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>>> Oil Climbs on Report That Israel Is Preparing to Strike Iran
Bloomberg
by Rob Verdonck and Yongchang Chin
May 20, 2025
https://finance.yahoo.com/news/oil-surges-report-israel-preparing-225142307.html
(Bloomberg) -- Oil jumped following a CNN report that new US intelligence suggests Israel is preparing for a potential strike on Iranian nuclear facilities.
Brent crude rose above $66 a barrel while West Texas Intermediate surged as much as 3.5% before paring gains. It wasn’t clear that Israeli leaders have made a final decision on whether to carry out the strikes, CNN said, citing unnamed officials.
Oil has been volatile since last week on mixed headlines about the fate of Iran-US nuclear talks, which could pave the way for more barrels to return to a market that’s expected to be oversupplied later in the year. An attack by Israel would hinder any progress in those negotiations and add to unrest in the Middle East, which supplies about a third of the world’s crude.
“This is the clearest sign yet of how high the stakes are in the US-Iran nuclear talks and the lengths Israel may go to if Iran insists on maintaining its commercial nuclear capabilities,” said Robert Rennie, head of commodity and carbon research for Westpac Banking Corp. “Crude will maintain a risk premium as long as the current talks appear to be going nowhere.”
The CNN report also briefly pushed traditional currency havens including the Swiss franc and Japanese yen higher, before the move pared. The US Department of Defense and National Security Council didn’t immediately respond to requests for comment. The Israeli embassy in Washington declined to comment.
Israel has long weighed targeting Iran’s nuclear program. A big question, however, is just how many of the atomic sites are insulated against anything but the most extreme attack. Earlier, those plans were also believed to have been deterred by comments from then-President Joe Biden following attacks between the nations last year.
Geopolitical concerns have for now overshadowed expectations of looser balances heading into the second half of the year, as OPEC and its allies bring back barrels to the market. US shale oil output hasn’t peaked and can still expand, but not if prices are near $50 a barrel, ConocoPhillips Chief Executive Officer said Tuesday.
Earlier this week, Iran’s Supreme Leader Ali Khamenei said he didn’t think the latest effort to negotiate with the US would lead to a result. WTI prices could tumble as low as $40 a barrel if sanctions on the Islamic Republic’s oil exports are lifted, according to Bloomberg Intelligence.
Iran has been able to keep exporting crude in spite of increasing sanctions by the US and allies including the UK and Europe. Tehran has even managed to boost supply recently, according to Goldman Sachs Group Inc.
“Iran has increased its supply by about a million barrels a day over the last couple of years,” Samantha Dart, Goldman’s co-head of global commodities research, said on Bloomberg Television. “If you remove a million barrels a day from Iran, this could represent an upside of about $8 a barrel to the crude oil price.”
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>>> Oil prices tumble as Trump hints US near nuclear deal with Iran
Yahoo Finance
by Ines Ferré
May 15, 2025
https://finance.yahoo.com/news/oil-prices-tumble-as-trump-hints-us-near-nuclear-deal-with-iran-151423549.html
Oil prices slid more than 3% before paring losses on Thursday after President Trump hinted that the US is nearing a nuclear deal with Iran — a move that could increase global crude supply.
West Texas Intermediate (CL=F) futures fell to just above $61 per barrel. Brent crude (BZ=F), the international benchmark, dropped to around $64.40.
"We'll see what happens," Trump said during a visit to Doha, Qatar. "But we're in very serious negotiations with Iran for long-term peace. And if we do that, it'll be fantastic."
A senior Iranian official told NBC News this week that Iran would agree to never develop a nuclear weapon and meet other terms of the deal — if all economic sanctions were lifted immediately.
CIBC Private Wealth senior energy trader Rebecca Babin isn't convinced an agreement will go through so easily. But if it does, she estimates the oil supply could increase by 200,000 to 400,000 barrels per day.
"They [Iran] have really gotten quite good at skirting sanctions, so most don't expect a massive flood hitting the market if sanctions are lifted," Babin told Yahoo Finance on Thursday.
Iran, a member of the Organization of Petroleum Exporting Countries (OPEC), currently produces more than 3 million barrels of oil per day.
Oil prices are down more than 12% year to date after tumbling in April following President Trump's announcement of new tariff policies and an OPEC+ decision to raise production starting in May. The oil cartel later agreed to further increase output in June.
"If we add in OPEC+'s additional oil production coming in the next few months, global crude supply and demand dynamics could shift toward oversupply," BOK Financial senior vice president Dennis Kissler said on Thursday.
Goldman Sachs analysts warned of downside risks to oil prices if OPEC+ proceeds with its planned output hikes — or adds more in July.
"We expect strong supply growth outside of U.S. shale to further pressure prices and U.S. shale production," Goldman Sachs' Daan Struyven and his team wrote in a Sunday night note.
The analysts forecast Brent to edge down to average $60 in the rest of 2025, with WTI averaging $56.
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>>> Centrus Energy Corp. (LEU) is a trusted supplier of nuclear fuel and services for the nuclear power industry. It is the only American company with proven enrichment technology, giving it a significant advantage in the current trade tensions. LEU has also received a boost due to nuclear energy regaining the spotlight during the ongoing AI boom.
Centrus Energy Corp. (NYSEAMERICAN:LEU) also posted strong results for its Q1 2025 this week, reporting an EPS of $1.6 and beating expectations by a significant $1.65. The company’s revenue also surged by 67.3% YoY to $73.1 million, topping estimates by almost $5 million. Moreover, Centrus has expressed confidence in its compelling investment case for the $3.4 billion in funding that Congress has provided to jumpstart domestic nuclear fuel production.
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https://finance.yahoo.com/news/why-centrus-energy-corp-leu-124045280.html
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>>> Trump Threatens Russia Oil Penalties Citing Anger at Putin
Bloomberg
by Skylar Woodhouse and Alex Longley
March 30, 2025
https://finance.yahoo.com/news/trump-threatens-russia-oil-penalties-162353470.html
(Bloomberg) -- President Donald Trump said he’s “pissed off” at Russian President Vladimir Putin and would consider “secondary tariffs” on Russian oil if a ceasefire with Ukraine can’t be reached, NBC News reported.
Trump said he was “very angry” about Putin’s recent comments suggesting ways to install new leadership in Ukraine and sideline President Volodymyr Zelenskiy, NBC reported, citing a phone interview with Trump on Sunday. New leadership in Ukraine means “you’re not going to have a deal for a long time, right,” he said.
“I was pissed off about it. But if a deal isn’t made, and if I think it was Russia’s fault, I’m going to put secondary sanctions on Russia,” Trump told NBC, saying he meant “all oil coming out of Russia.” He said he plans to speak to Putin this week.
Russia is one of the world’s three largest oil producers, meaning any attempts to punish purchases of Moscow’s supplies could have wide-reaching repercussions on the oil market, and any disruptions could add to global inflationary pressures. India and China, who have emerged as the key buyers of Russian barrels since Moscow’s full-scale invasion of Ukraine, would be under particular pressure.
As Trump seeks to make good on his campaign promise to end the war in Ukraine, the Russian president has been testing how far Trump might go in pressing Europe to ease sanctions on Russia. US sanctions on Russia’s oil tanker fleet are showing signs of faltering and Russian crude exports hit a five-month high in March.
Trump said if he can’t make “a deal on stopping the bloodshed in Ukraine, and if I think it was Russia’s fault — which it might not be — but if I think it was Russia’s fault, I am going to put secondary tariffs on oil.”
“That would be that if you buy oil from Russia, you can’t do business in the United States. There will be a 25% tariff on all – on all oil, a 25 to 50-point tariff on all oil,” he said.
After three days of negotiations in Saudi Arabia last week, the US said Ukraine and Russia had agreed to a Black Sea truce as the next stage in Trump’s efforts to end the war, following their acceptance of a 30-day halt to strikes on energy infrastructure.
With secondary tariffs, Trump last week appeared to invent a new economic statecraft tactic by threatening them on countries that buy oil from Venezuela to choke off its oil trade with other nations.
The threat, confirmed in an executive order by Trump, said countries could face 25% tariffs on trade with the US if they purchase oil and gas from Venezuela, which is already under heavy US sanctions. The move was meant to pressure Venezuela for the “tens of thousands of high level, and other, criminals” that Trump said Venezuela has sent to the US.
Trump also said he’s considering punishing Iran with unspecified “secondary tariffs” and raised the threat of bombing Iran until it signs a deal that renounces nuclear weapons.
“If they don’t make a deal, there will be bombing,” NBC cited Trump as saying.
Trump told Iranian Supreme Leader Ali Khamenei in a recently delivered letter that his nation has a two-month deadline to reach a new nuclear accord, according to a person familiar with its content. Trump has previously suggested he could “go in militarily” if necessary to stop Iran from obtaining a nuclear weapon.
Iran told Trump in response to his overture that it won’t hold talks with his administration, though indirect communications with the US remain a possibility, President Masoud Pezeshkian said Sunday.
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>>> How oil emerged as a central sticking point in the Trump tariff talks
Yahoo Finance
by Ben Werschkul
January 31, 2025
https://finance.yahoo.com/news/how-oil-emerged-as-a-central-sticking-point-in-the-trump-tariff-talks-174310146.html
Market anxiety ahead of Donald Trump's self-imposed Feb. 1 deadline for a first round of tariffs focused Friday on oil and gas after the president appeared to acknowledge Thursday there could be issues with the energy staple in his overall plans.
His comments left a key unanswered question about how new duties would impact energy markets, with petroleum sitting as Canada’s biggest export to the US and a slow in those oil flows likely to destabilize both nations.
White House Press Secretary Karoline Leavitt declined to offer any additional detail Friday afternoon about the closely watched issue of exceptions but underlined that Trump is committed to "unleashing the might of our energy industry, which we know will eventually drive down inflation."
She also flatly stated that "starting tomorrow, those tariffs will be in place" and denied a report that any delays could be in the offing.
The focus on oil comes after Trump on Thursday told reporters that "we may or may not" include oil in the tariffs and that a determination had yet to be made.
In part "it depends on what the price is," he added.
Trump often focused for weeks on Canadian tariffs even as the economic effects of a standoff with America’s largest trading partner — and key provider of oil — are just being sorted out.
This is a "sign that the message is getting through to him," Josh Zive, a tariff expert at Houston energy law firm Bracewell, said in an interview Friday about the president's comments.
"There's a real tension point between the tariff policy priorities of this administration and the energy policy priorities of this administration," Zive added, noting Trump "has got to find a way to solve that tension."
Indeed, the inclusion of oil would be no small detail. Canada exported over $160 billion worth of crude and refined petroleum in 2022, and US firms made up the lion's share of recipients. All told, Canada ships about 4 million barrels a day to the United States.
Oil markets were clearly paying attention Friday. West Texas Intermediate fell amid the uncertainty to trade just below $72 a barrel at one point. The effect was also seen in Canadian energy stocks, but with mixed results: For one, Phillips 66 (PSX) fell on the open Friday but then recovered some of the gains.
Trump also claimed Thursday that “we have more [oil] than anybody,” but many observers disagreed Friday, noting that a sudden disruption in oil could be destabilizing for the US as well as Canada.
“I think it’s just starting to hit because we don’t have all the oil we need,” noted Fernando Valle, Hedgeye energy analyst, in a Yahoo Finance interview on Friday.
He noted that the US produces a lighter oil and “we need the Canadian heavy crude to balance it in our refineries.”
The inclusion of oil in tariffs “could be tremendously destabilizing to United States,” added Zive, to underline the stakes.
For now the sector and larger economy remain in suspense as Trump weighs his options and the world awaits his next move.
Henrietta Treyz, director of economic policy research at Veda Partners, offered in a note to clients Friday that "given the copious energy trade between the two nations and American voter sensitivity to gas prices, we expect oil and gas, petroleum and other energy products will be excluded from any widespread tariffs."
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>>> Texas Pacific Land Corporation (TPL) engages in the land and resource management, and water services and operations businesses. The company owns a 1/128th nonparticipating perpetual oil and gas royalty interest (NPRI) under approximately 85,000 acres of land; a 1/16th NPRI under approximately 371,000 acres of land; and approximately 4,000 additional net royalty acres, total of approximately 195,000 NRA located in the western part of Texas.
The Land and Resource Management segment manages surface acres of land, and oil and gas royalty interest in West Texas. This segment also engages in easements, such as transporting oil, gas and related hydrocarbons, power line and utility, and subsurface wellbore easements. In addition, this segment leases its land for processing, storage, and compression facilities and roads; and is involved in sale of materials, such as caliche, sand, and other material, as well as sells land.
The Water Services and Operations segment provides full-service water offerings, including water sourcing, produced-water treatment, infrastructure development, and disposal solutions to operators in the Permian Basin. This segment also holds produced water royalties. Texas Pacific Land Corporation was founded in 1888 and is headquartered in Dallas, Texas.
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https://finance.yahoo.com/quote/TPL/profile/
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>>> Texas Pacific Land Corporation (TPL): A Bull Case Theory
Insider Monkey
by Ricardo Pillai
December 31, 2024
https://finance.yahoo.com/news/texas-pacific-land-corporation-tpl-155802106.html
We came across a bullish thesis on Texas Pacific Land Corporation (NYSE:TPL) on Special Situation Investing’s Substack by Six Bravo. In this article, we will summarize the bulls’ thesis on TPL. Texas Pacific Land Corporation (NYSE:TPL)'s share was trading at $1107.43 as of Dec 30th. TPL’s trailing and forward P/E were 56.82 and 37.74 respectively according to Yahoo Finance.
Texas Pacific Land (NYSE:TPL) has experienced a whirlwind of developments in recent months, presenting a compelling narrative for its shareholders. The company recently completed its second consecutive quarter of acreage acquisitions, spending $286 million on approximately 7,490 net royalty acres primarily in the Midland Basin. These newly acquired assets, operated largely by Exxon Mobil and Diamondback Energy, boast current production of around 1,300 barrels of oil equivalent per day, with promising prospects for near-term development and production growth. Given that over 80% of the acquired acreage overlaps or is adjacent to existing TPL holdings, the acquisitions align strategically with the company’s portfolio, providing strong visibility into future cash flows. Management estimates these deals will yield a double-digit cash flow return at a conservative $70 oil price, potentially adding $45.5 million to TPL’s annual free cash flow.
The third-quarter results showcased the company’s operational strength, particularly in its water segment, which continues to flourish. TPL is on track to collect royalties on an estimated one billion barrels of water through 2024, matching last year’s record income of $100 million from this segment.
Moreover, TPL’s transition from the S&P 400 to the S&P 500 in late November marks a milestone, introducing passive investment tailwinds but also market volatility risks. Since joining the index, TPL’s stock price has fallen approximately 33%. While some attribute this to lower oil prices or index-related technical factors, these dynamics have not deterred long-term investors. In fact, the recent dip has been seen as a buying opportunity, underpinned by confidence in the company’s robust fundamentals and strategic acquisitions.
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>>> WTI crude oil futures rose over 2% to surpass $75.5 per barrel on Friday, reaching the highest level since October, driven by a drop in US crude stockpiles. Cold weather in the US reduced inventory levels at Cushing, Oklahoma, to their lowest since 2014. The global oil market is tightening due to reduced supply from key exporters like Russia and Iran, as well as a surge in demand for heating fuels. The rise in oil prices is also linked to fears surrounding US policy under President-elect Donald Trump, including potential sanctions on Iran and trade conflicts that could disrupt energy flows. Trump’s plans to authorize new drilling and impose tariffs on Canadian imports, including oil, further heightened market concerns. Oil is now heading for its third consecutive weekly gain. <<<
https://tradingeconomics.com/commodity/crude-oil
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gfp: And Trump just threatened Iran that they would be in our crosshairs if all the Israeli hostages still held by Hamas are not freed by January 20th. And Trump is usually not someone who backs down, unlike Obama with his Syria threats back when he occupied the Oval Office.
>>> Iran plans new uranium-enrichment expansion, IAEA report says
Reuters
by Francois Murphy
11-29-24
https://www.msn.com/en-gb/news/world/exclusive-iran-plans-new-uranium-enrichment-expansion-iaea-report-says/ar-AA1uWEzc?ocid=TobArticle
VIENNA (Reuters) -Iran has informed the U.N. nuclear watchdog that it plans to install more than 6,000 extra uranium-enriching centrifuges at its enrichment plants and bring more of those already in place online, a confidential report by the watchdog said on Thursday.
The International Atomic Energy Agency report seen by Reuters details what Iran meant when it said it would add thousands of centrifuges in response to a resolution against it that the IAEA's 35-nation Board of Governors passed last week at the request of Britain, France, Germany and the United States.
More enrichment capacity means Iran can enrich uranium more quickly, potentially increasing the nuclear proliferation risk. Iran denies seeking nuclear weapons but Western powers say there is no civil explanation for enriching uranium to up to 60% purity, close to the roughly 90% that is weapons grade, which no other country has done without producing a nuclear bomb.
The only enrichment level specified for new centrifuges was 5% purity, far from the 60% Iran is already producing. The lower purity, particularly at its Fordow site, could be seen as a conciliatory move by Iran as it seeks common ground with European powers before the return of U.S. President-elect Donald Trump, though enrichment levels can be changed easily later.
