Broadcom (AVGO) -- September 4, 2025

Locator: 49015AVGO.

Updates

September 6, 2025: ChatGPT says the $10 billion most assuredly came from OpenAI and most assuredly NOT from Apple. 

Later, 6:51 p.m. CT: Broadcom (AVGO) "popped" on $10-billion customer. Link here. There are several story lines here for investors, but I'm traveling and don't have time. Quick: name a company with deep pockets -- who could easily afford $10 billion -- and a company that is very, very secretive, and a company that already has a very, very close relationship with Broadcom. [Regardless, Sophia is going to get a new pair of shoes this weekend. LOL.]

Original Post

GDPNow: 3.0 estimate for 3Q25; released today. Though 3.0 is still strong, it's been trending down.

AVGO
Broadcom (AVGO)
3Q25 Earings

Link here.

Avgo reported strong third-quarter fiscal 2025 results, with record revenue and adjusted earnings that topped analyst expectations. The positive results were fueled by surging demand for AI products, custom AI accelerators, and a growing infrastructure software business, though the stock saw a slight dip in extended trading.

Third-quarter financial highlights:

• Record Revenue: Broadcom reported revenue of $15.95 billion, a 22% increase year-over-year, and exceeded analyst estimates of $15.83 billion.
• AI Revenue Jump: The company's AI-related revenue surged 63% year-over-year to $5.2 billion, driven by custom AI chips and AI networking solutions.
• Adjusted Earnings Beat: Adjusted earnings per share (EPS) came in at $1.69, surpassing the consensus estimate of $1.66 and representing a 36.3% increase from the year-ago quarter. Infrastructure Software Growth: The infrastructure software segment, which includes VMware, accounted for 44% of sales and saw continued momentum.

Key growth drivers:

• Accelerated AI Demand: CEO Hock Tan highlighted the strength of AI semiconductor solutions, including custom AI accelerators and networking products, as the primary driver of growth.
• Hyperscaler Investment: The company is benefiting from ongoing investments in AI by large cloud computing companies like Alphabet and Meta.
• VMware Integration: The strategic acquisition and integration of VMware have significantly boosted Broadcom's infrastructure software business.

Business outlook and market reaction:

• Strong Guidance: Looking ahead to the fourth quarter of fiscal 2025, Broadcom projected revenue of approximately $17.4 billion, exceeding expectations.
• Market Skepticism: Despite beating estimates, the stock slipped in extended trading. This may be due to high investor expectations, following a significant rally in Broadcom's share price over the past year.
• Industry Context: The slight negative market reaction follows a similar trend seen with other AI chipmakers like Nvidia and Marvell Technology, whose stocks experienced short-term pullbacks after strong earnings reports.

Ticker:

Thursday -- September 4, 2025

Locator: 49014B.

AI: tokens and emojis. If I can figure out how to articulate what I'm thinking I'll talk about this later. It was an a-ha moment for me when talking to my tech-brilliant brother-in-law. 

Jobs: link here. I was really wrong. I was convinced for the past year that there would be no rate cuts in calendar year 2025. Now, the question is how many and how much by the end of the year. Remember: We're now talking about JPow's legacy.

Donald Trump: link here. Does this guy ever sleep? 24/7. He must be having the time of his life.

Natural gas, link here:

Natural gas: see today's "early access" RBN Energy blog. Down below.

Wi-Fi Air: link here. Wow, Amazon's Project Kuiper and T-Mobile. There are different definitions / reasons for moats. In the "tech" world there are two moats: a) deep pockets; and, b) a CEO with a strategic vision.

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Back to the Bakken

WTI: $63.17.

New wells:

• Friday, September 5, 2025: 8 for the month, 101 for the quarter, 541 for the year, 

  • 40503, conf, Hess, GO-Foss Fam TRST-156-97-2314H-4,
  • 36719, conf, Enerplus, Fort Berthold 148-94-19C-18-6H,
  • 36718, conf, Enerplus, Fort Berthold 148-94-19C-18-7H,
• Thursday, September 4, 2025: 5 for the month, 98 for the quarter, 538 for the year,  
• 40652, conf, Oasis, Lake Trenton Federal 5302 21-31 3B,

RBN Energy: forecasting Texas / Louisiana data center demand for natural gas. Archived.

Which is true, A or B? (A) Data center demand to power AI applications is the most transformative force to hit energy markets in years, or (B) This is one of the most overhyped, inflated narratives ever. We hear a constant stream of announcements, promotions and proclamations from developers, tech giants, utilities and politicians, many predicting a revolutionary surge in electricity and gas demand that will change everything. At the same time, others warn of a speculative bubble destined to pop. As we discuss in today’s RBN blog, sorting out which side is closer to reality is one of the most important questions facing U.S. energy markets. 

Hump Day -- September 3, 2025

Locator: 49013B.

The Winnipeg: link here.

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Back to the Bakken

WTI: $64.54.

New wells:

• Thursday, September 4, 2025: 5 for the month, 98 for the quarter, 538 for the year, 
• 40652, conf, Oasis, Lake Trenton Federal 5302 21-31 3B,
• Wednesday, September 3, 2025: 4 for the month, 97 for the quarter, 537 for the year,
• 41176, conf, KODA Resources, Amber 1435-5BH,

RBN Energy: US E&Ps tilt cash allocation to maintain solid balance sheets as cash flows in. 

