Fifteen visuals: link here.
Monday, February 27, 2023
Tuesday, February 21, 2023
PARA - 4Q22
May 15, 2023: Motley Fool — risk.
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Investors race to buy nine dividend stocks still paying off, IBD.
Variety: PARA+ to hike prices; sets $1 billion+write-down on Showtime integration.
Bleeding Fool: hiking prices as income and subscriber base shrinks.
Yahoo!News: acquisition target.
Yahoo!News: PARA misses estimates, stock plunges.
The graphics from the links above, in no particular order:
Monday, February 20, 2023
DVN -- David Messler -- Is This Shale Giant A Buy After Earnings Miss?February 20, 2023
By David Messler - Feb 20, 2023, 6:00 PM CST
- Devon Energy was hammered after an earnings miss, dropping from $64 to $53 on the 15th.
- Investors who understand the continued importance of oil and gas to the world’s economy may have been handed a gift.
- Devon Energy has strong financials with especially an appetizing dividend payout and its share price drop could present an opportunity to scoop some up at a discount.
As expected, Devon Energy (NYSE:DVN) was hammered by the market on the release of earnings, which missed analysts' EPS estimates by $0.09 and modestly exceeded revenue by $6.6 mm. They then committed two unpardonable sins. First, raising the 2023 capex forecast range modestly for the year, which analysts view dimly these days. Second, the company raised the standard dividend to $0.20, but reduced the variable to $0.69, a 34% drop from the prior quarter. On a forward basis, this is a 6.2% YOC, which is not too shabby, but tell that to the analysts and the fund managers who follow them. All they saw was a QoQ cut, and cut their ratings on the stock.
Shares of Devon tanked on these two pieces of news. When combined with the rest of the macro downer news of the week-a massive crude inventory build (due in large part to refinery maintenance), and downward pressure on the futures curve from economic and interest rate worries, these moves spelled doom for the stock. Shares dropped from $64 to $53 60 during the trading session on the 15th and finished the week near there.Trading volume was nearly 10X normal, with 52 mm shares hitting the market and indicating the large funds were washing their hands of DVN. I think this is overdone and will discuss why in this article. Investors who understand the continued importance of oil and gas to the world’s economy have been handed a gift.
The thesis for DVN
I've discussed my core concepts in past OilPrice articles. The key attributes-rock quality, scale, logistics, management/technology, and low cost,
which a shale driller needs to have for a long-term future. 20 years
from now, thanks to some shrewd acquisitions in key basins, DVN will be
one of those companies. Beginning with WPX in 2021 and continuing with Validus in ‘22, with occasional "bolt-on" acreage adds in the Williston and another-Rimrock, also in the Williston, DVN has built a multi-basin platform that will enable organic growth for many years into the future.
With these acquisitions came Tier I inventory that provides “risked” drilling locations for a dozen years (4,500/400 per year), at $65 WTI, and $2.75 HH gas. Add to this figure, another 20 years of inventory with unrisked locations included, totaling 10,000.
Recent acquisitions discussed above will work to increase DVN's oil fraction for production and promote more income stability. Note how DVN takes care to point out the increase in oil fraction attributable to each acquisition. With 15K BOPD of production, the $885 mm upfront cost was recaptured in about 2-years, leaving decades of commercial life afterward. Noteworthy as well is the "fill-in-the-gap" aspect of the Rimrock acreage. This helps to connect other DVN acreage and enable the long laterals to increase production.
This speaks to strategy and is a compliment to management's vision to maximize the revenue potential for the product. In a similar but increased fashion the Validus pick up doubled production of an oily asset with a cost recapture in less than 2 years. Notable as well is the existing inventory of 500 derisked drill sites to maintain production.
CEO Rick Muncrief commented in the Devon, Q-4 2022 analyst call on the value gained in these transactions-
“We also supplemented per share growth in 2022 by deploying a portion of our excess cash toward taking advantage of unique M&A opportunities. These acquisitions in the Williston and Eagle Ford were highly complementary to our existing acreage, and we secured and met an attractive and accretive valuation and capture top-tier oil resource in the best part of these prolific fields.”
The WPX merger in 2020
Only three years ago Devon and WPX Energy, (NYSE: WPX) combined in a stock swap merger that essentially created the present Devon. The first slide below highlights the “bolt-on” aspect of the WPX acreage to existing Devon leaseholds.
’Importantly, we expect overall well productivity from this program to be very consistent with the high-quality wells we have brought online over the past few years.”
Energy analyst firm, RBN has noted in past articles the Delaware basin is gassy and getting gassier. Currently producing over 22 BCF/D, a roughly 30% increase over a couple of years ago.