Iran already has well over 10,000 centrifuges operating at two underground plants at Natanz and Fordow and an above-ground pilot plant at Natanz. The report outlined plans to install 32 more cascades, or clusters, of more than 160 machines each and a massive cascade of up to 1,152 advanced IR-6 machines.
At the same time, the number of cascades Iran plans to install vastly outnumbers those that are already installed and that Iran said it would now bring online by feeding them with uranium feedstock, which the IAEA verified it had yet to do.
"The Agency has determined and shared with Iran the changes required to the intensity of its inspection activities at FFEP (Fordow Fuel Enrichment Plant) following the commissioning of the cascades," the report said, referring to Iran's plan to bring eight recently installed IR-6 cascades there online.
Fordow is particularly closely watched because it is dug into a mountain and Iran is currently enriching to up to 60% there. The only other plant where it is doing that is the above-ground Pilot Fuel Enrichment Plant at Natanz.
REBUFFED
Just before last week's quarterly meeting of the IAEA board, Iran offered to cap its stock of uranium enriched to up to 60%, but diplomats said it was conditional on the board not passing a resolution against Iran.
Although the IAEA verified Iran was slowing enrichment at that highest level and called it "a concrete step in the right direction", the board passed the resolution regardless, repeating a call on Iran to improve cooperation with the IAEA.
Thursday's report said Iran had finished installing the last two cascades of IR-2m centrifuges in a batch of 18 at its vast underground Fuel Enrichment Plant at Natanz, and that it planned to bring all 18 online, though the IAEA verified on Nov. 26 that no uranium had been fed into them.
Iran also told the agency it intended to install 18 extra cascades of IR-4 centrifuges at that Natanz plant, each with 166 machines, the report said.
At the above-ground pilot plant at Natanz, Iran informed the IAEA it planned to take various steps that suggested it would increase the number of full, rather than small or intermediate, cascades there, which could produce more enriched uranium.
It also said it planned to install one cascade of up to 1,152 IR-6 centrifuges at that pilot plant, which could be the biggest cascade by far in Iran yet.
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Bigworld, Thanks for the update. That sounds like a great plan since full retirement can get boring after a while. Eventually you start missing various aspects of work, and working also helps keep you mentally sharp, etc.
Good to hear you are out of UVXY. That's really just for short term trading, a few weeks or maybe a month at most. I still think if you want to trade, using the 1X long side makes more sense, since then the long term uptrend is there to bail out mis-timed trades. It lacks the excitement, and you won't get the 'quick score' rush, but it produces consistent profits that add up over the year.
With the market, it's tough to say where things will be heading in the new year. The post-election relief rally might contiue for a while, but the growing uncertainties over tariffs and other factors might come to dominate, and then the 'fear of the unknown' could make for periodic selloffs. Fwiw, to be safe I decided to lower the allowable max stock allocation down to 15%. I figure 2025 could end up being choppy like 2024 was, so a continuation of the Core-Flex strategy may be the way to go. It's been working, so 'if it ain't broke, don't fix it', but still have to be nimble in case a more prolonged bull (or bear) decide to reassert themselves. I'd rather just be buy / hold, but these days that requires too much Tagamet.
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GFP: I got stopped out of my position in UVXY for now. But if the VIX continues to drift lower in December then I think we're ripe for a significant sell off early next year. There is too much optimism out there. Trump is not going to have smooth sailing. He'll have to fight the Democrats with the narrowest margin in the House in a generation. And our majority in the Senate is brittle with RINOs like Murkowski, Collins and McConnell. So trump has to overcome two entrenched opponents...the entire Democrat Party and the RINO faction within the Republican Party. There is only so much he can do by Executive order. Culling the Administrative State to the levels we can actually afford without deficit spending is going to be very difficult. And if he succeeds in getting the reductions we need for the long term health of the economy it would still suck up lots of excess liquidity in the economy. Lots of borrowed and printed money are currently propping up the market
I hope you had a good Thanksgiving. I worked so I could give one of my co-worker who has 4 kids to have their holiday uninterrupted. But I'm on my last week of working close to full time. My last day is this coming Friday. After that I'm only going to work on call, maybe a couple weekends a month, and an occasional special project if it interest me. I'll have a lot more time to trade and follow Rinear's short term plays for spending money.
Bigworld, Have a great Thanksgiving :o)
Hope your knee is healing well also. This year has flown by, so we'll see what 2025 brings. Right now it seems like a combination of hope and angst, but the angst side may come to predominate again for a while, so we'll see what happens.
>> more UVXY <<
Yikes
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gfp: I'll put it on my watchlist. I'm not buying anything right now. Not with the market at these levels. I may sell some things. And if I was to buy anything it would probably be more UVXY. Meanwhile:
https://www.zerohedge.com/markets/leverage-and-speculation-signs-raging-bull-market
Have a very nice Thanksgiving. I'm actually working. I volunteered to cover two hospitals so some of my cohorts that have young families could have the day off. But my days are numbered. After December 6th I'll probably only be working 4-6 days a month. Which is perfect. And I basically have the last 3 weeks of December off. Social Security here I come.
>>> Texas Pacific Land Joins S&P 500: Buffett's Teen Pick Rockets 200% in 2024
Guru Focus
by Khac Phu Nguyen
November 22, 2024
https://finance.yahoo.com/news/texas-pacific-land-joins-p-173740523.html
Texas Pacific Land (NYSE:TPL) just hit the big leagues. The landowner-turned-energy player is joining the S&P 500 index on November 26, replacing Marathon Oil, which ConocoPhillips officially acquired this week. Investors aren't waiting to celebrateTexas Pacific Land's shares have already shot up nearly 12% Friday's morning, building on an eye-popping over 200% surge this year. And here's the kicker: S&P inclusion means funds and ETFs tracking the index will pile in, likely keeping its momentum alive in the short term. That's the power of the S&P Phenomenon.
But Texas Pacific Land isn't just another oil stock. This company, born from the ashes of a bankrupt railroad in 1888, owns a massive 873,000 acres in the Permian Basin, America's top oil and gas hotspot. Over the years, it's gone from a liquidation trust to a full-fledged corporation, making money not just from oil and gas royalties but also by leasing land to drillers, selling water to frackers, and handling wastewater disposal. Recently, it's broadened its horizons even further, adding bitcoin miners and renewable energy players to its roster of tenants. With a business model like that, it's no wonder Texas Pacific Land has outpaced even 2024's superstar stock, Nvidia (NASDAQ:NVDA)
Warren Buffett's early investment history adds an intriguing layer to Texas Pacific Land's story. As a teenager, Buffett made Texas Pacific Land Trust his second-ever stock purchase, drawn to its steady stock buybacksa rare and attractive strategy at the time. Reflecting on his investment at a 2022 Berkshire Hathaway meeting, Buffett praised the company's disciplined approach, noting how they bought stock week, after week, after week. While Buffett's early involvement was brief, Texas Pacific Land's legacy as a disciplined and innovative operator continues to resonate with investors today.
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>>> LandBridge Company LLC (LB) owns and manages land and resources to support and enhance oil and natural gas development in the United States. It owns surface acres in and around the Delaware Basin in Texas and New Mexico. The company holds a portfolio of oil and gas royalties. It also sells brackish water and other surface composite materials. The company was founded in 2021 and is based in Houston, Texas. LandBridge Company LLC operates as a subsidiary of LandBridge Holdings LLC.
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>>> Utilities outperform the broader markets amid enthusiasm over AI electricity demand
Yahoo Finance
by Ines Ferrér
October 18, 2024
https://finance.yahoo.com/news/utilities-outperform-the-broader-markets-amid-enthusiasm-over-ai-electricity-demand-175702728.html
Utilities have been on fire this year as enthusiasm over booming AI electricity demand pushes the sector higher.
Case in point: The S&P 500 Utilities ETF (XLU) is up a whopping 29% so far this year — the best-performing sector to date, compared to the broader index's 23% rise.
Much of the gains stem from enthusiasm over power producers that stand to benefit from the electrification boom — which includes Big Tech's massive appetite for AI data centers and electric vehicles.
By 2050, electricity is projected to become the largest source of energy worldwide, according to a recent McKinsey study.
Utilities have been the best performers this year.
Also, five of the top 10 returning companies in the S&P 500 this year have been energy companies, noted Matt Sallee, president of Tortoise Capital. “Utilities and midstream infrastructure are going to be secondary beneficiaries of the AI theme,” he said in a recent note.
There’s no better example of that investor fever than the S&P 500's top performer this year, power producer Vistra Corp (VST).
Shares of the Irving, Texas-based company are up 243% year to date, outperforming even AI heavyweight Nvidia (NVDA), up 186% during the same period.
On Thursday, JPMorgan analysts initiated coverage of Vistra along with two other Wall Street favorites, Talen Energy (TLN) and Constellation Energy (CEG) — all with an Overweight rating,
The analysts said the independent power producers (IPPs) stand to benefit from "a paradigm shift in power demand" amid structural tailwinds like manufacturing on-shoring, electrification trends, and data-center development.
"We do not see competitive market supply growth matching this demand, enabling IPPs to capture outsized margins for an extended period of time," wrote JPMorgan's Jeremy Tonet and his team.
As Yahoo Finance’s Julie Hyman pointed out, recent headlines like Microsoft (MSFT) teaming up with Constellation Energy to restart a nuclear reactor at Three Mile Island, and Amazon (AMZN) buying up a data center campus from Talen Energy have put Big Tech and its insatiable need for electricity into the spotlight.
The Utilities Select Sector SPDR Fund (XLU)
But XLU's massive performance this year begs the question — has it topped?
With the broader markets at all-time highs, it may be a good idea to keep investing in defensive stocks like utilities that provide dividends, said Burns McKinney, managing director and senior portfolio manager at NFJ Investment Group.
“There does seem to be a little bit more meat on the bone,” said McKinney, referring to more growth ahead.
If XLU holds its 29.1% year-to-date gains, it will be the best-ever yearly performance for the sector.
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GE Vernova - >>> A GE spinoff's stock is surging as it positions itself as the 'supermarket' for AI energy demand
Yahoo Finance
by Ines Ferrér
October 6, 2024
https://finance.yahoo.com/news/a-ge-spinoffs-stock-is-surging-as-it-positions-itself-as-the-supermarket-for-ai-energy-demand-140019819.html
The massive demand for energy as Big Tech races to build its AI infrastructure has been a tailwind for GE Vernova (GEV), the power equipment maker that spun out of iconic GE earlier this year.
Shares of the Cambridge, Mass.-based company have been hovering near all-time highs, along with the broader S&P 500 Industrial ETF (XLI), as investors look to play off the electrification and artificial intelligence theme led by AI chip heavyweight Nvidia (NVDA).
"[Vernova] seems to be caught up in the broader trade of AI and power demand," Daniel Rich, analyst at CFRA, told Yahoo Finance. The firm has a Buy rating and a price target of $230 on the stock.
Much of Wall Street's bullishness stems from expectations of power demand growth stemming from Big Tech's commitment to record infrastructure technology investments.
Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), and Meta (META) are expected to spend a combined $200 billion this year on cloud and AI investments, including building and maintaining data centers.
Power demand from infrastructure technologies in the US is expected to more than double by 2030 thanks to use of AI, according to consulting firm McKinsey & Co.
"Because of how much more power we're going to need —if the projections are accurate to power data centers — to power AI applications, Vernova is definitely a winner," he added.
One Wall Street analyst dubbed the $72 billion company the "supermarket" for the electric power industry — from natural gas turbines used to generate electricity to servicing of power plants, modernizing electric grids, and building wind turbines.
"This company does everything," Raymond James managing director Pavel Molchanov told Yahoo Finance in an interview this week.
"Because the buildout of electric power infrastructure is an all-of-the-above story, that means all of these solutions are going to be needed," he added.
The analyst notes Vernova's reach is global, with roughly 30% of its revenue stemming from the US. Some of its big competitors, like Siemens Energy, Schneider Electric, and ABB, are based abroad.
Vernova expects to deliver 70 to 80 heavy-duty gas turbines per year in 2026, up from roughly 55 for the last few years. Servicing those units is also expected to grow substantially.
"We're seeing increasing demand for power generation, driven by manufacturing growth, industrial electrification, EVs, and emerging data center needs," Vernova CEO Scott Strazik said during the company's latest earnings call over the summer.
The recent deal between software giant Microsoft and nuclear power provider Constellation Energy (CEG) to restart a reactor at Pennsylvania's Three Mile Island is one recent example of the growing energy demand among Big Tech.
The partnership has made Morgan Stanley analysts more bullish on the prospects of gas-powered plants adjacent to data centers.
"We believe a co-located data center and gas-fired power plant utilizing GEV's gas-turbine equipment could be announced in 2025," Morgan Stanley analyst Andrew Percoco wrote in a note last week.
The analyst reiterated an Overweight rating and increased his bull case scenario price target on the stock to $397 from $371.
Vernova stock is up more than 100% since its spinoff, compared to the S&P 500's (^GSPC) 21% year-to-date gain. That's despite negative headlines in the company's most challenged unit — its wind turbines — after incidents of blades breaking off in key offshore projects.
Molchanov from Raymond James cautions the strong run-up means there could be little room to run, though.
"It’s an S&P 500 stock that has doubled in the last six months. If that sounds a little bit like certain other AI-related companies that people are familiar with, well, that’s not a coincidence," said Molchanov.
Calling the AI-fueled rally "overstretched," the analyst and his team downgraded the stock from Outperform to Market Perform based on valuation. Much of the enthusiasm over AI is already baked into Vernova's share price, he said.
"The bottom line is that we think the stock could use a period of consolidation after its sentiment-driven gains, and we look forward to revisiting our rating if and when the trade becomes less crowded," he said.
The stock has 19 Buy, six Hold, and two Sell analyst recommendations.
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>>> Big Oil Urges Trump Not to Gut Biden’s Climate Law
The Wall Street Journal
by Collin Eaton, Benoît Morenne
10-6-24
https://www.msn.com/en-us/news/politics/big-oil-urges-trump-not-to-gut-biden-s-climate-law/ar-AA1rLuX7?cvid=54bdd711ae1748c1fe427f19366b02e2&ei=41
Oil companies are conveying an unlikely message to the GOP and its presidential candidate: Spare President Biden’s signature climate law. At least the parts that benefit the oil industry.
In discussions with former President Trump’s campaign and his allies in Congress, oil giants including Exxon Mobil, Phillips 66 and Occidental Petroleum have extolled the benefits of the Inflation Reduction Act. Many in the fossil-fuel industry opposed the law when it passed in 2022 but have come to love provisions that earmark billions of dollars for low-carbon energy projects they are betting on.
Some executives in the largely pro-Trump oil industry are worried the former president, if re-elected, would side with conservative lawmakers who want to gut the IRA. They fear losing tax credits vital for their investments in renewable fuel, carbon capture and hydrogen, costly technologies requiring U.S. support to survive their early years.
At a Houston fundraiser for Trump in May, Occidental CEO Vicki Hollub took her case directly to the candidate, saying tax credits propping up the company’s huge investments in technology to collect carbon directly from the air should be preserved, people familiar with the matter said. The company is building its first $1.3 billion direct-air capture plant in West Texas and aims to erect dozens more in the coming years.
Exxon has also told the Trump campaign it wants to preserve portions of the IRA. It and Chevron, the two largest U.S. oil companies, have promised to pump more than $30 billion combined into carbon capture, hydrogen, biofuels and other low-carbon technologies, virtually all of which rely on tax credits in the IRA to be viable.
Meanwhile, company officials at Phillips 66, a $58 billion U.S. oil refiner, have told members of Congress the IRA’s tax credits are important for its business, people familiar with the matter said. Instead of crude oil, the company’s renewable fuels are made from used cooking oil, vegetable oil, fats and the like, which qualify it for large tax credits.
“There are elements of the IRA that the general industry says would be bad to unwind,” Mark Lashier, CEO of Phillips 66, said in an interview last month. “Everybody is working out their contingency plans for either administration.”
Green politics
Trump has called Biden’s climate efforts the “Green New Scam” and last month promised to cut unspent IRA funds. With the backing of influential conservative think tanks, Republicans in Congress have tried to repeal the law and provisions in it dozens of times and are expected to push for cuts again next year during the legislature’s budget reconciliation.
Oil billionaires are some of Trump’s biggest backers, and the candidate has privately promised to deliver on many of the policies on their wish lists if elected.
Trump hasn’t fleshed out his plans for the climate law.
Energy policy has emerged as a key campaign issue. Trump has attacked Vice President Kamala Harris’s support for a fracking ban when she was a presidential candidate in 2019, a policy she has since backtracked on.
During the presidential debate in September, Harris touted her support for the IRA, which she said had kindled clean-energy investment but also spurred the record oil production levels reached during the Biden administration. If elected, she has promised to back investment in diverse energy sources.
Some oil lobbyists have told Trump’s campaign the industry’s IRA-backed projects will be a boon to U.S. jobs and manufacturing as major oil companies invest billions.