For most of us, matching spending with income is the logical path to financial stability. However, after decades of aggressive investment in search of growth, the “dollars in equals dollars out” method of allocating free cash flow has been an adjustment for many U.S. oil and gas producers. Their post-pandemic concentration on keeping capital spending well below inflows, maintaining healthy leverage ratios and directing excess funds to reward shareholders with dividends and stock buybacks has revitalized the industry and restored investor confidence. But ebbing commodity prices have upped the difficulty of this quarterly zero-sum game. In today’s RBN blog, we will analyze the shifts detected in Q2 2025 cash allocation of the 38 major U.S. E&Ps we cover.

As we explained earlier this summer in Mission: Impossible, higher free cash flows from increased commodity prices allowed producers to boost dividends and maintain an elevated level of share repurchases in Q1 2025. Producers funded a hefty $4.6 billion in net acquisition spending while cutting capital investment budgets by 4% to a near-term low 56% of free cash flow. Our universe of E&Ps maintained modest debt repayment and added $376 million to its cash balances.

However, as recently outlined in Wrong Road Again, commodity prices retreated sharply in Q2 2025. The E&P companies we track generated $25.5 billion in cash flow from operations (CFOA), down 12% from $28.9 billion in the prior quarter. Organic capital investment totaled $17.8 billion, yielding a 70% reinvestment rate (dark-blue bar in Capex grouping in Figure 1 below), a five-year high, and generated $7.7 billion in free cash flow (FCF), down from $12.9 billion in Q1 2025. In response, producers slashed Q2 2025 net acquisition spending to $2.2 billion, or 9% of CFOA (dark-blue bar in Acquisition grouping), less than half the acquisition outlays in Q1 2025 (green bar). Share repurchases continued their slide, falling to 10% of CFOA in Q2 2025 (dark-blue bar in Share Repurchases grouping), down from the peak of 17% in 2022 (gray bar). The approximately $2.5 billion in lower M&A spending and $1 billion shaved off buybacks largely offset the decline in CFOA.

Figure 1. E&P Cash Allocation, 2020-Q2 2025.

Source: Oil & Gas Financial Analytics, LLC

One key decision made by producers was to sustain the level of dividend payments as best they could quarter over quarter, despite the lower commodity realizations. And to that end, the cash allocated to dividends was only $100 million lower at $3.5 billion in Q2 2025. A second key decision by E&P managements involved the critical issue of maintaining solid balance sheets in the face of declining cash flows. While some companies dipped modestly into their credit lines to fund acquisitions over the last two years, management decided to draw the line in Q2 2025. Net debt repayments accelerated as $2.2 billion was paid down in Q2 2025; that equaled 11% of CFOA (dark-blue bar in Debt Repayments grouping), far above the amount paid off in Q1 2025 (green bar). As a result, the average debt-to-capital ratio dipped to a five-year-low 24.5% in Q2 2025 (blue bar to far right in Figure 2 below) from a high near 40% in 2020. 

Winnipeg Formation -- A Much Deeper Formation Than The Bakken -- September 3, 2025

Locator: 49012WINNIPEG.

Depth:

• deeper than the Red River, but not all that much deeper
• CLR has a lot of experience in the Red River
  
• shallow to the Deadwood
• age: 450 million years old
• age of dinosaurs:
  
• 245 to 66 million years ago.

Description:

The Winnipeg Formation in North Dakota has had limited and predominantly gas-focused production, with most of the oil coming from the Black Island Formation, a basal sandstone member of the Winnipeg Group. While there are some oil and gas shows in the Winnipeg, only 18 wells produced from it, resulting in over 200,000 barrels of oil equivalent (BOE) and over 115 billion cubic feet of dry gas. 

• The Black Island Formation is interpreted as a secondary source rock, while the Icebox Formation within the Winnipeg Group is considered a primary source rock. 
• Winnipeg Formation in North Dakota Members: 
• The Winnipeg Formation is generally divided into three members: 
• a basal sandstone (the Black Island Formation), 
• the Winnipeg shale, and, 
• a transitional upper member (sometimes called the Roughlock Formation). 
• Shale Member: 
• The Icebox (or Roughlock) Formation is a shale that acts as a source rock for oil and gas within the Williston Basin. 
• Sandstone Member: 
• The Black Island Formation, primarily a quartz arenite, has served as a reservoir, though it is primarily a gas-prone reservoir, according to the North Dakota Geological Survey. 
• Oil and Gas Production Focus: 
• Production from the Winnipeg 
• Formation has been predominantly from the Black Island sandstone and the overlying Deadwood Formation, notes the North Dakota Geological Survey. 
• Plays: 
• The formation has been explored as a potential play in the deeper Williston Basin, including a recent well in Divide County in 2024 by Continental Resources. 
• Limited Success: 
• Despite exploration efforts, the Winnipeg Formation has not been a major source of oil in North Dakota. 
• Geological Context Source Rocks: 
• The organic-rich shales of the Icebox Formation (Winnipeg Group) are considered the primary source of oil and gas, according to the USGS. 
• Migration: 
• Oil and gas generated from these source rocks have migrated into reservoirs such as the Winnipeg sandstones

From ChatGPT: not particularly helpful.

No data on the recent CLR well, a two-mile lateral. Still close hold but no evidence that it was a notable well.

From a reader, thank you very much:

Google Antitrust -- Long Awaited Ruling -- September 3, 2025

Locator: 49011AAPL.

Tag: AAPL, Apple, Google, GOOG.

This morning, September 3, 2025, at the open: 

Last night, just after midnight, about eight hours before the open: