reports EPS of $2.05 and revenue of $1.4 billion. But adjusted, earnings were $2.36. So hard to say. Forecast: $2.23. Bottom line: at best: in line. At worst: not as good as expected.

Baker Hughes: on the other hand, BKR is on a tear: up almost 4% at one point. Currently up77 cents/share.

ECB: "central rate" unchanged. Says economy "probably" contracted. EURO has strengthened against US dollar.  

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

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Back to the Bakken

Active rigs:

$53.06	1/21/2021	01/21/2020	01/21/2019	01/21/2018	01/21/2017
Active Rigs	12	53	67	58	38

One well coming off the confidential list -- Thursday, January 21, 2021: 31 for the month, 31 for the quarter, 31 for the year.

• 37505, loc/NC, CLR, Miles 11-6H2,Dimmick Lake,
  

RBN Energy: Mexico Pacific Ltd.'s LNG export project in Puerto Libertad.

There are no absolute certainties in the energy industry, but one thing a lot of people are betting on is increasing demand for LNG in Asia. A long list of countries there — China, Japan, and South Korea among them — have been shifting from nuclear and coal-fired power generation to natural gas, and as they do, their demand for LNG will be mind-blowing. The U.S. has emerged as a major supplier, but shipping LNG from the Gulf Coast to Asia involves either transiting the busy and costly Panama Canal or taking much longer routes through the Suez Canal or around the Cape of Good Hope. All of that has helped spur interest in developing LNG export terminals in western Mexico that would pipe in and liquefy Permian gas, then ship it straight across the Pacific Ocean. Today, we discuss plans for a large-scale liquefaction/export project aimed squarely at Asian buyers.

January 21, 2021

 

Link here.