Devon has developed a plan to ensure access to markets for their gas through investments in the Pin Oak export terminal in Corpus Christie and the buy-in for the proposed FLNG tanker with Delphin. Something we discussed in an OilPrice article last year. In the Q-4 analyst call, CEO Muncrief commented on how Devon's strategy has evolved to ensure their gas has access to multiple markets and liquids are priced against Brent.
“Looking specifically at the gas volumes, approximately 95% of our gas in the Delaware is protected by either firm takeaway constraints -- excuse me, contracts, or Gulf Coast by regional basis swaps. With oil production, we expect our revenue to benefit from access to premium Brent pricing through Pin Oak's export terminal in Corpus Christi. This advanced pricing, combined with low LOE plus GP&T cost structure of around $7 per BOE will drive another year of strong margins and excellent free cash flow from this franchise asset.”
To summarize this section we think the management of Devon has done a superlative job of preparing the company to thrive in a number oil price scenarios. The diversified footprint it has builds the company into a multi-regional powerhouse with the ability to leverage the five characteristics of a long term survivor.
Key outtakes from the Q-4, 2022 CC
Devon announced a very modest capex raise of ~$200 mm for the full year 2023. I took some pains in the section above to highlight the M&A activity the company has engaged in the last couple of years-ex WPX. Roughly $3.0 bn of additional investment, with new drilling opportunities that didn't exist prior to these acreage pickups. In that light, I think the analyst's reaction to the increase in capex, was overdone.
These acreage pick-ups also provide the ability for refracs and adjustments in well spacing. In the refrac scenario-at a very high level, a reservoir that has been previously stimulated-technical term for fracking, is cleaned out of sand and hardware, and a modified frac is pumped to stimulate less permeable sections. Fracs generally follow the easiest, most permeable path on the initial application, and due to the nature of shale-no horizontal permeability, may leave considerable hydrocarbons behind. There is also the opportunity to apply modern well spacing theories to the new drill opportunities in the acreage pickups.
CEO Muncrief discusses the refrac potential and well-spacing improvements in the Williston, and the Eagle Ford -
“Overall, this development-oriented activity is designed to maintain steady production in 2023. Looking beyond the production trajectory, a key catalyst for this asset in the upcoming year will be the continued appraisal of resource upside from tighter redevelopment spacing and refracs.”
Key financial points from the Q-4, 2022 call-
For the full year 2022, free cash flow reached $6 billion, which is the highest amount Devon has ever delivered in a year. Devon's dividend payout more than doubled in 2022 to a record high of $5.17 per share. Share buybacks reduced float by 5% with $2 bn total authorization and $1.3 bn spent at an average price of $51. Recent acquisitions have been funded with cash. Ready cash balances increased by $144 million in Q-4, 2022 to total $1.5 billion. Devon maintains a healthy net debt-to-EBITDA ratio of only 0.5 turn. Return on Capital Employed- ROCE, for 2022 came to 39%, with the same metric projected at 25% for 2023.
Devon plans to up average output for 2023 to range between 643-663K BOEPD, with most of growth occurring after Q-1. The first quarter is projected at 635K BOEPD, with about one half the total being oil. The slow start is due to some downtime relating to a compressor fire at Stateline that will keep 10K BOEPD offline in Q-1. Post Q-1, there will be a 15% activity ramp that is intended to drive average volumes to the upper end of the forecast range, ~660K BOEPD. The company notes that its capex and base dividend is funded internally down to $40 WTI.
A catalyst for future growth
The company is aggressively developing assets in the Powder River basin, acquired in the $1.9 bn purchase of Felix Energy (private) in 2016.
Adding to the gradual increases in lateral length shown in this 2020 slide, the company announced in Q-3 of 2022, the completion of a 15K foot lateral in the Powder River with impressive results. A three-well pad delivered IP-30's of 1,400 BOEPD (86% oil) per well with EUR's estimated at 1.2 mm bbl per well. This is 2-3X a typical recovery from a Delaware Wolfcamp A well. CEO Muncrief comments on the Powder River play-
“The key takeaway here is that Powder is one of the few emerging oil plays in North America, and we have a 300,000-acre net position in the core of the oil fairway providing Devon an important oil growth catalyst for the future.”
This substantial acreage footprint gives DVN considerable flexibility in capital allocation. With wells coming in like this, the capital efficiency for these wells is going to be well above average.
Your takeaway
It's been a rough ride the past few months for Devon. I think the share price has been punished out of proportion to the value the company delivers. I consider that DVN in the $50.00 zone is a compelling opportunity, and it is likely that if the current weakness in oil prices persists, we will get close to that level in the next few trading sessions.