Karoline Leavitt, a spokeswoman for the Trump campaign, said Trump’s policies turned the U.S. into a net exporter of energy.
“He cut red tape and gave the industry more freedom to do what they do best—utilize the liquid gold under our feet to produce clean energy for America and the world,” she said.
Political strategists said Trump may try to rebrand the law, given the support for it among officials and companies in some Republican-leaning states, such as Oklahoma and South Carolina, who see it as a draw for new investments and jobs.
“If we win, we need to take a scalpel, not an ax, to the IRA,” said Sen. Kevin Cramer (R., N.D.). North Dakota is well-known for its booming oil fields in the Bakken Shale. Oil companies there aim to inject industrial carbon dioxide into the ground to recover more crude, which would also make them eligible for carbon-capture subsidies.
The industry’s support for the IRA only extends so far. Many oppose tax credits for renewable energy and purchasing electric vehicles, saying those incentives undermine competition with gas- and diesel-powered vehicles. Smaller frackers, which aren’t investing in low-carbon technologies, mostly dislike the entirety of the law.
In recent months, Biden’s administration has signaled it is rushing to fund clean-energy projects from a $400 billion lending program created by the IRA. A second Trump administration might slow-walk spending by federal agencies meant to support those projects, said Gordon Huddleston, president of investment firm and natural-gas producer Aethon Energy Management.
“The DOE would just slow down giving out money in a Trump administration,” he said.
A small, vocal faction of GOP budget hard-liners could make it difficult for Trump to preserve even parts of the IRA. The law would make for a tempting target to offset fiscal deficits as the party pushes to renew its 2017 tax cuts next year.
Big bets
The oil industry has fought Biden’s administration for years on restricting fracking, rules for drilling in the Gulf of Mexico and other environmental regulations. But companies that are investing in low-carbon projects stand to lose much if Biden’s climate law is repealed or watered down.
Occidental, one of America’s largest oil producers, is betting big on a largely unproven technology—at a large scale—to suck carbon dioxide from the atmosphere and store it underground.
The process is costly and Occidental has said benefits from federal subsidies of $180 per metric ton of CO2 captured that way and stored permanently will boost the endeavor. Its CEO has for years personally lobbied in Washington to increase the value of the credits.
Bolstered by the IRA, Phillips 66 has transformed a 128-year-old Rodeo, Calif., oil refinery into one that can pump 50,000 barrel-per-day of renewable diesel and aviation fuel.
But the economics of producing renewable fuels are challenging and some of the refiner’s competitors, including Chevron, BP and Shell, have scaled back on similar plans this year. Losing IRA credits would make the business even more difficult.
Oil-and-gas companies are stressing that the IRA is valuable to the country’s economy now in hopes of avoiding tougher conversations after the election, lobbyists said.
“It’s really striking the degree of commitment the industry has made to low-carbon businesses like carbon capture, biofuels and hydrogen,” said Daniel Yergin, the vice chairman of S&P Global and a veteran chronicler of energy trends.
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Enbridge - >>> This 6.5%-Yielding Stock Has Paid Dividends for Nearly 70 Years and Has Plenty of Fuel to Continue Paying Them
by Matt DiLallo
Motley Fool
Sep 26, 2024
https://finance.yahoo.com/news/6-5-yielding-stock-paid-114500592.html
Enbridge (NYSE: ENB) is one of the most durable dividend stocks in the energy sector. The Canadian pipeline and utility company has paid dividends to its investors for more than 69 years. It has increased its payment for the last 29 years in a row. That's impressive, considering all the volatility in the energy sector over the years.
The energy company has plenty of fuel to continue paying dividends. With a dividend yield above 6.5% and more growth ahead, it's an excellent option for those seeking a very bankable income stream.
Built to be reliable
Enbridge has four core franchises: liquids pipelines, making up 50% of its adjusted EBITDA; gas transmission and midstream, 25%; gas distribution and storage, 22%; and renewable power, 3%. They provide the company with very predictable earnings backed by cost-of-service agreements and long-term contracts, accounting in total for 98% of its EBITDA. That predictability has been on full display over the last 18 years. Enbridge has achieved its financial guidance each year despite two major recessions and two additional periods of oil market turbulence.
The pipeline and utility company pays out 60% to 70% of its stable cash flow in dividends each year. That's a conservative payout ratio for a company with such stable cash flow. It gives Enbridge ample room for error while enabling the company to retain meaningful cash flow to fund expansion projects and bolt-on acquisitions.
Enbridge also has a rock-solid financial foundation. Thanks to its strategy of using long-term, fixed-rate debt and keeping its leverage ratio low, it has an investment-grade credit rating. It ended the second quarter with a 4.7 leverage ratio, which was in the middle of its 4.5-to-5.0 target range. It sees its leverage ratio trending toward the lower end of that range next year as it captures the full benefits of its recent natural gas utility acquisitions and maintains its current capital spending range.
These features put Enbridge's high-yielding dividend on a very sustainable foundation. It generates enough post-dividend free cash flow to fund a significant portion of its secured capital program. Meanwhile, it has the balance sheet capacity to fund the remainder with room to spare. That provides additional flexibility to capitalize on future growth opportunities as they emerge.
The fuel to grow
Enbridge ended the second quarter with $24 billion Canadian ($17.8 billion) of secured capital projects in its backlog. Those projects include oil terminal expansions, new gas pipelines, natural gas utility expansions, and renewable energy projects. The company expects these projects to enter commercial service through 2028. That provides Enbridge with tremendous visibility into its future growth.
Those secured capital projects should grow the company's EBITDA by around 3% per year through 2026. Meanwhile, cost savings and optimizations will add another 1% to 2% to its bottom line each year. On top of that, Enbridge has meaningful additional investment capacity it could deploy to add another 1%-plus to its annual earnings growth rate. It sees the potential to continue growing its earnings by around 5% annually after 2026, given the capital projects it has under construction and in development.
The company's visible earnings growth drives its view that it should have ample fuel to continue increasing its dividend. It could raise its payment by up to 5% annually over the medium term.
Plenty of power to continue paying dividends
Enbridge has been one of the most reliable dividend stocks in the energy sector over the decades. That trend should continue in the future. The company has a very low-risk business model and visible growth prospects, so it should have no trouble paying dividends in the future, with its payout likely to continue rising for the next several years. That makes it a great stock to buy for those seeking a very sustainable stream of dividend income.
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>>> Why Occidental Petroleum Is Selling Shares of This 9.5%-Yielding Dividend Stock
Motley Fool
by Matt DiLallo
Aug 15, 2024
https://finance.yahoo.com/news/why-occidental-petroleum-selling-shares-094200259.html
Occidental Petroleum (NYSE: OXY) recently closed its needle-moving acquisition of CrownRock. It paid $12 billion for the fellow oil company, which will significantly enhance its position in the prolific Permian Basin. The acquisition should also boost its annual free cash flow by about $1 billion.
However, the oil stock took on a boatload of debt to close the deal (it issued $9.1 billion of new debt while also assuming $1.2 billion of CrownRock's existing debt). Because of that, the company's near-term focus is on paying down its debt as fast as possible. It recently took another step toward that goal by selling some of its interest in master limited partnership (MLP) Western Midstream Partners (NYSE: WES). That move should come as no surprise and might not be the last time it taps into this source of value.
Choppy progress on its plan
Occidental plans to repay at least $4.5 billion of debt within 12 months of closing its CrownRock deal via its increased free cash flow and the proceeds from asset sales. The oil company aims to raise $4.5 billion to $6 billion from selling assets over the coming years to help repay debt.
The company has already made some progress on that plan. It recently agreed to sell some non-core assets in the Delaware Basin to Permian Resources for $818 million. The company also sold some other non-core assets for $152 million. Those sales will give it $970 million to repay debt.
Occidental was working on an even larger deal. It had agreed to sell a 30% stake in CrownRock to its joint-venture partner in the Permian, Ecopetrol. The deal would have raised $3.6 billion, enabling it to achieve the low end of its target range well ahead of schedule. However, Ecopetrol opted out of that deal.
Despite that sale falling through, Occidental has made solid progress on its overall debt-reduction target. It had already retired $400 million in debt earlier this year. Meanwhile, it plans to make $1.9 billion of debt repayments by the end of this month, most of which it has funded with excess cash flow. The Permian Resources deal will give it another roughly $800 million to repay debt, which it expects to complete by the end of the third quarter. That would push its total debt reduction to $3.1 billion, leaving it about $1.4 billion away from its near-term target.
Trimming a little off the top
With the Ecopetrol deal falling through, Occidental Petroleum is pivoting by selling some of its stake in Western Midstream. Occidental is the largest unitholder of Western Midstream Partners, and until recently, the oil company owned 49.8% of the MLP's outstanding units. In addition, it has a 2% interest in Western Midstream Operating (the company that owns the operating assets). Occidental initially acquired its stake in Western Midstream when it bought Anadarko Petroleum in 2019, which had formed the midstream company to help support its operations.
The oil company has benefited from its relationship with Western Midstream over the years. The MLP has supported Occidental's growth by building additional infrastructure to handle the company's rising production volumes. The MLP has also supplied the oil company with a steady stream of cash flow via its lucrative cash distributions. Western Midstream has increased its base distribution by 52% this year, boosting its current yield to around 9.5%.
Occidental is now using the MLP as an additional source of cash. It recently launched a secondary offering to sell 19 million units. The sale has raised over $658 million in gross proceeds. That will put it even closer to achieving its near-term debt-reduction target.
The company could continue selling down its stake in Western Midstream if it needs additional cash to repay debt. It had reportedly shopped its entire stake in the company earlier this year. It could still sell its remaining interest to another midstream company or a private equity fund. Alternatively, Occidental could launch additional secondary offerings to raise cash when it wants to pay off more debt.
Almost there
Occidental Petroleum borrowed a lot of money to buy CrownRock, which is a concern given the oil sector's volatility (and what happened when it used that approach to buy Anadarko a few years ago). Because of that, the company planned to repay a big chunk of that debt by selling assets. It's now well on its way toward achieving its goals after selling some non-core assets and an interest in its MLP. With the company making progress, it's whittling away at a risk that could have weighed on its stock price if oil prices fall unexpectedly in the future.
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Enbridge - >>> Data Is the New Oil, and It's Powering Growth for This 7%-Yielding Dividend Stock
by Matt DiLallo
Motley Fool
Aug 6, 2024
https://finance.yahoo.com/news/data-oil-powering-growth-7-084900902.html
Oil has been fueling the industrial economy for over a century. It's still important today and likely will remain vital for years to come. However, the digital economy runs on a different fuel: data. Companies rely on data centers to process and store data for their cloud computing and artificial intelligence (AI) applications. And those power-hungry facilities require massive amounts of energy.
That's playing right into the hands of Enbridge, a leader in energy infrastructure. The Canadian pipeline and utility operator is capitalizing on new opportunities to help supply lower-carbon energy to data centers. This could give the company even more cash to grow its 7%-yielding dividend in the future.
Already paying dividends
Enbridge recently closed its $4.3 billion acquisition of Questar, the second of three natural gas utilities it's buying from Dominion. The initial draw of buying Questar (now Enbridge Utah) and the other two gas utilities is that they generate very stable cash flow that should grow steadily in the future.
CEO Greg Ebel commented on one driver in its second-quarter conference call: "Utah's projected population growth is 5% annually through at least 2028, which we expect to drive rate-based growth for years to come."
Another new growth driver is starting to emerge in Utah. Enbridge noted in its second-quarter earnings release that "we are in negotiations to connect up to 200 megawatts (MW) of power to serve data center customers and have had numerous inbounds to connect up to an additional 1.5 gigawatts (GW) over the long-term."
Connecting its gas distribution system to support growing power demand by data centers would enhance the already solid growth it sees ahead for this recently acquired gas utility.
Enbridge, which will soon operate the largest gas utility franchise in North America, is seeing similar opportunities elsewhere in its footprint. In the second-quarter call, Ebel said, "Throughout our utility footprint, we are engaged in additional early stage discussions with data centers that we expect to translate into future growth."
Growing demand by data centers will also benefit the company's large-scale gas transmission business (its pipelines deliver 20% of the gas consumed in North America each day). Ebel discussed the opportunity on the call:
In gas transmission, our assets are ideally located and well connected. We are within 50 miles of 45% of all natural-gas power generation in North America ... We've had a range of customers in the U.S. Southeast that expressed interest in securing approximately 700 million cubic feet a day of transmission capacity to serve up to 5,000 megawatts of new gas power demand.
Utilities will need to build more natural gas power plants to support surging power demand by data centers and other catalysts like electric vehicles and the onshoring of manufacturing. With its strategically positioned gas pipeline assets, Enbridge has an excellent chance to supply gas to these new facilities. Growing demand could boost volumes across its existing pipelines and provide expansion opportunities.
Providing clean power to tech companies
Technology companies must balance their need for baseload power (which natural gas provides) to meet basic demand with their sustainability goals. That's also leading them to secure renewable energy directly from producers like Enbridge.
For example, Amazon signed a long-term power purchase agreement to buy 100% of the energy produced by Enbridge's Fox Squirrel Phase 2 solar energy project in Ohio, which should come on line in the third quarter. The company noted that data center operators value Enbridge's reliability, experience, and proven track record.
The company is working on creative ways to provide these companies with renewable energy, which it can't always build near a data center. For example, companies are signing virtual long-term power purchase agreements with Enbridge. These allow them to buy renewable energy directly from the company, which it supplies to the grid, allowing the purchasers to offset the emissions from the power they're using.
It signed a virtual power purchase agreement with AT&T to support its Orange Grove solar farm in Texas. AT&T will buy 100% of the power of the 130 MW facility.
Enbridge has over 2 GW of wind and solar energy projects in development. That gives it a large portfolio of projects to support the new power load from data centers that should come on line in 2026 and beyond.
A data-powered growth accelerator
Enbridge is in the early days of capitalizing on the expected acceleration in power demand, driven in part by data centers. It's already starting to see new growth opportunities emerge to supply more gas and renewable energy to utilities and data center operators. That could help put a charge in its already solid earnings growth rate, potentially giving the company even more fuel to grow its high-yielding dividend.
That growth and income make Enbridge an enticing low-risk way to play the coming surge in power demand as the digital economy shifts into a higher gear.
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Chevron - >>> A relatively safe way to invest in the energy sector
https://finance.yahoo.com/news/high-hopes-3-dirt-cheap-121500958.html
Chevron is another stock that has gone practically nowhere over the last year or so. There are a few factors at play. The first is uncertainty regarding Chevron's acquisition of Hess, whose crown jewel is its stake in the Stabroek drilling block off the shores of Guyana. The other partners in the Guyana joint venture -- ExxonMobil and CNOOC, a Chinese national oil company -- are looking to stymie the deal and keep Chevron out of Guyana.
The good news is that Chevron doesn't need the deal to go through to be a great investment. It can continue ramping up spending in its existing plays, namely the Permian Basin. It can also continue buying back its stock, which remains a good value with a 14.4 P/E ratio.
It's also important to know how the market can reward or overlook certain qualities at different times. Right now, sentiment is optimistic, and peers like ExxonMobil are rewarded for higher spending and bold acquisitions.
Many other companies have followed suit. Even ConocoPhillips, which is known for being a conservative capital allocator, announced it is acquiring Marathon Oil in a blockbuster $22.5 billion deal. With Chevron's major deal in limbo, there's just one more box left unchecked.
Chevron's financial health and prudence could also be getting overlooked right now. When oil prices are falling, investors often gravitate toward safe, stodgy, dividend-paying names like Chevron. And for good reason. Its financial health helped it acquire multiple companies at compelling valuations during the COVID-induced downturn when other producers were struggling to stay afloat.
For the last three years or so, oil prices have been remarkably stable and strong, which might convince some investors to gravitate toward riskier, more-leveraged plays. It could work out, but long-term investors know the best way to compound gains is to buy quality companies and hold them as long as the investment thesis remains intact.
In sum, Chevron has the qualities of an excellent long-term holding. Its greatest strength is its financial health, which is particularly important given the volatile nature of commodities like oil and gas. With its 4.2% dividend yield, the company stands out as a compelling choice for generating passive income regardless of oil prices.
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>>> Warren Buffett Just Bought $435 Million of This Stock and Plans to Hold It Forever
by Adam Levy
The Motley Fool
Jun 26, 2024
https://finance.yahoo.com/news/warren-buffett-just-bought-435-085000603.html
Lately, there aren't a lot of stocks Warren Buffett has found interesting enough to add to Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) $385 billion portfolio. Buffett, through Berkshire, has made only a handful of purchases during the current bull market.
Truth be told, Buffett has sold more stocks than he's bought in each of the last six quarters. Some of his biggest sales last quarter included a portion of his top holding, Apple, as well as all of Berkshire's position in Paramount Global stock and the rest of Berkshire's stake in HP. But he's been consistently adding to some positions in 2024, including one of his biggest holdings.
So far in June, Buffett spent another $435 million on Occidental Petroleum (NYSE: OXY) to make it Berkshire's sixth-largest position.
More recent Securities and Exchange Commission filings reveal purchases of Occidental Petroleum between June 5 and June 17. Buffett has been snapping up shares of Occidental when it trades around $60 per share, and investors may want to follow his lead.
