Wednesday, May 4, 2022

When Will They Learn -- LNG -- May 4, 2022

I don't even know what to say. Link here.

Houston-based Cheniere Energy Inc reported an unexpected Q1 loss, but bumped its full-year profit forecast by 17% in its earnings release Wednesday, on the back of soaring LNG demand and natural gas prices.

The largest LNG exporter in the United States, Cheniere reported earnings up to $8.7 billion before interest, taxes, depreciation and amortization. That represents a $1.2-billion increase over analyst estimates from Bloomberg.

Despite the stellar guidance, Cheniere’s reported a net loss of $865 million ($3.41 per share) for the quarter, compared with a profit of $393 million ($1.54 per share) in the same period a year ago.


Analysts had been expecting the reverse–earnings of $3.51/share.

According to Cheniere, the company lost significantly on commodity derivative instruments indexed to international LNG prices and LNG margins were not enough to offset the loss.

“While operationally we seek to eliminate commodity risk by utilising derivatives to mitigate price volatility for commodities procured or sold over a period of time, as a result of the significant appreciation in forward international LNG commodity curves during the quarter, we incurred approximately $3.1bn of non-cash unfavorable changes in fair value attributed to positions indexed to such prices,” Cheniere said.

You have to be pretty special to pull this off.

April Jobs Data — With Seven Million New Hires, Still Twelve Million Job Openings -- May 4, 2022

Stagflation: three components:

  • high inflation;
  • low growth;
  • high unemployment

The jobs numbers today: April, 2022, private payrolls --

  • rose, but rose less-than-expected
  • a rose by any other name is still a rose

Despite these discrepancies, the underlying trend amid the plethora of recent labor market data has been clear: the U.S. labor market remains extremely tight, with demand for workers far outstripping supply. In March, job openings raced to a record high of more than 11.5 million, while new hires were little changed at 6.7 million. And these vacancies have persisted even after months of payroll growth coming in well above pre-pandemic trends. 

Right now, we don't have stagflation unless one wants to ignore jobs data. 

So:

  • 12 million job openings
  • new hires: 7 million

*****************************
April Automobiles

CAFE.

Ford: link here.

  • if SUVs are on pick-up truck chassis, Ford is a truck company, not a car company
  • April, 2022, sales
    • truck: 97K
    • SUV: 90K
    • car: 10K
  • EVs
    • Mustang Mach E: 2K
    • F-150 PowerBoost: 3.4K
    • Escape: 3.7K

GM vs Toyota. Toyota outsells GM.

"Killing The Keystone XL" Meme / Metonym Includes ESG Moratoriums -- May 4, 2022

Link here.

EIA Weekly Petroleum Report -- Surprise Crude Oil Build But Distillate Fuel Now 22% Below Five-Year Average; WTI Holds, Maybe Even Up A Bit -- May 4, 2022

Link here.

  • US crude oil in storage surprises everyone with an increased build of 1.3 million bbls, and now stands at 415.7 bbl, 15% below the five-year average -- wow!
    • looks like more room for another SPR release
  • US imported 6.3 million bopd, up by 397,000 bopd; the average of 6.0 million bopd is 3.3% greater than the same period last year (yawn)
  • US refiners are operating at --- they drop below 90% -- 88.4% of their operable capacity; what does that do to distillates?
  • distillate fuel inventories decreased by 2.3 million bbls; and are now 22% below their five-year average:
    • refiners need that heavy oil from Canada to produce distillate fuel
    • too bad the Keystone XL was killed. 
  • jet fuel supplied was up 28.2% compared with same four-week period last year
    gasoline demand will be posted later.

Maybe Biden's auditors can start here, link here:
 

Conspiracy theory:

  • API, non-government: huge drawdown yesterday; should drive prices higher all things being equal;
  • EIA, from Biden's government: a surprise build; all things being equal, should drive gasoline prices at the pump lower, which is what the Biden administration would like;
  • WTI price doesn't drop despite that EIA surprise build
  • here's the conspiracy theories: 
    • are traders thinking the same thing I'm thinking?
    • do you trust the API (non-government) numbers or do you trust the EIA (the Biden) numbers?
  • I've always gone with the EIA, but ...

WTI:

  • up about 4% today;
  • trading up $4.04 / bbl -- think about that -- up $4.04 / bbl
  • trading at $106.50

Which brings me to another topic: DUCs.

With WTI at $105 not one single drilled well should come off the confidential list as a DUC -- drilled but uncompleted.

This is like Tesla having all those $100,000/car orders and not being able to meet demand.

Oil companies must be seething. Drilling a well to completion, seeing $106.50 on the WTI ticker and unable to get the well fracked.

This is where analysts / experts and I part company.

It's  not the rig count that matters; it's the ability to get drilled wells completed. 

As long as I see one well in the Bakken coming off the confidential list as a DUC, it tells me we have "enough" rigs (don't take that out of context) but not enough frack spreads to complete the wells. 

Today, of the five wells coming off the confidential list (yesterday and today), only two reported production. The other three, by definition, are DUCs, although it's possible they aren't even drilled yet, I suppose, and then in that case, the additional rigs would be nice. So, to some / great extent I might be wrong but as long as I see DUCs, I see more need for frack spreads than more rigs.

Having said that, a number of great operators that should be drilling in the Bakken now are not drilling. 

The faux environmentalists would be happy: "Leave it in the ground."

In round numbers, I think less than a thousand wells will be drilled in the Bakken this calendar year, and there are about 500 Bakken DUCs.

Equinor Earnings -- Uff-Da -- May 4, 2022

Uff-da! Equinor pretty much hit a home run! 

  • production drops 3% y/y --
  • company must have been listening to faux environmentalists chanting "leave it in the ground."
  • operating income surges from $5.2 billion to $18.4 billion
  • net income surges from less than $2 billion to almost $5 billion

Barron's: Equinor posts record profit as natural gas prices soar in Europe. Link here.

The $18 billion result compared with a revised $4.1 billion a year earlier and beat the $17.1 billion predicted in a company-compiled poll of 25 analysts.

$18 billion this quarter vs $4 billion a year ago! Whoo-hoo!