As I noted above, trading volume Wednesday was 10X normal. It looks to me like a lot of funds cut their position. DVN is well below its 200 day moving average, and just below previous long term support at $55. At $50 per share DVN would trade at -5X OCF and $58K per flowing barrel. This is at a considerable margin of safety to current oil and gas prices. Devon should be attractive to investors looking for growth and income in this range.
In summary, Devon Energy has positioned itself through strategic acquisitions over the past several years. Each of these have served a purpose-increase oil percentage, gain access to European markets for gas, increase scale, and enable longer laterals on legacy acreage in key shale plays. The company is developing resources at a high level of capital efficiency and is able to fund maintenance capex internally. The dividend policy the company favors assures investors that 50% of free cash will go toward the special dividends that augment the regular dividend.
In my view WTI is passing through its worst levels of the year now, and the Q-1 bottoming in the relative QoQ performance of shale drillers like DVN, will present a strong buying opportunity at that level. Investors looking for growth and income may find the company attractive near current levels.
February 20, 2023
WMT:
- Tuesday, February 21, 2022, before market open -- WMT to report 4Q22 earnings;
- Barron's: WMT could rally after earning report;
- WMT to close several stores, The Hill; Insider; for underperformance; saety; shoplifting;
- this is not unusual; Walmart closes a handful of "major" stores every year;
- the major stores to close in 2023:
- Illinois: Homewood and Plainfield (Chicago area)
- New Mexico: Albuquerque
- Wisconsin: Milwaukee
Personal investing:
- I will be closing out my DFS and T positions to raise cash; planned sales;
- I will be using cash to add to my WMT position; start SBUX position;
- all "new February money" is still going into semi-conductors;
- starting again in March, all "new money" will be allocated 40-30-20-5-5.
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.
All my posts are done quickly:
there will be content and typographical errors. If anything on any of
my posts is important to you, go to the source. If/when I find
typographical / content errors, I will correct them.
From social medial (this guy knows his stuff), link here:
Friday, February 17, 2023
Enbridge: The Cost Of Going Woke -- Dividend At Risk -- February 17, 2023
TSM: cut dividend, to 35.97 cents.
- one site says the cut was to 35.97 cents;
- this site says new dividend: 43.94 cents, record 3/17/23; payment, 4/13/23
- previous quarter: 45.1278 cents;
- a year ago: 47.5613 cents;
Enbridge: misses, link here.
- EPS: 46 cents vs 56 cents; last year, 54 cents;
- revenue: $9.888 million; down from $9,893 million one year ago
- the weak quarterly results were primarily driven by lower contributions from the Renewable Power Generation Segment
- this will not sit well with energy investors
- is ENB losing its focus?
DE: link here.
- IBD
- earnings more than double
- guides high
- EPS: jumped 124%; $6.55 vs $5.57 estimate
- revenue: surged to $12.652 billion vs $12.325 billion
- guided net income of $8.75 billion to $9.25 billion
- well above consensus estimates of $8.31 billion
- DE closed down $7 yesterday; pre-market today, up $10
- a huge thank-you to a reader getting me into DE over a year ago; it's now a regular part of my "new-money" allocation (40-30-20-5-5) -- for the archives.
Wednesday, February 15, 2023
Tuesday, February 14, 2023
Oil And Buffett -- February 14, 2023
When you are in your 90's your horizon is no longer 30 years. No matter what they say.
Semiconductors aree for those with at least a 5-year horizon.
Oil is for those with a one-year horizon (or less).
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.
All my posts are done quickly:
there will be content and typographical errors. If anything on any of
my posts is important to you, go to the source. If/when I find
typographical / content errors, I will correct them.
Link here. At the link, follow the thread.
TSM And Buffett -- February 14, 2023
Comment: My "new money" allotment is invested in five different "sectors" (percentage: 40-30-20-5-5) and the 20% is semiconductors. During the month of February, 2023, my entire "new money" allotment went into semiconductors as an exception in order to "re-balance" the portfolio. In the semiconductor sector, my primary holdings are TSM, AVGO, QCOM, SWKS, NVDA, AMD, and maybe some others that I have forgotten.
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.
All my posts are done quickly:
there will be content and typographical errors. If anything on any of
my posts is important to you, go to the source. If/when I find
typographical / content errors, I will correct them.
Some think that Warren Buffett may be concerned about a Taiwan invasion. If so, there are going to be bigger issues than TSM and the stock market in general. And then, wouldn't he have sold all his TSM?
Original Post
Investors
Chips, semiconductor: link here.