A stock Buffett plans to hold forever
Buffett originally invested in Occidental in 2019, when he purchased $10 billion of preferred shares directly from the company for Berkshire Hathaway. That $10 billion investment helped finance Occidental's acquisition of Anadarko, strengthening its position in the Permian Basin.
While that acquisition left Occidental laden with debt just ahead of a tough period for the energy market that nobody could have predicted (the COVID-19 pandemic), management admirably navigated through the challenging environment. It suspended its dividend and strategically sold off assets to deleverage its balance sheet, and it's once again on solid footing.
Buffett has since added to his position in Occidental. With the most recent $435 million purchase, Berkshire Hathaway now owns about 28.8% of shares outstanding -- a stake worth about $15.9 billion. It also still owns about $8.5 billion of preferred shares, which include warrants to buy more of the company's common stock at $59.62 a share (it currently trades around $62.90).
In his most recent letter to Berkshire shareholders, Buffett praised Occidental CEO Vicki Hollub, saying the energy stock is a holding he plans to maintain indefinitely. "Under Vicki Hollub's leadership, Occidental is doing the right things for both its country and its owners," Buffett wrote. "We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives."
Occidental will add to its leading position in the Permian Basin this year with its $12 billion acquisition of CrownRock, which is set to close in the third quarter. Hollub will likely follow the same playbook as with the much larger Anadarko acquisition, selling off non-essential assets to reduce the amount of debt on Occidental's balance sheet. It's already exploring a sale of Permian assets worth over $1 billion, according to a report from Reuters in May.
A big bet on oil prices
While Occidental is an integrated energy company, the bulk of its revenue and income comes from drilling. It's in the business of acquiring land and separating oil from rock. That means that its profits depend heavily on the price of oil.
When it announced the CrownRock acquisition at the end of last year, it estimated it could generate an additional $1 billion in annual free cash flow assuming oil prices remain above $70 per barrel.
Hollub now expects oil prices to remain in the $80 to $85 range through 2025. Oil prices took a hit after the members of OPEC+ agreed earlier this month to a plan that would extend their production cuts into 2025, but that would also allow eight member nations to start easing back from their voluntary cuts beginning in October. However, crude prices quickly recovered to around $80.
Buffett took the opportunity to buy Occidental when oil prices came down, and he has already benefited from the slight recovery. Even if oil prices remain relatively stable, Occidental is well-positioned to generate significant cash flow for its shareholders.
Should investors follow Buffett's lead?
As mentioned, Buffett is buying Occidental shares practically any time they dip below $60. At that price, the stock trades at around 14 times forward earnings. That puts it firmly in the value stock territory, but it's not as attractive a valuation as some other oil producers and integrated energy companies carry.
But Occidental, under Hollub, is far more aggressive at growing its bottom line via acquisition and cost-cutting. That could result in far better profit growth over the long run, especially if oil prices consistently move higher. Her strategy brings with it considerable risk, but it also comes with much more potential growth in the long run. In the meantime, the company is certainly stable enough, generating plenty of cash to continue growing its operations while paying a nice dividend.
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Re-post - >>> Warren Buffett loves $OXY! Berkshire Hathaway just loaded up again with a purchase of 1,750,308 shares worth approximately $105.5 million
By: Barchart | June 13, 2024
• Occidental Petroleum Insider Trading Alert
Warren Buffett loves $OXY! Berkshire Hathaway just loaded up again with a purchase of 1,750,308 shares worth approximately $105.5 million
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=174592860
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>>> Alaska pipeline - >>> Environmentalists urge US to plan 'phasedown' of Alaska's key oil pipeline amid climate concerns
by BECKY BOHRER
Associated Press
6-12-24
https://www.msn.com/en-us/news/us/environmentalists-urge-us-to-plan-phasedown-of-alaska-s-key-oil-pipeline-amid-climate-concerns/ar-BB1o75XB?cvid=aef0dabde69640d0913ff2a0c52ec878&ei=62
JUNEAU, Alaska (AP) — Environmental groups on Wednesday petitioned the U.S. Department of Interior to review climate impacts related to the decades-old trans-Alaska pipeline system and develop a plan for a “managed phasedown” of the 800-mile (1,287-kilometer) pipeline, which is Alaska's economic lifeline.
The request comes more than a year after the Biden administration approved the massive Willow oil project on Alaska's petroleum-rich North Slope, a decision that was welcomed by Alaska political leaders seeking to stem a trend of declining oil production in the state and by many Alaska Native leaders in the region who see the project as economically vital for their communities. Willow, which is being developed by ConocoPhillips Alaska, could produce up to 180,000 barrels of oil a day.
Some of the groups who filed the petition, including the Center for Biological Diversity and Sovereign Iñupiat for a Living Arctic, are among those who have asked an appeals court to overturn the approval of Willow. A decision is pending.
Oil flow through the trans-Alaska pipeline system averaged around 470,000 barrels a day last year. At its peak, in the late 1980s, about 2 million barrels a day flowed through the line, which began operating in 1977.
The last environmental analysis, done more than 20 years ago as part of a right-of-way renewal, is “woefully outdated,” the groups said in their petition. They cite the rapid warming and changes the Arctic region has experienced, noting that several ice-reliant species, such as polar bears, have received Endangered Species Act protections since the last review. They also raise concerns about the impacts of thawing permafrost on the pipeline infrastructure. While the next environmental review is expected in about a decade, that's too long to wait, they argue.
“Every drop of oil that moves through the pipeline is more climate devastation, both here in Alaska and around the world,” said Cooper Freeman, Alaska director for the Center for Biological Diversity. “The longer we wait to have this hard conversation about the inevitable — because we must transition off of fossil fuels and we have to do it urgently — the harder it’s going to be for Alaska.”
Michelle Egan, a spokesperson for pipeline operator Alyeska Pipeline Service Co., said in a statement that the company continues to “collaborate with our numerous federal and state regulatory partners as we meet our commitments to safe and environmentally responsible operations. We are steadfast and dedicated to being a prudent operator, safely and reliably transporting oil from the North Slope of Alaska into the future.”
Freeman said Interior can accept the groups' request or deny it, which the groups could challenge. If Interior doesn't respond in what would be considered a reasonable amount of time, the groups can seek to compel a response through the courts, he said.
Interior did not have a comment, spokesperson Giovanni Rocco said by email.
The petition asks that the U.S. Bureau of Land Management, which falls under Interior, evaluate a range of options that include not renewing the right-of-way, issuing a right-of-way for a period of 10 or fewer years to allow for “continuous re-evaluation of the landscape in which TAPS operates,” setting potential limits on how much oil flows through the pipeline and requiring North Slope oil producers to adopt emissions controls for their operations.
The groups say the “only rational conclusion of that analysis will be a managed phasedown of the pipeline,” and their petition calls on the land management agency to begin work on such a plan. It doesn't suggest a timeline for a phasedown.
“We're not asking for the pipeline to shut down tomorrow. We’re saying you need to start the conversation now,” Freeman said. “That includes extensive conversation, engagement, consultation with communities across Alaska, especially on the North Slope. ... The longer we wait, the more pain for people, wildlife and the climate, especially here in Alaska.”
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>>> OPEC agrees to keep oil production cut, likely maintaining high prices through November election
Fox News
by Bradford Betz
6-3-24
https://www.msn.com/en-us/money/markets/opec-agrees-to-keep-oil-production-cut-likely-maintaining-high-prices-through-november-election/ar-BB1nuWGl?cvid=ff3b6506c5cd42658cc4aea078822c5c&ei=95
The Organization of the Petroleum Exporting Countries (OPEC+) on Sunday agreed to extend output cuts through next year, likely keeping prices high through the November presidential election.
The alliance said after a meeting Sunday that the move was aimed at boosting slack prices that have lulled despite the ongoing war in Gaza and attacks on shipping vessels in the Red Sea.
International benchmark Brent has loitered in the $81-$83 per barrel range for the past month, reaching nowhere near the $100 per barrel levels not seen since late 2022. Reasons include higher interest rates, concerns about demand due to slower than desired economic growth in Europe and China, and rising non-OPEC supply including from U.S. shale producers.
SENATE DEMOCRATS ACCUSE OIL COMPANIES OF COLLUSION WITH OPEC, DEMAND DOJ INVESTIGATION
The alliance said that it is extending additional voluntary cuts of 1.65 million barrels per day that that were announced in April 2023 through the end of December 2025.
Saudi Arabia, which dominates the alliance, desperately needs an inflow of cash as it seeks to diversify its economy away from fossil fuel exports. Higher oil prices would also allow fellow OPEC+ member Russia to maintain economic growth and stability as it spends heavily on its war against Ukraine.
Analysts say the cuts could push oil prices higher in coming months, and will be heavily watched going into the November election. The summer usually sees a spike in demand through the July-September quarter, but uncertainty about demand grows after that.
U.S. motorists have benefited from weaker oil prices which have stagnated in recent weeks, averaging $3.56 per gallon last week. That’s just a penny less than a year ago and down from a record national average high of $5 per gallon in June 2022.
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Texas Pacific Land (TPL) - >>> A passive company packed with passive income potential
https://finance.yahoo.com/news/think-crude-oil-going-100-094500311.html
Daniel Foelber (Texas Pacific Land): Formed out of the bankruptcy of Pacific Railroad in the 19th century, Texas Pacific Land owns around 880,000 acres of land in West Texas. If you've ever been to West Texas, you know the terrain can be inhospitable to human settlement. But it is gushing with oil reserves.
Texas Pacific makes money from its land through royalties, water sales, and other factors. It typically makes more money when oil and gas prices are higher, but it isn't as correlated to the price of fossil fuels as an exploration and production company.
For example, it reported significantly lower realized oil, natural gas, and natural gas liquids (NGLs) prices in 2023 compared to 2022. The price per barrel of oil equivalent, which is basically a weighted average for oil, natural gas, and NGLs, was 30% lower in 2023 than in 2022. Yet overall revenue was down less than 6%, and net income was down a little over 9% thanks to higher water royalties.
Category
2022
2023
Oil and gas royalties
$452.43 million
$357.39 million
Water sales
$84.73 million
$112.20 million
Produced water royalties
$72.23 million
$84.26 million
Easements and other surface-related income
$48.06 million
$70.93 million
Land sales and other operating revenue
$9.97 million
$6.81 million
Total Revenue
$667.42 million
$631.6 million
In the following chart, you can see that Texas Pacific Land consistently makes a profit no matter the cycle due to its low cost and passive business model. It also converts a majority of revenue to net income.
Texas Pacific rewards its shareholders with quarterly dividends, which vary in size based on its earnings. For example, the company paid $32 per share in 2022 dividends but just $13 per share in 2023.
Texas Pacific isn't the ideal company if you're looking for predictable passive income or to supplement income in retirement. Still, it is a good choice if you want to invest in oil and gas but avoid the volatility that comes with severe downturns.
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>>> Why the death of North Sea oil is a disaster for Britain
The Telegraph
by Jonathan Leake
April 7, 2024
https://finance.yahoo.com/news/why-death-north-sea-oil-050000216.html
Decommissioning is the new name of the game – despite an estimated 25 billion barrels of untapped oil
Far out in the North Sea a deserted but massive oil platform awaits its fate. Brent Charlie is the last remainder of the Brent field – a resource so big it once provided a third of the UK’s daily oil needs.
Discovered in the 1970s, the Brent field at one point produced 184 million barrels of oil a year, earning billions for Shell, its owner, plus £20bn in tax revenues for the Exchequer. It was so big it needed four massive platforms to extract its riches – Brent Charlie, Alpha, Bravo and Delta.
Today Alpha, Bravo and Delta have gone, cut from their supports and taken to the scrapyards.
Later this year Brent Charlie will also have its legs cut from under it and be lifted on to Pioneering Spirit – a giant ship specially designed to rip apart decaying oil and gas installations.
Pioneering Spirit and the growing fleet of similar oil rig-slaughtering vessels are set for some busy years. In the waters around the UK, hundreds more oil and gas installations are falling silent. Fifty years after the North Sea bonanza began, the final decline is upon us.
As well as hauling the retired rigs to shore, nearly 8,000 wells that were drilled deep into the seabed must also be plugged.
The decline of the North Sea has implications not just for energy policy and tax income, but public finances more broadly.
We face a huge bill – potentially up to £60bn – to clean up the North Sea.
The energy companies are responsible for decommissioning, but tax breaks mean much of that money will be reclaimed from the Exchequer - and ultimately taxpayers.
Last year alone more than 200 oil and gas wells were plugged, eight platforms were removed and 8,000 tonnes of subsea structures were taken out of the ocean – with another 250km of seabed pipelines being decommissioned. Another 180 of the UK’s 284 oil and gas fields will close down by the end of the decade.
Mass closures are not the result of eco-protests, nor because of a lack of demand.
Supply isn’t dwindling either. Over the last five decades oil and gas equivalent to 47 billion barrels of oil have been extracted, but seismic surveys suggest another 25 billion remain.
Instead, operators blame punitive taxes for the rapid pullback, with some facing levies of more than 100pc on their profits.
Production is now in rapid decline.
Data from the North Sea Transition Authority (NSTA), the government’s regulator, shows UK oil production peaked at 150 million tonnes of oil a year in 2000 – roughly double the nation’s consumption. We also produced about 108 billion cubic metres of gas – about 20 billion more than we consumed.
Exports, jobs and taxes were all booming. The oil and gas industry was employing 500,000 people directly or in its supply chains and its products were the essential fuels powering not just our homes and vehicles but the whole UK economy.
Over the five decades to 2020 the offshore industry poured around £400bn of taxes into the Treasury’s coffers.
The contrast with now could hardly be greater. Last year the UK produced just 38 million tonnes of oil, down by 74pc from its peak and about 20 million tonnes less than we need. Gas production was 30 billion cubic metres – less than half our needs.
Employment has fallen to 130,000. So too has the tax take, to around £3bn.
Meanwhile, the UK’s reliance on oil and gas has hardly changed. We still get 75pc of our total energy from oil and gas – just like two decades ago.
Fossil fuels may be warming the climate but they are also essential to heating the 27 million homes reliant on gas or oil-powered boilers. Around 30 million vehicles still run on diesel or petrol and gas-fired power stations provide over a third of our electricity.
We still consume 77 billion cubic metres of gas a year or 1,100 cubic metres per person, the volume of 14 double-decker buses. We also consume about 60 million tonnes of oil – nearly a tonne per person. Imagine several wheelie bins of oil for each citizen, including children.
Whatever the green lobby claims and whatever politicians promise, the fact is that the UK remains a fossil-fuelled nation.
Will that change? Fossil fuel consumption has declined a little and should fall faster if the Government can persuade us to install heat pumps, buy electric cars and change our lives in all the other ways required by net zero.
But what’s becoming all too clear is that our consumption of fossil fuels will never fall as fast as the decline in our North Sea supplies.
It means that for at least the next few decades the UK will be increasingly reliant on imports – with all the vulnerability to global markets, price shocks and the whims of dictators such as Putin that this implies.
Two decades ago we were producing enough oil and gas for the nation and exporting some. Now we face energy poverty and reliance on other nations to keep our homes warm, our lights on and our vehicles moving.
How did it come to this?
Black gold
“Dear God, give us another oil boom. Next time we won’t p*** it up against the wall”.
The words of an anonymous graffiti artist scrawled on a wall some years ago in Aberdeen still resonate today.
The city’s roots as the UK’s oil and gas capital can be traced back to the mid-1960s when BP discovered the West Sole gas field, the first confirmation that more fossil fuel riches were waiting to be found in the North Sea.
Other companies soon came looking, with Philips Petroleum discovering Norway’s mighty Ekofisk field in 1969, followed by the UK’s colossal Brent field in 1971 and the Piper field in 1973.
These giant oilfields and others like them offered the potential to transform the UK’s economic landscape.
Tony Benn welcomed the first delivery from the Argyll field. A famous picture shows the then-Labour energy secretary opening a valve to release the first consignment of oil into the BP refinery on the Isle of Grain in Kent.
Tax receipts also started flowing in, hitting a record high of £12bn in the mid-1980s.
At its peak, roughly one in every £12 that the UK Government took in tax revenues came from the sector.
Today, that figure is less than £1 in every £100.
The oil boom sparked huge shifts in Britain’s economy as the pound soared in value, rendering huge swathes of British industry uncompetitive and destroying thousands of jobs.
It also helped to bankroll Thatcher’s tax-cutting drive in the late 1980s, cementing her legacy as a big reformer.
Politicians knew at the time they had a cash cow, and successive chancellors have been milking it ever since.
First came the petroleum revenue tax (PRT), introduced alongside the discovery of oil and gas. A new 20pc tax on North Sea oil was introduced in 1981 by Tory chancellor Geoffrey Howe.
Labour’s Gordon Brown introduced a 10pc “supplementary charge” on North Sea profits in 2002, effectively raising tax on the region’s production to 40pc from 30pc. He launched a second raid on profits in 2005 by doubling the supplementary charge in what the SNP branded a £2bn “smash and grab”.
