On Dividends -- April 16, 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. 

I'm running out of time this morning so I will come back to these two stories later. 

First, dividend stocks are out of favor, but here are nineteen that Wall Street loves, including CVX and WMB. Link to MarketWatch.

Williams Cos. Inc. and Chevron Corp. provide some insight into what has gone on in energy during the COVID-19 pandemic. 

Williams is an oil refiner and pipeline operator, while Chevron is an integrated oil company. It was not surprising to see both drop as fuel demand cratered during the pandemic’s most painful period for financial markets. 

But 20/20 hindsight makes the stocks’ declines appear to be overreactions. Williams came roaring back, producing a return of only -8% in 2020. The stock is up 20% so far in 2021. 

Chevron was down 26% in 2020 and has returned 24% so far in 2021. Analysts see plenty of price upside for both companies — and that excludes the dividends. 

Second, a reminder: a dividend aristocrat on sale -- AbbVie. Think Humira.

Heart drug Lipitor is the biggest-selling drug of all time. Perhaps no surprise to dedicated pharma-watchers, who know the statin med still racks up blockbuster-level sales despite years of generic competition.

It won't hold that crown for much longer, though. AbbVie's Humira is set to steal it away—and remain history's biggest-selling drug at least through 2024. Lifetime total by then? A whopping $240 billion. [AbbVie's Humira goes off-patent in 2023, and every Tom, Dick, and Harry will start to manufacture it.]

That fact may not be all that surprising, either. But as generics continue to bite and biosimilars begin to rear their heads, the current set of all-stars is in for a shuffle over the next five years, according to estimates tallied by Evaluate Pharma.In both cases, the articles bring up points that have nothing to do with investing or dividends. They are simply interesting stories for other reason.

I will have to go back and look, I've long forgotten but I put Lipitor in "old" biotechnology; Humira in "new" biotechnology. 

The Covid-19 vaccine research will morph into "Star Trek" biotechnology. It was research into an Ebola virus vaccine that led to the success of the Covid-19 vaccine. Interestingly enough, an Ebola virus vaccine was never marketed; that research was done under pre-Trumpian thinking.

[Ronald Reagan brought us a "Star Wars" military-industrial complex. Donald Trump brought us "Star Trek" biotechnology.]

We are now back to pre-Trumpian thinking with the new administration but there is one difference. The "horse has left the barn" as they say. 

By the way, that was the same thing that happened with regard to fracking, which we discussed years ago. Wow, the synapses are firing today. Chaos.

Masks Vs Deaths -- Another Look -- April 16, 2021

Graphic of the day, sent to me by a reader early this morning.

The reader noted that moments after sending me this graphic it was announced that the governor of New Hampshire (whose name I cannot spell due to too many "u's" and "n's") has just ended the mask mandate for state, immediately.

By the way, with regard to the graphic above, there's another point being made that may not be immediately obvious.

And until 2025, this graphic cannot be posted too many times:

Bakken Production -- February, 2021 -- The Director's Cut -- A Closer Look -- April 16, 2021

Take another look at the February data at the Director's Cut that was posted yesterday. 

First, this:

Crude oil production:

• February, 2021: 1,083,020 bopd (prliminary)
  
• January, 2021: 1,147,374 (preliminary); 1,147,377 (final)
  
• December: 1,192,145 (preliminary); 1,191,429 bopd (final)
  
• November: 1,224,540 (preliminary); 1,227,138 bopd (final)
  
• October: 1,222,871 bopd (preliminary); 1,231,048 bopd (final)
  
• delta:  -64,357 bopd (this is interesting
  
• delta:  -5.6%
  

Now, this:

Number of producing wells:

• February, 2021: 15,773 (preliminary)
• January, 2021: 15,861 (revised)
• December, 2020: 15,798 (preliminary -- I forgot to update it)
• November, 2020: 15,601 (preliminary -- I forgot to update it)
• October, 2020: 15,512 (preliminary); 15,524 (final)

In addition to whatever observations / thoughts you have with regard to the data above, be sure to ask this one question:

• with WTI at recent highs, and with more than adequate takeaway capacity (DAPL is not yet shut down) why did operators take so many producing wells off line (no, this is not likely the result of weather, although I could be wrong on that)?
• number of producing wells dropped by 5.6%

From the NDIC, historical monthly oil production statistics:

• First column: Year
• Second column: Month
• Third column: BBLS oil, total for the month
• Fourth column: daily oil, bbls
• Fifth column: number of wells that were actively producing (includes all ND wells, not just Bakken wells)
• Sixth column: bbls of oil per producing well, average, for the entire month
• Seventh (last column): bbls of oil per producing well, on average, on a daily basis;

With regard to DUCs, no analysis is possible until we get to summer.

A Reader Responds -- April 16, 2021

Yesterday I played "devil's advocate" with regard to The Financial Times story on US shale operators dying on the vine.

A reader responded. I will respond to the reader's response below -- to suggest what this means for those who are curious how I see the reader's very insightful, very prescient comments. 

The following was edited slightly for formatting. If there are typographical and/or content errors, they are mine, not the readers, which occurred during my editing:

I had finished poring over the just-released Pennsylvania production numbers for February (most recent) before turning to your blog.

To "cut to the chase," several smaller "No-Name" companies - all privately owned - continue to post exceptionally strong numbers  from their smallish land holdings. [Connect this line to the concluding statement by the reader.]

My "in-a-nutshell" appraisal ...