Then:
- 60,060,880 shares
- $87
- $5,225,295,560
Today:
- $98
- This was basically a $70-stock for most of the period that Buffett would have bought it (?) — 3Q22
- So, he made nearly 45% in less than 3 - 6 months (?)
The big question: why did he sell 88% of it rather than all of it.
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.
All my posts are done quickly:
there will be content and typographical errors. If anything on any of
my posts is important to you, go to the source. If/when I find
typographical / content errors, I will correct them.
From the blog just last month:
Why in the world does Buffett invest in companies that make up less than 1% of his entire portfolio, which is the vast majority of his holdings -- companies that make up less than 1% of his entire portfolio.
Link here. It took three screenshots to get his entire portfolio, and this does not include the companies he owns outright.
Summary -- February 14, 2023
"Higher for longer."
Most pundits: 5% to 5.2% through the end of the year; small cut in 2024; followed by another small cut in 2025.
A few pundits: we could see one cut by the end of the year
Pundits continue to tell us we need to see unemployment increase. Wow. Doing what they can to put people out of jobs just so butter can come down in price. Wouldn't it be better if we worked to "grow economy" into full employment instead of shrinking the economy (recession) by cutting jobs?
Biggest shock to day: Ford halts production and shipments of its electric F-150 Lightning due to potential battery issue. Say what? Potential? What? No guts, no glory?
CNBC releases chart showing where inflation exists in the economy. Practically all of it was in food which the Fed is not targeting.
Dianne Feinstein, 89, won't see re-election. Eighty-nine years old and someone was encouraging her to run again. Wow. C'mon madam: I retired at age 57 and never looked back. What a sad life to "die" in the US Senate.
DIS actually eked out a gain today.
DVN missed (by a big margin); drops over 5% after hours and cuts fixed+variable dividend. Obfuscation: the company says it raises its regular dividend by 11 percent, but qtr / qtr the F+V dividend goes from $1.35 to 89 cents, or a cut of 34%.
Inflation -- SMH -- Happy Valentine's Day -- February 14, 2023
Here's how CNBC reports inflation, January, 2023, in one chart.
When a reader sent me that link, my not-ready-for-prime-time reply:
You know, I go through that chart and I shake my head. Seriously.That’s what JPow is worried about? Seriously?We start with eggs: avian bird flu with a bit of farmers price gouging, but hardly “true inflation” due to government spending. Regardless, it’s not as if eggs even affect my overall monthly spending, considering I just ordered another Lego set for $169, which totaled $183 with sales tax [regressive sales taxes are a bigger problem than the price of eggs].Then, butter. I buy a $6.00-tub which lasts a month.Fuel oil? Are you kidding me? That’s a state choice forcing folks to use fuel oil for heating when coal and natural gas are dirt cheap.And it goes on and on. So a chicken that cost $8.00 last year is now $8.80. OMG.But here’s what’s important to me:Televisions, a big ticket item, down 13%.Computers, another big ticket item, down 6%.Beef steaks and bacon, down. And folks will spend a lot more on beef and bacon than eggs, butter, and lettuce. In fact, most Americans could give up lettuce for Lent and not even miss it.If this is the worse CNBC can come up with, I would say I’m in pretty good shape. Even rent is a non-issue for me. I’m a senior on fixed income — that’s how the analysts classify me — and even if my housing doubled I could manage.Unless I missed it, healthcare wasn’t even on the list, and as a senior/Medicare, healthcare is practically free. Folks on Obamacare should have it so good.I can’t believe how good we have it.The Ukrainians should be so lucky. The Syrians and Turks should be so lucky.What Americans should really be upset with: presidents paying $0 in federal income tax; Buffett paying way less than me as a percent of income for federal taxes (and that’s grossly understating the travesty); and, Bakken millionaires who can’t underwrite universal free school lunches.Folks are nuts -- Ms Huckabee is correct: it's now a battle between "crazy" and "normal" but I'm wondering who the "crazy" folks are.
My grandfather raising sheep in the worse land in the US while his sons were fighting in WWII would really shake his head, and then he would hitch up three horses to plow his few acres of god-forsaken South Dakota prairie and get on with life, leaving exactly $0 to his children. I doubt he even knew what CPI was or what it meant.From what I can see, market forces could manage this just fine without JPow’s help.Much more could be written.Not proofread: there will be typographical and content errors.
The chart:
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The Lego Page
Monday, February 13, 2023
CNBC Talking Head -- Closing -- February 13, 2023
A very well-known, credible talking head on CNBC. I don't associate him with energy.
Today he says he is over-weighted in energy "by a factor of 2," whatever that means.
His recommendations:
- for the average investor (whatever that means): XOM, CVX.