George Osborne tinkered with North Sea taxes further, launching a £2bn raid in 2011 to pay for a one penny cut in fuel duty as oil prices soared above $100 a barrel.
Jeremy Hunt’s windfall levy in the wake of Russia’s invasion of Ukraine helped to plug a hole in the public finances.
Countries such as Norway have taken a very different approach to managing their oil and gas wealth.
In 1990, when the UK was using its North Sea income to fund battles against the unions and prop up day-to-day finances, Norway set up a giant savings account – now known as a sovereign wealth fund.
That fund today controls assets worth £1.5 trillion, including a stake in 113 buildings on London’s Regent Street ranging from Apple’s flagship store to Hamleys toy shop.
Norway’s sovereign wealth fund today holds the equivalent of about £250,000 for each citizen – enough to make the nation comfortable for many decades to come, including long after the oil and gas runs out.
There were people advocating for a similar UK North Sea wealth fund at the time of the industry’s beginnings. Labour’s Tony Benn was one of them, as was Bruce Millan, the former Scottish secretary of state. But they were overruled by the rest of the cabinet, who were becoming wary of the growing calls for Scottish independence.
Denis Healey, the former Labour chancellor, admitted in one of his final interviews that the government did “underplay the value of the oil to the country because of the threat of nationalism”.
Sukhdev Johal, accountancy professor at Queen Mary University, London, estimates that if the UK had set up a similar fund to the Norwegian it would be worth £850bn. Given the UK’s much larger population, that would work out to £13,000 per person – a smaller haul, but still significant.
Ultimately, the North Sea income helped support tax cuts for the better-off when the Tories ousted Labour. Nigel Lawson, chancellor under Margaret Thatcher, had cut the top rate of tax from 60p to 40p by 1988.
Healey told Holyrood magazine: “Thatcher wouldn’t have been able to carry out any of her policies without that additional 5pc on GDP from oil. Incredible good luck she had from that.”
Today the North Sea isn’t the cash cow that it used to be and the money is swiftly running out.
Operators’ revenues were £10bn in 2022-23, the Office for Budget Responsibility (OBR) estimates, but this is projected to fall to £4bn this financial year and just £2bn by 2028-29.
Production costs are also mounting. Decades of extraction mean all the easily accessible oil has already been drilled out.
The UK’s mature fields are now one of the most expensive places in the world to extract oil from. It costs $26.20 to produce a barrel of the stuff today, compared with $5.50 in Saudi Arabia and $7.30 in Norway, according to Rystad Energy.
Scrapheap challenge
The big challenge today is decommissioning.
Six years ago the NSTA estimated that the cost of dealing with all the rusting remains of the UK’s North Sea ventures was £60bn. Its scrapheap challenge includes 320 fixed installations, 250 “subsea systems” – meaning wellheads and other kit on the seafloor – plus 20,000 miles of pipelines snaking between wells, platforms and the shore.
But the costliest challenge is dealing with the 7,800 wells, which often stretch over a mile into the bedrock. Each needs to have sections of its steel casings stripped out and plugged with cement, a process likely to consume half the entire decommissioning budget.
“Each unplugged well is a threat to the future, potentially leaking pollutant oils or methane, a potent greenhouse gas, into the ocean above for decades or centuries,” says one of the industry’s most experienced engineers.
For the Treasury, however, the problem is not future pollution but cost.
The UK treats decommissioning as a business expense, meaning it can be offset against profits made in previous years to lower tax bills. Shell’s Brent clean-up alone has cost the Treasury £600m in tax rebates since 2018.
Just how much the end of the North Sea will ultimately cost taxpayers is a bone of contention.
The National Audit Office (NAO) estimated the Treasury faced a £24bn bill for such rebates in a 2019 report.
“Taxpayers are ultimately liable for the total cost of decommissioning assets that operators cannot decommission,” the NAO said.
The warning prompted the Treasury to put pressure on the NSTA to cut the cost of decommissioning. Its latest predictions show an astonishing reduction in the total cost from £60bn to £40bn, which combined with increases in oil prices and profits has reduced the Treasury’s predicted liability to £4.5bn.
Some critics suspect a politically inspired accountancy exercise, but the NSTA says the savings are genuine. It insists that knowledge-sharing and “more sophisticated” forecasting have helped, adding: “Setting cost reduction targets sharpened industry’s focus on the need to improve.”
Industry insiders beg to differ, questioning how any sector could slash costs by a third in an era of rampant inflation.
Gilad Myerson, executive director of Ithaca Energy, one of the UK’s largest offshore operators, said the NSTA’s estimates took too little account of the impact of the UK windfall tax, which has restricted investment and “will bring forward the timing of decommissioning programmes whilst reducing production from existing UK fields”.
Myerson says: “These changes to fiscal policies were designed to boost taxes, but in reality will cost the economy more as fields shut early, reducing tax payments and driving up decommissioning costs.”
More than 250 decommissioning plans have been lodged so far. Each sets out in detail what will be removed but also what will be left in place, including pipelines, concrete mattresses (used to protect pipelines) and other redundant metalwork or concrete.
In theory all such dumping is banned under the Ospar Convention on maritime pollution, an agreement between the UK and 14 other European governments, plus the EU, aimed at protecting the north-east Atlantic.
In practice, however, a relaxed approach from the regulator means the UK’s seabeds will never be put back to their natural state – a saving that will benefit companies and the Treasury, but infuriate environmentalists.
More cost savings may come from derogations, where Ospar signatories permit companies to leave massive installations in the sea forever despite official rules.
The UK has approved 10 such derogations and Ospar warns many more are likely: “There are currently 59 steel installations weighing more than 10,000 tonnes and 22 gravity-based concrete installations, for which [more] derogations from the dumping ban may yet be considered.”
Protests at Shell Brent field in the North Sea
Ageing oil rig structures left to rust in the North Sea have infuriated environmental groups - Greenpeace
Shell in particular wants derogations for the 165-metre tall legs that once supported three of its Brent platforms, claiming leaving them in place is the cleanest and safest option.
These “gravity-based structures” were built from concrete reinforced with steel bars at a time when the main thought was how to survive the 200mph winds and 80-foot waves found in the Atlantic seas north east of Shetland.
No-one thought about their eventual removal. The resulting structures each weigh 300,000 tonnes, the same as New York’s Empire State Building.
They also served as oil storage tanks and so contain thousands of tonnes of toxic oily sludge.
Shell believes leaving them in place was the best option: “Our recommendations are the result of 10 years of research, involving more than 300 scientific and technical studies.”
Others disagree. Tessa Khan, executive director of Uplift, an NGO that campaigns to shut down UK fossil fuel production, said: “Oil and gas companies that have profited from the basin for decades, and which are sitting on huge windfall profits today, should obviously be made to clean up after themselves, like any other business.
“It’s even more scandalous that the Government has caved to industry lobbying such that taxpayers now pick up a chunk of the clean-up bill.”
Energy insecurity
What does the future hold? For offshore contractors, pulling apart oil and gas installations is becoming the most reliable source of income.
Spending on decommissions has risen from £1.39bn in 2019 to £2bn this year and there will be far more spent in future especially if, as expected, the NSTA’s £40bn predicted total proves too optimistic.
Increased spending on decommissioning comes as investment in exploration for new oil and gas fields tumbles - from £800m in 2019 to just £330m this year.
Only a handful of new wells have gone into production in the last five years compared with the many hundreds that have shut down.
Some believe there is still money to be made in the North Sea. The NSTA has approved 51 new exploration licences in the last year with up to 60 more pending. Energy secretary Claire Coutinho has argued for more, saying the domestic oil and gas industry is vital to the UK’s energy security and economy.
However, energy companies are not impressed by such blandishments. Few are investing and some are walking away – for reasons that have nothing to do with geology and everything to do with politics.
The current government’s windfall tax has raised the levy on oil and gas production profits from 40pc to 75pc. The vagaries of the tax system mean some operators have in fact faced tax rates in excess of 100pc.
Harbour Energy, the UK’s largest oil and gas producer, blamed the tax burden for halting its investment in the UK.
The likely next government has only added to the uncertainty. Labour has pledged to halt all new licensing, add another 3pc to the windfall tax and potentially even backdate it.
The impacts of those policy swings from the UK’s two main political parties are proving disastrous for both the industry and the country, argues Chris Wheaton, an analyst with Stifel who specialises in the offshore industry.
In a recent note, he estimated that the UK Government would lose out on £20bn of tax income if investment is “effectively being shut down by higher taxes or stopping any future developments”.
Energy security would also suffer, he argues. “UK gas production would see an accelerated decline, forcing more gas to be imported… with impacts on energy costs for consumers. We estimate the UK would be importing 80pc of its gas demand as early as 2030.”
Mike Tholen, policy director at Offshore Energies UK, the oil, gas and wind industries trade body, said shutting down UK oil and gas without first building the low-carbon systems to replace them, would leave the UK exposed to global price spikes and the whims of dictators.
“Over 23 million homes rely on gas boilers for heat and hot water and gas provides 40pc to 60pc of our electricity depending on wind strength,” he says.
“We can choose an energy transition where [oil and gas] infrastructure continues to offer opportunities for UK companies and workers. Or we can choose increasing reliance on energy from other countries.”
These arguments appear to be falling on deaf ears in Westminster, with no meaningful proposals to reduce the tax burden. Instead, decommissioning is the new name of the game.
This year’s general election will roughly coincide with Brent Charlie being cut away and melted down for scrap.
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Occidental and the insanity of 'Carbon Capture' -
>>> This Could Be Warren Buffett's Shrewdest Big Bet Since Making Billions on Apple
by Keith Speights
Motley Fool
February 25, 2024
https://finance.yahoo.com/news/could-warren-buffetts-shrewdest-big-105000230.html
Warren Buffett raised some eyebrows with Berkshire Hathaway's sale of 10 million shares of Apple in the fourth quarter of 2023. I wouldn't read too much into the move, though.
Apple remains by far the largest holding in Berkshire's portfolio. Buffett also almost certainly remains a fan of the company. Less than one year ago, he told Berkshire shareholders that Apple was "a better business than any we own."
Investing in Apple has proven to be a smart decision for Buffett. Since he first bought shares of the tech giant in the first quarter of 2016, Apple's market cap has increased by close to $2.2 trillion.
But now Buffett is aggressively buying another stock. And it could be his shrewdest big bet since making billions of dollars on Apple.
Buffett's big zig
As far as I know, Buffett has never uttered the phrase, "Zig when others zag." However, his famous statement about being "fearful when others are greedy, and greedy when others are fearful" expresses a similar sentiment. The legendary investor is practicing what he preaches with what I'd call a pretty big zig -- buying shares of Occidental Petroleum (NYSE: OXY) hand over fist.
The conventional wisdom is that the demand for fossil fuels will decline, with renewable energy stepping up to take their place. This view could appear to make sense, with countries and corporations around the world setting ambitious goals for reducing carbon emissions. Investing in an oil stock such as Occidental might seem ill-advised in light of the changing dynamics in the energy sector.
Buffett disagrees. He told CNBC in April 2023 that more oil will be produced five years from now than is produced now -- or at least "about the same amount." The Berkshire Hathaway CEO is wagering a lot of money on the proposition that he'll be proven right.
Berkshire now owns a stake in Occidental Petroleum that's worth close to $14.9 billion. Occidental ranks as the sixth-largest position in Berkshire's portfolio (trailing behind another oil and gas producer, Chevron, by the way.)
Occidental's lottery ticket
I suspect that Buffett has never bought a lottery ticket in his life. At Berkshire Hathaway's 2016 shareholder meeting, he referred to buying lottery tickers as "mathematically unsound." But I think that his investment in Occidental comes with something like a lottery ticket, albeit one with arguably much better odds than the Powerball.
Occidental is betting heavily on direct air capture (DAC). What is DAC? In a nutshell, the technology aims to suck carbon dioxide out of the air. The CO2 is then stored underground.
In August 2023, Occidental announced the acquisition of Carbon Engineering for $1.1 billion, a leader in developing DAC technology. The company is also constructing the billion-dollar Stratos plant in the middle of oil fields in West Texas. Once Stratos is operational, it will be the biggest DAC facility ever by a factor of 100x.
Carbon capture could present a massive opportunity. ExxonMobil estimates that it could be a $4 trillion market by 2050. Occidental CEO Vicki Hollub believes DAC, in particular, could give new life to the oil and gas industry. She told National Public Radio in December 2023 that "there's no reason not to produce oil and gas forever" if her vision of DAC is achieved.
Buffett's on board
Buffett appears to be fully on board with Occidental's DAC focus. He praised Hollub in his interview with CNBC last year, saying that she is "extremely competent" and "understands oil" as well as "political realities."
His aggressive buying of Occidental stock will likely continue. Berkshire won regulatory approval in August 2022 to purchase up to 50% of the oil company; its stake currently stands at a little over 28%.
Will Buffett ever like Occidental as much as he does Apple? Probably not. However, his investment in Oxy just might be the Oracle of Omaha's best major bet since initiating a position in Apple eight years ago.
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>>> NextEra Energy -- Fossil fuels aren't going away anytime soon, but renewable energy has steadily contributed more to America's electric grid. NextEra Energy (NYSE: NEE) is one of the world's largest green energy producers and the largest electric utility business in the United States. Growth in renewable energy has fostered big investment returns. Since going public, NextEra has beaten the S&P 500.
https://finance.yahoo.com/news/4-supercharged-dividend-stocks-buy-131600987.html
The company is also an excellent dividend growth stock. The payout has increased for 30 years, and investors get a solid 3.7% starting yield.
The best part? Its dividend growth. Management has raised the dividend by an average of 11% annually over the past five years and is guiding for 10% increases through at least this year. That makes NextEra a dividend growth stock you want to snap up whenever the price dips.
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>>> Enbridge -- Oil and gas must move from where they are extracted to refineries and exports. This doesn't happen by itself. Midstream companies like Enbridge (NYSE: ENB) own vast networks of pipelines and storage to make this possible.
https://finance.yahoo.com/news/4-supercharged-dividend-stocks-buy-131600987.html
Enbridge is one of North America's largest energy companies. Its network of pipelines spans thousands of miles from Canada to the Gulf of Mexico. It also operates renewable energy projects and a natural gas utility business.
Enbridge acts like a toll booth, making money on fees when oil and gas flow through its lines. That makes the business less volatile, and the utility business also helps create dependable revenue streams.
Enbridge has raised its dividend for 28 consecutive years, a testament to its business model. Additionally, investors get a high starting yield of 7.4%. The payout ratio is manageable at 81%, so investors can feel reasonably confident in it despite its abnormally high yield.
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Occidental - >>> Warren Buffett's Latest $2.1 Billion Buy Brings His Total Investment in This Stock to More Than $74 Billion in Under 6 Years
by Sean Williams
Motley Fool
Mar 4, 2024
https://finance.yahoo.com/news/warren-buffetts-latest-2-1-100600894.html
For nearly six decades, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has been putting on a clinic for Wall Street. Whereas the benchmark S&P 500 has delivered a total return, including dividends, of a little north of 33,000% since the "Oracle of Omaha" took over as CEO in the mid-1960s, Berkshire's Class A shares (BRK.A) have galloped higher by an aggregate of more than 5,000,000% as of the closing bell on Feb. 28, 2024! An outperformance of this magnitude is going to get you noticed by professional and retail investors.
Warren Buffett's phenomenal track record is a big reason why there's a buzz surrounding Berkshire Hathaway every time the company files Form 13F with the Securities and Exchange Commission (SEC). A 13F gives investors an over-the-shoulder look at what Wall Street's greatest money managers have been buying and selling, and is a required quarterly filing for institutions and investors with at least $100 million in assets under management.
Warren Buffett has been adding to a core position and building up his stake in a value stock
Throughout 2023, the Oracle of Omaha and his investment aides, Todd Combs and Ted Weschler, were very selective about their purchases. One core holding that's continued to see somewhat regular additions is energy stock Occidental Petroleum (NYSE: OXY).
Accounting for Berkshire's latest share purchases during the first week of February, Buffett's company has gobbled up more than 248 million shares of Occidental Petroleum since the start of 2022. That's a roughly $15 billion position, with $34 billion, in total, devoted to energy stocks, including Berkshire's position in Chevron.
Having 9% of Berkshire's invested assets tied up in two integrated oil and gas stocks is a pretty clear message that the company's brightest minds anticipate crude oil prices will remain elevated for an extended period. With the global supply of oil remaining tight following years of capital underinvestment tied to the COVID-19 pandemic, there's a real possibility the spot price of crude oil heads even higher.
What makes Occidental Petroleum an intriguing investment in the energy arena is its revenue breakdown. Despite being an integrated operator that generates some of its revenue from downstream chemical plants, Occidental derives the lion's share of its sales from drilling. If the spot price of crude oil climbs, it'll benefit more than virtually any other integrated oil and gas company.
Beyond Occidental, we've also seen Warren Buffett and his team piling back into satellite-radio operator Sirius XM Holdings (NASDAQ: SIRI). Though radio operators are often highly dependent on advertising revenue to keep the lights on, Sirius XM has an assortment of competitive advantages working in its favor that should help it navigate any economic climate better than terrestrial and online radio companies.