Yes, many moneyed people/institutions are about at the end of their rope looking at these monthly figures while simultaneously seeing no financial returns coming their way. 

Yes, it would not surprise me that many private companies have been drilling/producing at a fast pace these past 2 years in order to show the Big Boys just how good their potential is.

However ... for those of us looking at the Bigger Picture, this might be what to expect in the coming years:

• higher pricing for raw hydrocarbons. ~$70 WTI and ~$3/$3.25 Henry Hub (HH) might be a reasonable assumption.
• this assumption is completely meaningless in the Real World as both you and I know things change with blinding speed.
• (the mere fact that ongoing attacks on Saudi infrastructure and a not-so-low-grade war taking place in the Middle have clearly shown no impact on global pricing is SO far removed from our historical experience as to make future prognostications groundless).
• abundant hydrocarbon resources available for decades to come with remaining US producers doing very well.
• fringier areas in the current basins will be developed by tenacious, risk taking Little Guys as the hardware, technology, and proven processes will be employed to 'wring out' every viable barrel, every cubic foot of hydrocarbons
• if/when prices spike upwards (even temporarily) - say, in the ~$90/$100 bbld range - new plays will be exploited.
• these include - but are not limited to - the Powder River Basin, the Tuscaloosa Marine Shale, the Uinta, the Rogersville, and more
• artificial lift and re-frac'ing technologies will continue to improve so as to upend the standard, current production profiles of many of today's  wells
• no one talks about EOR anymore, but there are over a half dozen projects taking place right now with publicised results expected in the next year or two.
• a much higher recovery factor is practically guaranteed, but no operator wants to tout that even MORE oil will be coming to market.

I could go on, but I will stop right there with one recent comparison ... the frenzied boom related to the Dot Bomb phenomenon 20 years ago.

 

Bill Gates said, (2004/5 timeframe, IIRC), that, yes, an over-exuberant atmosphere drew in hundreds of billions of dollars that did not offer a positive financial return.

 

However, Gates continued, a new, paradigm-shattering framework was put into place whereby this new fangled Internet thingy would exert a profound influence across the globe.

This is what Harold, Mark Papa, Aubrey McClendon, et al have bequeathed to the world.

Wow, that's a great note. 

Notes And Comment -- Early Morning Note -- April 16, 2021

First things first: a huge apology to a reader for my delay in responding to his very insightful e-mail he sent me yesterday. I haven't forgotten. I will get to it today! I promise. That reader is perhaps the most insightful reader I have when it comes to the shale revolution; his experience is in natural gas in the northeast but sometimes I think he understands the Bakken better than I (do). He is certainly more exuberant about the science than even I am. And that's saying a lot.

So much going on today. I thought it was Saturday and was going to sleep in. That's why I'm behind in blogging this morning. 

So much to cover:

• the buzz today: the EV companies, with regard to the market, are doing very, very poorly; "a stunning fall from grace." They must be reading the blog -- I just posted a note on EVs yesterday that "explained" this
• masks and deaths per capita: a reader sent me a  most interesting chart. I will post it later; as soon as he saw the graph, the governor of New Hampshire removed the state's mask mandate -- at least that's what the reader who sent me the graphic suggested;
• ten-year treasury: not trading as "experts" expected
• US markets: on the way to more records; YOLO has morphed to FOMO;
• a BofA "talking head" suggested the US GDP is running at 10% and that rate of growth will continue for quite some time, although maybe not quite that high, and there will be "ankle-biters" that will pull the GDP down. By the way, the huge deficit / debt (whatever) will cut the GDP as much as 0.8%. Really? Really. 
• Dow and S&P hit another record today. I can't keep up.
• COMCAST: share price target raised. Whoo-hoo! 
• re-iterating: I see no comparison between 1920s and 2020s; the 2021 - 2026 looks a lot more like 1949 - 1965; and, yes, the time-span "discrepancy" is incredibly important to note. Link here.
  

***********************************
Back to the Bakken

Director's Cut: production numbers for February -- overnight I just noticed something that no one has yet talked about; see post here.

Slawson is back! What it means for the Bakken. Maybe later. 

Active rigs:

$63.39	4/16/2021	04/16/2020	04/16/2019	04/16/2018	04/16/2017
Active Rigs	17	33	65	59	51

Two wells coming off the confidential list -- Friday, April 16, 2021: 13 for the month, 13 for the quarter, 94 for the year:

• 37795, drl/NC, CLR, Carson Peak 14-35HSL1, Corral Creek, no production data,
• 37230, drl/NC, WPX, Patricia Kelly 2-1HS, Spotted Horn, no production data,

RBN Energy: reducing intentional releases of natural gas spurred by ESG objectives, regulations. Methane bad, natural gas good.

Methane, the primary component of natural gas, is the second-most-abundant greenhouse gas tied to human activity after carbon dioxide, and pound-for-pound has 25 times the heat-trapping potential of CO2. We also know that a considerable portion of methane emissions come from the oil and gas industry, not just from leaks but from intentional releases such as “blowdowns,” when operators vent natural gas into the atmosphere to relieve pressure in the pipe and allow maintenance, testing, and other work to take place. 

Sure, it would be better for the environment and most everybody involved if there was a way to capture natural gas instead of releasing it. (Spoiler alert: there is.) But what are the incentives for producers, pipeline owners, or local distribution companies invest in a solution? Today, we consider what midstreamers, transmission operators, and LDCs can do to minimize blowdowns.