- for the most conservative energy investor: KMI.
- his personal favorite: RIG.
After hours: Palantir. Reports profit for the first time in its history.
think about that;
- webpage;
- ticker: up 18% after hours; think this might affect tech stocks this week? Well, duh.
Apple -- Super -- Super Bowl -- February 13, 2023
Rihanna ended her electrifying first live performance in seven years suspended high above the State Farm Stadium field, singing her hit “Diamonds,” as both the live audience and the internet screamed its approval.
Let’s flashback to last year. When the opportunity presented itself for Apple to consider sponsoring the Super Bowl halftime show, the decision on whether to do it was immediate. “We didn’t have any hesitation, the minute we talked about it,” says Apple’s vice president of marketing, Tor Myhren. “It was one conversation.”
Pepsi dropped its halftime show sponsorship last May after a decade-long run that had its ups (BeyoncĂ©!) and downs (Maroon 5!). Does anyone remember who had the sponsorship before Pepsi? Don’t tread on me: It was Bridgestone, the tire company. So, this year marked the first time ever that a halftime music sponsor would be a brand that actually has products related to, ya know, music.
“It felt like a no brainer, to be honest,” says Oliver Schusser, vice president of Apple Music and Beats. “It felt really natural for us, and it felt like the right moment for us. There’s not much more science behind it than that.”
Spotify?
Saturday, February 11, 2023
ENB -- 4Q22
Full year GAAP earnings of $2.6 billion or $1.28 per common share, compared with GAAP earnings of $5.8 billion or $2.87 per common share in 2021
Adjusted earnings* of $5.7 billion or $2.81 per common share*, compared with $5.6 billion or $2.74 per common share in 2021
Adjusted earnings before interest, income taxes and depreciation and amortization (EBITDA)* of $15.5 billion, compared with $14.0 billion in 2021
Cash provided by operating activities of $11.2 billion, compared with $9.3 billion in 2021
Distributable cash flow (DCF)* of $11.0 billion or $5.42 per common share*, compared with $10.0 billion or $4.96 per common share in 2021
Exited 2022 in a strong financial position with Debt to EBITDA of 4.7x
Reaffirmed 2023 full year guidance range for EBITDA of $15.9 billion to $16.5 billion and DCF per share of $5.25 to $5.65
Increased the 2023 quarterly dividend by 3.2% to $0.8875 ($3.55 annualized) per share reflecting the 28th consecutive annual increase -- in fact, previously posted -- nothing new for those following the company.
Increased ownership in Gray Oak Pipeline by a further 10% bringing Enbridge's interest to 68.5%
Toll Settlement reached with B.C. Pipeline shippers and approved by the CER for a five-year term ending in 2026
Rate case settlement reached with Texas Eastern Transmission, LP (TETLP) shippers and approved by the Federal Energy Regulatory Commission (FERC)
Completed the previously announced US$1.5 billion investment in Woodfibre LNG
Successfully placed into service, $4B of conventional and renewable projects in 2022
Advanced $18 billion portfolio of growth and expansion projects across the enterprise
Advanced low-carbon strategy announcing a partnership with Oxy Low Carbon Ventures to transport and sequester carbon dioxide in the Corpus Christi area
Filed rebasing and incentive rate-setting application at Enbridge Gas Inc. (EGI) for the next five years
Announced the renewal of Enbridge's normal course issuer bid (NCIB) of up to $1.5 billion
Issued a $900 million Sustainability-Linked Bond (SLB) in Canada, further strengthening Enbridge's commitment to its emissions reduction goals
UNP -- February 11, 2023
From the linked article:
Fourth-quarter revenue climbed 8% year over year thanks to higher fuel surcharge revenue, strategic price increases, and demand growth. Also helping to drive revenue in Q4 was Union Pacific's fuel consumption rate, which improved 2%.
In fact, Union Pacific has improved its fuel consumption rate for four straight years. Last quarter, thanks largely to locomotive modernizations, was the most fuel efficient the railroad has ever been. A more efficient fleet not only reduces Union Pacific's carbon footprint but also makes for a more productive and reliable operation.
From its all-time high of nearly $280 in March 2022, Union Pacific stock dropped 25% to its current price range around $209. Meanwhile, the railroad is breaking records for annual operating revenue, operating income, net income, and earnings per share. And according to Yahoo! Finance, Union Pacific is estimated to grow at an annual rate of over 9% per year for the next five years. With an ever-improving workforce and more efficient railway network, I think it's time to buy the dip on Union Pacific stock.If the company executes its network recovery initiatives as expected, record earnings could eventually translate into record-high stock prices.
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