To start with the obvious, Sirius XM is the only licensed satellite-radio operator. While this doesn't mean it's free of competition for listeners, it does give the company reasonably strong subscription-pricing power.
What's arguably even more important with Sirius XM is how the company generates revenue. Whereas terrestrial and online radio providers are reliant on advertising revenue, only 20% of Sirius XM's sales came from advertising in 2023. Meanwhile, a whopping 77% of Sirius XM's revenue can be traced to subscriptions. Subscribers are less likely to cancel their service during an economic downturn than businesses are to meaningfully pare back their advertising budgets.
Sirius XM is also historically cheap. Shares are currently trading for a multiple of 13 times forward-year earnings, which is a 32% discount to its average forward-year earnings multiple over the trailing five-year period.
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Occidental - >>> Warren Buffett Just Added $246 Million to 1 of Berkshire Hathaway's Top Holdings
by Adam Levy
Motley Fool
February 12, 2024
https://finance.yahoo.com/news/warren-buffett-just-added-246-100100988.html
While Warren Buffett hasn't seen a whole lot to like in the stock market recently, there's one stock he seemingly can't get enough of.
Over the last couple of years, he's built up a 28% stake in Occidental Petroleum (NYSE: OXY) for Berkshire Hathaway. That makes it one of Berkshire's top holdings, just behind fellow oil and gas company Chevron (NYSE: CVX).
The Oracle of Omaha has added to his Occidental position on three separate occasions since the start of December. His most recent purchase for Berkshire Hathaway's portfolio amounted to about $246 million. That follows purchases of about $589 million and $312 million in December. Meanwhile, Berkshire still owns about $8.5 billion worth of preferred shares in Occidental, which pay an 8% dividend.
Here's why Occidental has become Buffett's favorite energy stock and could soon top Chevron as Berkshire's biggest investment in the industry.
A big bet on oil prices
Occidental and Chevron are both integrated oil and gas companies. However, where Chevron makes most of its money from downstream operations like refineries and chemical plants, Occidental is heavily invested in drilling oil out of the ground. As a result, Occidental's business is much more closely tied to the price of oil.
Its strong position in the Permian Basin gives it a cheap source of oil production. It strengthened that position with the acquisition of Anadarko, supported by Berkshire's $10 billion investment in the company. More recently, it added CrownRock last December, when Buffett started buying up shares again.
Occidental's big investments in the Permian Basin have put pressure on its balance sheet. The company now holds a significant amount of debt. Management plans to divest non-core assets to accelerate the paydown of that debt. It did something similar following the Anadarko acquisition in 2019 and the subsequent drop in oil prices in 2020.
The moves to add more cheap sources of oil make sense in light of Occidental CEO Vicki Hollub's extreme bullishness on the price of the commodity. For one, she said the CrownRock acquisition will generate an additional $1 billion in cash flow in its first year as long as oil prices remain above $70. That was exactly the spot price of oil at the time of the acquisition, and it's only climbed to the mid-70s since.
More recently, Hollub has noted the potential for an oil supply shortage as soon as 2025. A production cut from OPEC combined with growing demand from China will push oil prices higher, she says. As a result, she sees oil climbing to $80 per barrel by the end of the year.
Buffett has a lot of confidence in Hollub. He called her "an extraordinary manager" at Berkshire's 2023 Shareholder meeting in May. After managing the company through the depressed oil prices of 2020 right after acquiring Anadarko, she seems to be up for almost any task.
Should you follow Buffett into Occidental?
Shares of Occidental have gotten off to a poor start in 2024. While Chevron shares have climbed about 2% since the start of the year, Occidental is down about 3.5%.
Moreover, the valuation for Occidental is extremely attractive. Shares currently trade for an enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of just 5x. By comparison, Chevron trades for a 6.6x multiple.
That said, there's a lot more risk in buying Occidental than competing oil and gas companies. For one, it's heavily reliant on the price of oil. As explained, the bulk of its revenue comes from drilling, not downstream operations. Moreover, Occidental's balance sheet includes substantial levels of debt following the CrownRock acquisition. That leverage puts added pressure on management if oil prices decline in the future, making it less profitable to drill.
It's important to note that while Buffett is very confident in the future of Occidental, it's still less than 4% of Berkshire's equity portfolio and an even smaller percentage of the conglomerate's total holdings when you include its cash position and wholly owned subsidiaries. So, remaining diversified is key.
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>>> Genie Energy Ltd. (GNE), through its subsidiaries, supplies electricity and natural gas to residential and small business customers in the United States and internationally. It operates in two segments, Genie Retail Energy and Genie Renewables. The company also develops, constructs, and operates solar energy projects for commercial and industrial customers, as well as its own portfolio; provides energy advisory and brokerage services; and manufactures and distributes solar panel, as well as engages in solar installation design and project management activities. Genie Energy Ltd. was incorporated in 2011 and is headquartered in Newark, New Jersey.
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https://finance.yahoo.com/quote/GNE/profile?p=GNE
>>> Genie Energy Ltd. is an American energy company headquartered in Newark, New Jersey. It is a holding company comprising Genie Retail Energy, Genie Retail Energy International, Genie Energy Services, and Genie Energy Oil and Gas. Michael Stein is the Chief Executive Officer, Genie Energy Ltd.[2]
In 2004, seeking to diversify, IDT Telecom’s Founder, Chairman and CEO, Howard Jonas, launched its first Retail Energy Provider or “REP” and enrolled its first energy supply customers. Then, in October, 2011, Genie Energy Ltd. (NYSE:GNE), was spun-off from IDT Corporation as an independent public company, at which point Class B common stock of Genie Energy Ltd. began trading on the NYSE under the ticker symbol "GNE".
Genie's founder and chairman is Howard Jonas. Michael Stein is the company's Chief Executive Officer of Genie Energy and Chief Executive Officer of Genie Retail Energy. Avi Goldin serves as the company's CFO.
The president of its Israeli subsidiary is Effie Eitam. Genie Energy's Strategic advisory board is composed of: Dick Cheney since 2009 (former vice president of the United States),[3] Rupert Murdoch (media mogul and chairman of News Corp), James Woolsey (former CIA director), Larry Summers (former head of the US Treasury), Bill Richardson (former Governor of New Mexico, ex-ambassador to the United Nations and United States Energy Secretary),[4] Michael Steinhardt, Jacob Rothschild,[5][4] and Mary Landrieu, former United States Senator from Louisiana.
In 2013, IDT Energy, Inc., a subsidiary of Genie Energy, acquired both Dallas-based Diversegy, LLC a commercial energy advisory and its network marketing channel, Epiq Energy. They are now wholly owned subsidiaries of Genie Energy Ltd.[6]
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https://en.wikipedia.org/wiki/Genie_Energy
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>>> Occidental lands $12 billion takeover of shale producer CrownRock
Reuters
Dec 11, 2023
By Sabrina Valle and Sourasis Bose
https://finance.yahoo.com/news/occidental-petroleum-buy-crownrock-12-120620740.html
HOUSTON (Reuters) - Occidental Petroleum on Monday agreed to buy closely-held U.S. shale oil producer CrownRock in a cash-and-stock deal valued at $12 billion including debt, expanding its presence in the largest U.S. shale oilfield.
The deal comes amid a new wave of shale consolidation underpinned by Exxon Mobil's $60 billion proposed deal for Pioneer Natural Resources and Chevron's $53 billion agreement for Hess.
If approved, the CrownRock takeover would make Occidental a bigger player in the Permian shale field than Chevron and Hess combined. Its total production was 1.2 million boed at Sept. 30.
The CrownRock deal, expected to close in the first quarter of 2024, would boost Occidental's Permian production by 170,000 barrels of oil and gas production per day to 750,000 boed.
"We found CrownRock to be a strategic fit, giving us the opportunity to build scale in the Midland Basin and positioning us to drive value creation for our shareholders with immediate free cash flow accretion," said Occidental CEO Vicki Hollub.
Occidental's shares rose less than 1% to $56.96 in morning trade.
U.S. oil producers are using the post-Pandemic profit boom to expand their holdings and build assets to secure higher output and drilling inventory. That has led to a series of deals in the two years since the 2020 price crash.
U.S. oil is trading at about $71 per barrel, encouraging higher output as members of the Organization of Petroleum Exporting Countries pare oil quotas.
Occidental said it will finance the purchase with $9.1 billion of new debt, the assumption of CrownRock's $1.2 billion of existing debt and will issue $1.7 billion in common stock.
"The CrownRock assets are generally perceived to be of high quality, but investors are likely to question the merits of adding leverage to the Occidental balance sheet at this point in the cycle," said Third Bridge energy analyst Peter McNally.
Occidental had about $18.6 billion in long-term debt as of Sept. 30 and the deal would increase its debt to nearly $28 billion. CrownRock would be its first big deal since a widely criticized debt-laden purchase of Anadarko Petroleum in 2019.
"We are pretty negative on this deal," said Sankey Research analyst Paul Sankey. "You're adding a load of debt, when arguable you should be paying with shares".
Occidental plans to reduce its debt by about $15 billion and by at least $4.5 billion in the next 12 months from asset sales and cash flow.
Hollub said in a CNBC interview that Warren Buffett's Berkshire Hathaway, which had helped finance the Anadarko purchase, was not involved in the CrownRock deal.
Occidental said it will raise its quarterly dividend by 4 cents, to 22 cents a share, and expects to retain its investment grade credit ratings.
Cole Smead, CEO of Smead Capital Management, which owns about 5.9 million shares of Occidental in its U.S. portfolio said the deal showed "the optimism that Vicki and the folks at OXY exude right now about the future of the oil and gas business and the prices they are getting to take advantage of that".
Reuters first reported in September that CrownRock was preparing to explore a sale that could give it an enterprise value of well over $10 billion.
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>>> Saudi Arabia may wage oil 'market share war' against the US, reversing output cuts and unleashing a flood of supply, energy expert says
Business Insider
by Aruni Soni
December 6, 2023
https://finance.yahoo.com/news/saudi-arabia-may-wage-oil-053232252.html
Saudi Arabia may wage a "market share war" against the US and flood oil markets with supply, energy expert Paul Sankey said.
That would mark a reversal from Riyadh's strategy of curbing production to boost oil prices.
"You've got to attack the guy that's making the marginal decision to drill or not — and that guy is Mr. Permian Basin."
Saudi Arabia is struggling to boost oil prices with production cuts and may soon make a dramatic reversal aimed at the US, according to energy expert Paul Sankey.
In an interview with Business Insider, he said Saudi Arabia may pivot to ramping up production to flush the market with a flood of supply in the first half of 2024. And that's not to target emerging producers like Guyana or Brazil.
"You've got to attack the guy that's making the marginal decision to drill or not — and that guy is Mr. Permian Basin," Sankey said, referring to the US shale epicenter.
He later added, "I think to be specific, it's a market share war."
Saudi Arabia is currently producing about 2.5 million barrels a day below maximum capacity. If the country follows through with additional supplies that sink crude prices, the goal would be to essentially "bankrupt" the US industry by making it unprofitable to drill oil, Sankey explained. It's a tactic Riyadh used in 2014 and 2020 to regain control over oil prices.
And right now, the set-up is similar to both earlier episodes, the market veteran said. There's a lack of support from the rest of OPEC as countries like the UAE keep producing more oil while Iran is eating into Saudi's share of Chinese crude oil imports. And then there's weakening demand, like what happened during Covid.
"In all three instances you've had the biggest problem, arguably, which is that the US is just making highs and new highs and even further highs in terms of its own production," Sankey said.
US crude production has exploded this year and recently hit a record high of 13.2 million barrels a day, according to the Energy Information Administration.
Meanwhile, global energy markets have become skeptical that OPEC+ is serious about its latest pledges to curb production. After the cartel's meeting last week, when members vowed to extend cuts, oil prices fell.
Its weakening hold over oil markets was on display again this week. On Monday, the Saudi energy minister told Bloomberg TV that production cuts could go past the first quarter. On Tuesday, the Kremlin also talked tough. But oil prices dropped further.
Sankey declined to comment on whether he has heard about plans to increase production from Saudi officials. But the time to act may come soon.
"I think what will happen is they'll wait through winter to see what's going on and maintain, as they've said, into Q1, their cuts," he said. "And then if things start to weaken from there, they're going to have to decide what they're going to do."
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>>> Chevron to Acquire Hess for $53 Billion in Latest Major Oil Deal
The acquisition marks further consolidation of the oil industry and highlights the confidence that energy companies have in the future of fossil fuels.
New York Times
Oct. 23, 2023
https://www.nytimes.com/2023/10/23/business/chevron-hess-acquisition.html
In the second energy megadeal this month, Chevron, the second-largest U.S. oil giant, said Monday that it had agreed to acquire Hess, a medium-size rival, in an all-stock deal valued at $53 billion.
The deal marks a further consolidation of the energy industry, especially in the United States, where smaller companies appear to be taking advantage of relatively high oil prices to join forces with bigger players. The transaction follows Exxon Mobil’s $60 billion purchase of the shale driller Pioneer Natural Resources this month, another sign of confidence among large industry players in the future of fossil fuels even as policymakers promote cleaner energy sources.
Like Exxon’s acquisition of Pioneer, Chevron’s move shows that big oil companies want to invest closer to home amid rising political risks in Asia, the Middle East and Africa. In recent years, Chevron has increased its holdings in the Rocky Mountains and the Permian Basin straddling Texas and New Mexico.
“Besides the United States, South America is the region where Chevron is making its bet,” said Peter McNally, an energy analyst at Third Bridge, a research firm. He said the recent flurry of acquisitions reminded him of a wave of takeovers a quarter-century ago that produced Exxon Mobil and Chevron-Texaco. At that time, he said, the companies were looking to lower costs; today, the acquired companies offer large assets and specialized expertise to develop unconventional resources like shale.
The jewel of the deal is the acquisition of Hess’s investment in offshore Guyana, which, in partnership with Exxon Mobil, is producing 400,000 barrels a day, up from nothing four years ago. Output is expected to triple by 2027, with Guyana representing more than 1 percent of total global output.
Exxon, Hess and CNOOC, a smaller Chinese partner, have made more than 30 discoveries in Guyana, with more than 11 billion barrels in the largest Stabroek block alone.
Natural gas bubbles up with the oil, providing an opportunity in the local electricity market and the potential to export to Trinidad and Tobago to produce liquefied natural gas for European markets.
Exxon Mobil is the Guyana project’s operator and major investor, with Hess piggybacking on what has developed into one of the biggest cash machines in the oil business. Along with West Texas, Guyana is Exxon’s biggest investment to increase future production.
Chevron has a longstanding investment in Venezuela, which borders Guyana, producing potential synergies should the U.S. government further loosen the sanctions it has imposed on that country.
Chevron will also acquire Hess’s shale fields in North Dakota; offshore production in the Gulf of Mexico, where it made a major oil discovery this year; and a natural gas business in Southeast Asia.
In a news release, Chevron said the acquisition would diversify its portfolio. Hess would add about 10 percent to Chevron’s overall oil and gas production of about three million barrels a day.
Mike Wirth, Chevron’s chairman and chief executive, said in a statement that the deal enhanced the company’s operations “by adding world-class assets.”
Pierre Breber, Chevron’s chief financial officer, said, “The addition of Hess is expected to extend further Chevron’s free cash flow growth.”
“With greater confidence in projected long-term cash generation,” he added, “Chevron intends to return more cash to shareholders” in the form of dividends and higher share repurchases.
John Hess, the chief executive of Hess, is expected to join Chevron’s board. He and his family will be big winners from the transaction.
On a conference call with Mr. Wirth, Mr. Hess recalled what he said was his company’s “long, proud history,” which began about 90 years ago with his father’s delivering fuel oil during the Depression.
Mr. Hess portrayed the merger as combining his company’s growth prospects, especially in Guyana, with Chevron’s broader reach, financial strength and ability to pay much bigger dividends.
In a note to clients on Monday, Biraj Borkhataria, an analyst at RBC Capital Markets, said it was surprising that Chevron had struck a big-ticket deal when Exxon, the company’s main rival, appeared out of the hunt because of its multibillion-dollar Pioneer purchase. He figured that Chevron “could bide its time.”
Mr. Borkhataria said Hess would give Chevron “a stronger, more diversified portfolio, which should bode well for shareholders over the long term; but in the near term, the news could weigh on the shares.”
Chevron shares were down about 2 percent on Monday morning.
A Bernstein Research note on Monday morning said the firm saw “little risk” in regulatory challenges, although “an activist contesting the deal is possible.” The research note added, “A counter deal is possible.”
Environmentalists were critical of the deal, as they had been of Exxon’s acquisition of Pioneer. “Chevron’s acquisition of Hess this week is yet another concerning sign that the fossil fuel industry has no intention of slowing down,” said Cassidy DiPaola, campaign manager for Fossil Free Media. “Deals like this lock us into greater fossil fuel dependency and greenhouse gas emissions for decades to come.”
Chevron, like Exxon, says it is building new abilities to capture carbon dioxide and bury greenhouse gases in the ground or recycle them. (lol)
The Chevron-Hess deal is the latest in a series of mergers and acquisitions that are changing the industry. Occidental Petroleum acquired Anadarko Petroleum four years ago for $40 billion. Pioneer spent more than $10 billion in recent years to buy Parsley Energy and DoublePoint Energy in 2021.
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>>> 3 market implications from the Israel-Hamas war
Yahoo Finance
by Rick Newman
October 9, 2023
https://finance.yahoo.com/news/3-market-implications-from-the-israel-hamas-war-183752115.html
Just about every US president gets a Middle East crisis, and President Biden now has his. The war between Israel and the Palestinian Hamas group, which attacked Israel on Oct. 7, could be long and complex. Iran, which backs Hamas and seeks the destruction of Israel, might be involved. Israel has vowed a massive operation in Gaza, which Hamas controls, and months or even years of urban warfare there are likely to be grueling and ugly.
Financial markets are insulated from the direct effects of this unfolding war, which doesn’t immediately threaten energy supplies, corporate profits, or banking stability. But there are market concerns nonetheless, especially if the war escalates. Here are three things to watch.
Oil supplies in 2024. Crude prices jumped by about 4% following the Hamas attack, which is a fairly typical reaction as markets apply a “fear premium” premised broadly on the perception of higher risk. That’s not a huge jump and the price hike could quickly fade if the oil market continues to function normally.
Two geopolitical changes could affect oil supplies in 2024, however — which means they have implications for the US presidential election. The first involves Saudi oil supplies. Before Hamas attacked Israel on Oct. 7, the Biden administration had been trying to broker a deal in which Saudi Arabia and Israel would establish formal, normalized relations for the first time ever. Each nation would make concessions to the other, and the United States would do its part by offering Saudi Arabia defense guarantees that make a deal with Israel possible.
Some analysts think an unstated part of the deal would be Saudi willingness to pump more oil in 2024, to help keep US gasoline prices down as Biden is running for reelection. But the war may now scuttle the Israeli-Saudi deal and with it the prospects of a boost in Saudi oil production in 2024.
“We see more support for tighter oil supply and higher oil prices over the longer term as diplomatic progress on a security deal with Saudi Arabia is likely to face significant headwinds during a period of heightened military activity in the Middle East,” Raymond James analysts wrote in an Oct. 8 report. “Speculation that Saudi Arabia could ease its oil production cuts to build goodwill for a security deal with the US had ramped up, but the potential for this weekend’s events to spark a broader regional conflict will likely place any further progress on hold.”
Iranian oil is another 2024 wild card. There have been subtle signs of a thaw between the United States and the Islamic theocracy, including Iran’s recent release of five US hostages in exchange for the unfreezing of $6 billion in Iranian funds. That, too, may have been a Biden effort to coax or allow more Iranian oil on to global markets to bring prices down. But even suspicion of Iranian aid to Hamas in its attack on Israel may force Biden to tighten sanctions on Iran and end any make-niceties. “Iran’s fingerprints on the attacks could reduce political space for the White House to pursue such leniency,” analysts at ClearView Energy Partners wrote in an Oct. 8 analysis.
Biden’s political prospects have suffered from high inflation, including gasoline prices that hit $5 per gallon in 2022 and have been persistently higher than when Donald Trump was in office before him. Biden clearly wants to keep gas prices as low as possible while he campaigns for reelection. The war in Israel will make that harder.
A coherent Republican party? Republicans in the House of Representatives are waging civil war among themselves, with the first big casualty being former Speaker Kevin McCarthy, who lost his post on Oct. 3 when a handful of far-right members voted to fire him, depriving him of a majority vote. Deep divisions between moderates and conservatives could keep the House leaderless for weeks and lead to a government shutdown when temporary funding bills expire on Nov. 17.
But a shocking war involving a close US ally that might at some point require Congressional action could cure Republicans of their adolescent hissy fits. A “growing sense of crisis will place new pressure on the House to resolve its leadership battle,” Raymond James asserted in its Oct. 8 report. The first test will come sometime around Oct. 11, the first opportunity Republicans will have to elect a new speaker. If they do so in short order, it would reduce the odds of a November shutdown. If they don’t, then maybe the party’s immaturity is incurable.
More aid for Ukraine and more money for defense. The temporary spending bills Congress recently approved did not include the $24 billion Biden wanted for Ukraine in 2024, to help fight its own war against Russian invaders. McCarthy’s ouster darkened the outlook for that aid passing Congress through some other mechanism, since the far-right conservatives asserting their newfound power generally oppose further aid to Ukraine.
The Israeli war may create a fresh opportunity for Congress to approve that aid. Russia is an ally of Iran, which is Israel’s sworn enemy and perhaps a co-conspirator in the Hamas attacks. So it could become politically more difficult for some members of Congress to snub Ukraine, since that favors Russia and by extension Israel’s nemesis, Iran. The world also seems even more dangerous in the aftermath of the Hamas attacks, which came as a total surprise and ruptured a period of relative calm in the Middle East. There are now two major wars in America’s sphere of influence, with China signaling its own interest in invading Taiwan one of these years. Gamesmanship over defense spending suddenly seems dumber than usual.
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Chevron - >>> Got $500? 1 Warren Buffett Stock to Buy Emphatically
Motley Fool
By Reuben Gregg Brewer
Sep 22, 2023
https://www.fool.com/investing/2023/09/22/got-500-1-warren-buffett-stocks-to-buy-emphaticall/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
KEY POINTS
Oil and natural gas are vital energy sources used the world over.
Despite a global push to increase the use of non-carbon energy sources, oil and natural gas will remain important for decades.
Financially strong Chevron will be there to provide it while paying an attractive dividend.
The world will need oil for decades, and Chevron is well positioned to provide it while rewarding investors with dividends along the way.
Warren Buffett's portfolio contains a number of energy companies, including both utilities and oil and natural gas production companies. It's an admission of the important role that energy plays in the modern world. If you are looking at Buffett's portfolio at Berkshire Hathaway (BRK.B -0.86%), one energy company that even conservative investors with as little as $500 might want to add to their portfolios is Chevron (CVX 0.66%). Here are some key reasons why.
1. Oil demand is not going away
According to the Energy Information Administration, the International Energy Agency, and OPEC, demand for carbon fuels will continue to be robust through at least 2050. The biggest shift will be a trend away from coal, the dirtiest of the major carbon fuels, and toward natural gas, the cleanest. Oil demand will be higher, too, but it will not grow as quickly as natural gas. All in, neither oil nor natural gas is going away, largely thanks to a still-growing world population.
With this backdrop, it is clear that oil and natural gas companies are going to be important providers of energy. Chevron is an integrated energy giant with a market cap of over $300 billion. It has been producing oil and natural gas for a very long time and has highly efficient operations. If there is a need for oil and/or natural gas, it is well positioned to produce the fuels.
2. Chevron is financially strong
There are a lot of energy companies in the world, however, even some very large ones that rival Chevron in scale. But one thing that separates Chevron from similar peers is its impressive financial strength. To put a number on that, Chevron's debt-to-equity ratio is roughly 0.14 times. That would be low for any company.
But Chevron's debt-to-equity ratio also happens to be the lowest in its direct peer group, as the chart above shows. This is important because oil and natural gas are commodities prone to dramatic and often swift price swings. Excessive debt reduces a company's strategic options when times get tough. Chevron, given its financial strength, has more choices during the inevitable industry downturns it will face. That's something conservative investors should greatly appreciate.
3. Chevron has a strong playbook
Just having choices isn't enough, however; a company has to show that it knows what to do. And Chevron did just that during the oil downturn spurred by the economic shutdowns used to slow the spread of the coronavirus in 2020.
As the graph above shows, when oil prices declined in 2020, crimping Chevron's earnings, it took on more debt and increased its leverage. That cash was used to keep the business going and to continue paying dividends to investors (more on this in a second). Just as important, when energy prices recovered, Chevron reduced leverage so it would be prepared for the next industry weak spot. So not only does Chevron have a strong financial foundation, but it has proven willing to use that strength when needed.
4. Chevron puts investors first
As noted, one of the things Chevron did during the last downturn was support its dividend. The company's earnings dipped into the red, so it could have easily justified a dividend cut. It did not, though, preferring instead to increase the dividend just like it has every year for over three decades. Through good energy markets and bad ones, Chevron has continued to increase its dividend annually. This is notable for a couple of reasons.
First, it shows that the company knows how to navigate a highly volatile industry. Second, and perhaps more importantly, it proves that the company places a high value on the needs and desires of its shareholders. There are other energy stocks out there, some with dividend policies that effectively rise and fall along with oil prices. However, the board of Chevron is well aware that conservative income investors buy its stock because they expect a consistent and slowly growing dividend. And that is what they have made sure shareholders get.
An all-around great energy stock for conservative income investors
There are other things to like about Chevron, like its growing production profile and the current guidance that it will continue to improve the returns on the capital it invests. It's also working to improve its own environmental footprint. Such things will ebb and flow over time.
The bigger picture is what Buffett generally looks at. And from that perspective, Chevron operated in an industry that is out of favor but will remain important for years. It has a large and financially strong business. It has proven it can use its financial strength to muddle through difficult times. And it continues to put investors first with a steadily increasing dividend. If that sounds like a good combination of traits, then you might just be channeling your inner Warren Buffett.
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Here's how the energy sector fared in the 2008 and 2020 crashes, vrs the S+P 500, gold, silver, and the miners (approx figures) -
2008 -
XLE - (60%)
CXV - (47%)
SPY - (52%)
GLD - (32%)
GDX - (73%)
SLV - (60%)
2020 -
XLE - (63%)
CVX - (57%)
SPY - (35%)
GLD - (14%)
GDX - (50%)
SLV - (39%)
SIL - (53%)
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The US still has those two gigantic untapped oil reserves in Alaska that were revealed in Lindsey Williams' book 'The Energy Non-Crisis'. Lindsey was there when the first discovery was made (Gull Island area), but it was never developed, and its existence was immediately classified by the govt and not made public. A 2nd massive reserve was then discovered nearby. Lindsey said each reserve is approx the size of the Saudi Arabian reserves, so they represents several centuries worth of oil.
Why they were kept secret and never developed is a complex question, but at the time (late 1970s) the US had only just established the Petrodollar system (following the collapse of Bretton Woods), and thus needed oil prices high to support global demand for the otherwise unbacked US dollar. Later, the US/West globalists decided upon the current 'electric everything' paradigm, and ultra cheap / abundant oil would work against that goal. And in addition, eliminating the use of oil / natural gas will also weaken the global influence of Russia, Saudi Arabia, etc. So, the US' massive reserves just sit there in the ground, untapped for the last ~ 50 years.
Meanwhile, the Russians found their ultra-deep Siberian oil (abiotic oil), and thus became the world's 2nd largest supplier. It turns out that most oil is not a 'fossil fuel' at all (derived from decaying organic matter), except for the relatively shallow oil deposits. Ultra deep drilling in Siberia revealed an almost endless supply of 'abiotic' oil, formed continuously by the high pressures and temperatures at those depths -
Abiotic oil - https://en.wikipedia.org/wiki/Abiogenic_petroleum_origin
>>> Growth stocks ‘highly overvalued’ but energy looks attractive, says strategist
Yahoo Finance
by Ines Ferré·Senior Business Reporter
September 12, 2023
https://finance.yahoo.com/news/growth-stocks-highly-overvalued-but-energy-looks-attractive-says-strategist-165549242.html
Energy stocks are looking attractive as investors rotate out of "crowded" growth trades, says one Wall Street strategist.
"The tech trade is still highly overvalued at this time" Lori Calvasina, RBC Capital Markets head of US equity strategy, told Yahoo Finance Live on Tuesday. "The leadership areas [stocks] are tired and need to take a break."
"I agree that longer term that's [growth trade] where you want to be from a fundamental perspective, but we've just got to go through a correction there," added Calvasina. "Money is going to rotate into these value oriented sectors, and I think energy is giving you one of the best alternatives."
Strategists expect the energy sector to outperform this quarter as oil is up around 29% since late June. On Tuesday, the S&P 500's Energy Select ETF (XLE) rose more than 2%, as technology stocks slid.
"We're starting to see energy do what tech was doing at the beginning of the year —exiting that downward revision cycle but it's still very early days," she added.
The Information Technology XLK ETF (XLK) which is up 40% year-to-date, still far ahead of XLE, up 6% since the start of the year.
Oppenheimer's chief investment strategist John Stoltzfus agrees oil's surge to 2023 highs brings a buying opportunity among equities.
"We find the S&P 500 energy sector looking increasingly attractive as policy makers in the US and abroad strive to contain inflation and manage economic growth," Stoltzfus wrote.
Oppenheimer also sees energy benefitting amid a US push towards infrastructure projects and chip manufacturing.
On Tuesday, West Texas Intermediate (CL=F) hovered just below $89 per barrel in midday trading. Brent crude futures (BZ=F) sat above $91 per barrel.
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>>> Oil prices spike as Saudi Arabia, Russia extend 1.3 million barrel a day oil cut through December
Associated Press
by By JON GAMBRELL
9-5-23
https://www.msn.com/en-us/money/markets/oil-prices-spike-as-saudi-arabia-russia-extend-13-million-barrel-a-day-oil-cut-through-december/ar-AA1gh2sj
DUBAI, United Arab Emirates (AP) — Saudi Arabia and Russia agreed Tuesday to extend their voluntary oil production cuts through the end of this year, trimming 1.3 million barrels of crude out of the global market and boosting energy prices.
The dual announcements from Riyadh and Moscow pushed benchmark Brent crude above $90 a barrel in trading Tuesday afternoon, a price unseen in the market since November.
The countries' moves could increase inflation and the cost for motorists at gasoline pumps. It also puts new pressure on Saudi Arabia's relationship with the United States, as President Joe Biden last year warned the kingdom there would be unspecified “consequences” for partnering with Russia on cuts as Moscow wages war on Ukraine.
Saudi Arabia's announcement, carried by the state-run Saudi Press Agency, said the country still would monitor the market and could take further action if necessary.
“This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets,” the Saudi Press Agency report said, citing an unnamed Energy Ministry official.
State-run Russian news agency Tass quoted Alexander Novak, Russia's deputy prime minister and former energy minister, as saying Moscow would continue its 300,000 barrel a day cut.
The decision “is aimed at strengthening the precautionary measures taken by OPEC+ countries in order to maintain stability and balance of oil markets,” Novak said.
Benchmark Brent crude traded Tuesday above $90 a barrel after the announcement. Brent had largely hovered between $75 and $85 a barrel since last October. A barrel of West Texas Intermediate, a benchmark for America, traded around $87 a barrel.
White House national security adviser Jake Sullivan declined to comment on the market impact of the decision, though he said U.S. officials had regular contact with the kingdom. He added that Biden would look to utilize “everything within his toolkit” to assist American consumers.
“The thing that we ultimately stand for is a stable, effective supply of energy to global markets, so that we can in fact deliver relief to consumers at the pump, and we do this in a way that is consistent with the energy transition over time,” Sullivan said.
Bob McNally, the founder and president of the Washington-based Rapidan Energy Group and a former White House energy adviser, said Saudi Arabia and Russia had “demonstrated their unity and resolve to proactively manage" the risk of oil prices potentially dropping in tougher economic conditions with their announcement Tuesday.
“Barring a sharp economic downturn, these supply cuts will drive deep deficits into global oil balances and should propel crude oil prices well above $90 per barrel,” McNally said.
The average gallon of regular unleaded gasoline in the U.S. stands at $3.81, according to AAA, just under the all-time high for Labor Day of $3.83 in 2012. However, gasoline demand typically drops for U.S. motorists after the holiday so it remains unclear what immediate effect this could have on the American market, AAA spokesman Andrew Gross said.
“I’m more concerned about what the rest of hurricane season may hold,” Gross told The Associated Press. “A big storm along the Gulf coast could move prices dramatically here.”
Hurricane Idalia just plowed through Florida and U.S. forecasters said Tuesday that Tropical Storm Lee in the Atlantic Ocean will become an “extremely dangerous” hurricane by Friday.
Meanwhile, higher gasoline prices can increase transportation costs and ultimately push the prices of goods even higher at a time when the U.S. and much of the world is already raising interest rates to combat inflation.
“The impact these cuts will have on inflation and economic policy in the West is hard to predict, but higher oil prices will only increase the likelihood of more fiscal tightening, especially in the U.S., to curtail inflation,” said Jorge Leon, a senior vice president at Rystad Energy.
The Saudi reduction, which began in July, comes as the other OPEC+ producers have agreed to extend earlier production cuts through next year.
A series of production cuts over the past year has failed to substantially boost prices amid weakened demand from China and tighter monetary policy aimed at combating inflation. But with international travel back up to nearly pre-pandemic levels, the demand for oil likely will continue to rise.
The Saudis are particularly keen to boost oil prices in order to fund Vision 2030, an ambitious plan to overhaul the kingdom’s economy, reduce its dependence on oil and to create jobs for a young population.
The plan includes several massive infrastructure projects, including the construction of a futuristic $500 billion city called Neom.
But Saudi Arabia also has to manage its relationship with Washington. Biden campaigned on a promise of making the kingdom's powerful Crown Prince Mohammed bin Salman a “pariah” over the 2018 killing of Washington Post columnist Jamal Khashoggi.
In recent months, tensions eased slightly as Biden's administration sought a deal with Riyadh for it to diplomatically recognize Israel.
But those talks include Saudi Arabia pushing for a nuclear cooperation deal that includes America allowing it to enrich uranium in the kingdom — something that worries nonproliferation experts, as spinning centrifuges open the door to a possible weapons program.
Prince Mohammed already has said the kingdom would pursue an atomic bomb if Iran had one, potentially creating a nuclear arms race in the region as Tehran’s program continues to advance closer to weapons-grade levels. Saudi Arabia and Iran reached a détente in recent months, though the region remains tense amid the wider tensions between Iran and the U.S.
Higher oil prices would also help Russian President Vladimir Putin fund his war on Ukraine. Western countries have used a price cap to try to cut into Moscow’s revenues. But those sanctions have seen Moscow be forced to sell its oil at a discount to countries like China and India.
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>>> Enbridge Bets Big on US Gas With $9.4 Billion Dominion Deal
Bloomberg
by Will Wade and Mark Chediak
September 5, 2023
https://finance.yahoo.com/news/enbridge-buy-three-dominion-utilities-202519451.html
(Bloomberg) -- Canadian pipeline operator Enbridge Inc. agreed to buy three utilities from Dominion Energy Inc. in a $9.4 billion deal to create North America’s largest natural gas provider.
The acquisition of the East Ohio Gas Co., Questar Gas Co. and Public Service Co. of North Carolina will double the Calgary-based company’s gas utility business, Enbridge said in a statement Tuesday.
The deal is a massive bet that gas will remain a transition fuel for the foreseeable future even as much of the world tries to phase out fossil fuels to fight climate change. While there’s a strong push to deploy more renewable energy, there’s also a growing recognition that the green transition will take time, ensuring gas will be in demand for years.
“The assets we are acquiring have long useful lives and natural gas utilities are ‘must-have’ infrastructure for providing safe, reliable and affordable energy,” Enbridge Chief Executive Officer Greg Ebel said in the statement.
The move comes as Enbridge, North America’s largest pipeline company, is pushing to position itself for the transition toward cleaner energy. The three companies it’s buying serve customers in Ohio, Utah, Wyoming and North Carolina, where revenue from utility bills is forecast to grow faster than the national average.
“They’re going for that very fixed cash flow,” Bloomberg Intelligence analyst Talon Custer said in an interview.
The transaction is valued at $14 billion including debt. It will be Enbridge’s largest since its acquisition of Spectra Energy Corp. for about $28 billion in 2017, according to data compiled by Bloomberg.
Enbridge shares fell 6.2% as of 9:09 p.m. in after-hours trading in New York while Dominion was 0.3% lower. To help finance the transaction, Enbridge said separately that it plans to raise C$4 billion ($2.9 billion) in a share sale underwritten by a group of institutions led by RBC Capital Markets and Morgan Stanley.
The deal to buy the companies, which serve 7 million homes and businesses across multiple states, will require approvals from regulators, including the Federal Trade Commission to ensure it doesn’t violate antitrust laws. Enbridge said it would start pushing forward to secure the approvals immediately. It expects the deal to close in 2024.
The transaction is also the latest to arise from Dominion’s corporate review launched by CEO Bob Blue late last year to reverse a slumping stock price. Dominion executives said they wanted to focus on the company’s growing electric utility business and pay down debt.
The deal with Enbridge comes nearly two months after the Richmond, Virginia-based Dominion agreed to sell a $3.3 billion stake in a Maryland liquefied natural gas export project to Berkshire Hathaway Energy.
Dominion said Tuesday the sale of its gas distribution utilities would help it improve the company’s funds from operations to debt ratio by 3.4%. Blue said the company will provide an update on its review during the fourth quarter.
Morgan Stanley and RBC were Enbridge’s financial advisers on the deal while Sullivan & Cromwell LLP and McCarthy Tétrault LLP were its legal advisers. Dominion’s financial advisers were Citigroup Inc. and Goldman Sachs Group Inc., and its legal adviser was McGuireWoods LLP.
The group of underwriters for the equity sale also includes BMO Capital Markets, CIBC Capital Markets, National Bank Financial Markets, Scotiabank, and TD Securities.
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>>> Buffett Takes Control of US LNG Plant With $3.3 Billion Deal
Bloomberg
by Ruth Liao
July 10, 2023
https://finance.yahoo.com/news/buffett-takes-control-us-lng-211309707.html
(Bloomberg) -- Berkshire Hathaway Energy agreed to buy Dominion Energy Inc.’s stake in a Maryland liquefied natural gas export project for $3.3 billion.
The deal will boost the company’s limited partnership ownership of the terminal to 75%, while a unit of Brookfield Infrastructure Partners holds the remaining 25%, Warren Buffett’s Berkshire said in a statement Monday.
Berkshire Hathaway Inc. first took a stake in the one-train export plant with an annual export capacity of 5.25 million tons in 2020.
The deal will give Berkshire control of one of just seven operational US facilities that can export LNG at a time when the fuel has assumed an increased economic and geopolitical significance. Natural gas prices surged in 2022 following the invasion of Ukraine, and US exports of the liquefied form of the fuel helped to sustain Western European economies after Russia cut supplies.
Cove Point LNG is contracted on a long-term basis to companies including Tokyo Gas Co. and Sumitomo Corp.
Dominion said in a separate statement that it will use the proceeds to repay debt. Dominion, which has been conducting a business review, has said it plans to host an investor day in the third quarter to give an updated strategic and financial outlook.
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Vitesse Energy - >>> Warren Buffett's Bold Move: Acquiring a 10% Dividend Yield Stock
Motley Fool
By Lee Samaha
May 27, 2023
https://www.fool.com/investing/2023/05/27/warren-buffetts-bold-move-acquiring-a-10-dividend/
KEY POINTS
The investment case for Vitesse Energy is based on its management team.
The company operates a flexible and conservative business model.
Hedging and diversifying its investments helps to reduce risk.
Berkshire Hathaway's acquisition of stock in a high-yield oil and gas company is attracting a lot of investor interests.
Warren Buffett's Berkshire Hathaway purchased just over 51,000 shares in oil and gas company Vitesse Energy (VTS -0.88%) in the first quarter. It's not a significant position for Berkshire -- the current value is just over $1.1 million. However, it is intriguing for retail investors who want to follow the oracle of Omaha into a stock currently yielding 9.5%. So let's look at Vitesse and why it might attract income-seeking investors.
A classic Warren Buffett stock
The stock has all the hallmarks of a Buffett value stock purchase. The key to this argument is as follows:
It's an investment decision that relies on Berkshire's confidence in an experienced management team. I'll return to this point in detail in a moment.
It's a shareholder-friendly company with management aiming to grow dividends over time and expecting to initially "pay quarterly cash dividends and dividend equivalents totaling approximately $66.0 million per fiscal year" -- equivalent to $2 per share.
Management diversifies risk in its business model, ensuring free-cash-flow generation is returned to investors in the form of buybacks and dividends.
It's a classic "value" investment because the downside is limited, while the upside is significant.
Introducing Vitesse Energy
The company is unusual in the oil and gas sector because it's not an owner/operator of assets. Instead, its management team, led by industry veteran Bob Gerrity as CEO, acquires interests in oil and gas assets (primarily in the Bakken oil field in North Dakota) operated by leading oil companies. Some of its better-known listed partners include Chord Energy, Civitas Resources, Hess, and to a lesser extent, Marathon Oil and ExxonMobil.
The company's risk management extends to diversifying its interests. As of March 2023, the company had interests in 6,475 productive wells "with an average working interest of 2.7% per working interest well," according to company presentations. In addition, management aims for a ratio of net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) of less than 1. Also, it uses hedging to reduce its exposure to the volatility of oil and gas prices.
The conservatively run balance sheet and hedging reduce the upside potential from higher oil and gas prices. Still, it also helps ensure a steady cash flow stream to support dividends. In addition, it means Vitesse can be in relatively better shape to deal with a downturn -- a significant plus because management can then go and use its cash flow to pick up working interests in oil and gas assets when prices are low.
Another advantage of not being an owner/operator of assets is that Vitesse is "burdened with various contractual arrangements with respect to minimum drilling obligations, and [the company] can avoid exploratory, upfront leasing and infrastructure costs customarily incurred by operators" according to its SEC filings.
Why the management team matters
Given the business model, it's clear that investing in Vitesse Energy means trusting in the management team to allocate capital wisely, manage risk accordingly, and have the skill to identify productive investments. It's relatively less of what could be crudely described as the typical oil-price-led investment in oil and gas assets. Hedging commodity price volatility is always going to be an imperfect science. For example, Vitesse doesn't hedge its natural gas (only responsible for 13% of revenue in the first quarter) production and has no plans to do so, and only 31% of its oil production is hedged to 2024.
That said, management retains the flexibility to hedge higher percentages of its oil production, which helps lower risk. That came through in the first-quarter results with average realized prices before hedging of $72.95 a barrel, compared to $74.02 after hedging.
It's clear that management's role is crucial, and it's worth looking into the key figure at Vitesse, namely Gerrity. He is the founder of Gerrity Oil & Gas Corporation, which merged with Snyder Oil assets to create Patina Oil in 1996, a company then acquired by Noble Energy in 2008. Gerrity would go on to found Vitesse Energy in 2014.
Gerrity and his management team have a demonstrable track record of success, and there's no doubt that Berkshire feels comfortable with the company's business model.
A stock to buy?
If you are looking for oil and gas exposure and a high-yield stock, and you trust what Berkshire sees in Vitesse's management, the stock offers an excellent option for investors. The fossil fuel sector isn't short of high-yield candidates, but Vitesse is one of the relatively lower-risk plays in the sector. As such, the stock is attractive for income-seeking investors.
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>>> More Money Will Flow Into Solar Than Oil For The First Time
Oilprice.com
By Alex Kimani
May 28, 2023
https://oilprice.com/Alternative-Energy/Solar-Energy/More-Money-Will-Flow-Into-Solar-Than-Oil-For-The-First-Time.html
According to Fatih Birol, the IEA’s executive director, solar investments are expected to attract over $1 billion a day in 2023.
Since the energy crisis hit two years ago, many of the world’s governments have doubled down on renewable energy since they view the sector as an ideal way to not only decarbonize but also achieve energy security.
Several oil producing hubs including Saudi Arabia and UAE are investing heavily in renewable energy as they try to diversify their economies.
Solar
The amount of capital investment flowing into the solar sector is poised to overtake the amount of investment going into oil production for the first time ever in 2023, the International Energy Association has reported.
According to Fatih Birol, the IEA’s executive director, solar investments are expected to attract over $1 billion a day in 2023 with over $1.7 trillion slated to flow clean energy technologies such as EVs, renewables and storage. Overall, global investment in energy is projected to hit ~$2.8 trillion in the current year.
Speaking to CNBC’s Arabile Gumede on Thursday, Birol said there was a “growing gap between the investment in fossil energy and investment [in] clean energy. Clean energy is moving fast--faster than many people realize. This is clear in the investment trends, where clean technologies are pulling away from fossil fuels. For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy.”
Since the energy crisis hit two years ago, many of the world’s governments have doubled down on renewable energy since they view the sector as an ideal way to not only decarbonize but also achieve energy security. Further, several oil producing hubs including Saudi Arabia and UAE are investing heavily in renewable energy as they try to diversify their economies.
Cheaper than oil and gas
Another big reason why the clean energy sector is growing fast is due to the fact that after many decades, renewable energy is finally competitive with fossil fuels in electricity generation.
Last year, Energy Intelligence’s senior reporter Philippe Roos analyzed the cost of generating electricity, also known as levelized cost of energy (LCOE), of conventional and renewable forms of electricity generation in five regions: the U.S., Western Europe, Japan, the Mideast and developing Asia. The data, which also include break-even prices for oil, gas and coal in the Mideast and developing Asia, was based on Energy Intelligence’s proprietary LCOE model.
The EI study revealed that renewables had overtaken gas permanently on cost-effectiveness, with the race for lowest cost remaining mostly between solar photovoltaic (PV) and onshore wind. This trend rings true even in Japan, where the scarcity of real estate handicaps land-intensive renewables, onshore wind beats coal and PV displaces gas.
According to the LCOE report, “wind and PV generation costs remain lower than fossil fuel alternatives, especially with current high gas and coal prices”, and with supply chain issues troubling both sectors equally, renewable technologies are still the cheapest.
A possible exception to this trend later this year is natural gas since gas prices have fallen so dramatically over the past couple of months.
After hitting multi-decade highs shortly after Russia invaded Ukraine, natural gas prices in Europe have declined sharply with prices on course to drop by as much as 15% this week alone. Prices have now crashed 90% since the August 2022 record-high of over $322 (300 euros) per MWh with weak industrial demand and high inventories for this time of the year the main reasons.
In contrast, oil and coal prices remain well above their 5-year averages. With OPEC+ willing to go to great lengths to keep prices high and U.S. shale drillers unwilling or unable to rapidly ramp-up production, oil markets are likely to remain relatively tight at least in the medium term.
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>>> Hedge Funds’ Ultra-Bearish Oil Bets Signal US Recession Angst
Non-commercial positions are near most bearish since 2011
Bloomberg
By Devika Krishna Kumar and Chunzi Xu
May 20, 2023 at 9:00 AM EDT
https://www.bloomberg.com/news/articles/2023-05-20/hedge-funds-ultra-bearish-oil-bets-signal-us-recession-angst?srnd=premium&sref=XLA0GJqR
Money managers that trade derivatives linked to oil and fuel prices are about as bearish as they’ve been in more than a decade, suggesting they’re braced for a recession that could cause contracts from crude to jet fuel to take another tumble.
The trading positions of non-commercial players such as hedge funds are near the most bearish levels since at least 2011 across a combination of all major oil contracts. And in bets that are perhaps most indicative of recession expectations, speculators’ combined views on diesel and gasoil — fuels that power the economy — are near the most bearish levels since early in the Covid-19 pandemic.
The gloom over the oil market this year has come from multiple directions, including expectations that the Federal Reserve’s rate hikes will provoke a contraction and China’s less-than-booming rebound from its Covid-19 restrictions. Add in the threat of a US default if politicians fail to raise the debt ceiling and the possibility that OPEC+ may not deliver all the output cuts they’ve pledged, and traders have no shortage of bear scenarios to choose from.
“It’s pretty remarkable to see this type of positioning,” Greg Sharenow, who manages a portfolio focused on energy and commodities at Pacific Investment Management Co., said in an interview...
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https://investorshub.advfn.com/boards/read_msg.aspx?message_id=171954377
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Enbridge - >>> Buffett has loaded up Berkshire's portfolio on some oil stocks, but there aren't any midstream energy companies in the mix. His secret portfolio, though, is a different story. NEAM owns a tiny stake in midstream leader Enbridge (ENB).
https://www.fool.com/investing/2023/02/12/3-top-dividend-stocks-in-warren-buffetts-secret-po/
That small position won't move the needle much at all for NEAM and certainly not for Berkshire. However, buying shares of Enbridge could potentially pay off for income investors. With a dividend yield of 6.73%, every $10,000 invested in the stock would make $673 in annual income.
Enbridge's dividend is arguably one of the safest in the energy sector. The company has increased its dividend for 28 consecutive years. Its cash flow also doesn't hinge on volatile oil prices. Nearly all (98%) of Enbridge's cash flow is either based on a cost-of-service model or contracted.
The stock could be ready for a big upswing this year. Enbridge is rapidly expanding into renewable energy, with several new projects in progress.
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Name | Symbol | % Assets |
---|---|---|
Exxon Mobil Corp | XOM | 23.51% |
Chevron Corp | CVX | 18.13% |
ConocoPhillips | COP | 5.43% |
Phillips 66 | PSX | 4.20% |
Schlumberger Ltd | SLB | 4.08% |
EOG Resources Inc | EOG | 3.36% |
Kinder Morgan Inc Class P | KMI | 3.26% |
Marathon Petroleum Corp | MPC | 3.26% |
Valero Energy Corp | VLO | 3.23% |
Occidental Petroleum Corp | OXY | 2.81% |
Name | Symbol | % Assets |
---|---|---|
Exxon Mobil Corp | XOM | 22.33% |
Chevron Corp | CVX | 21.24% |
Phillips 66 | PSX | 5.23% |
ConocoPhillips | COP | 4.52% |
Marathon Petroleum Corp | MPC | 4.20% |
Schlumberger Ltd | SLB | 4.11% |
EOG Resources Inc | EOG | 4.01% |
Valero Energy Corp | VLO | 4.01% |
Kinder Morgan Inc Class P | KMI | 3.88% |
Occidental Petroleum Corp | OXY | 3.61% |
Name | Symbol | % Assets |
---|---|---|
Exxon Mobil Corp | XOM | 21.76% |
Chevron Corp | CVX | 18.11% |
ConocoPhillips | COP | 4.70% |
Phillips 66 | PSX | 4.32% |
Schlumberger Ltd | SLB | 3.69% |
Marathon Petroleum Corp | MPC | 3.60% |
Valero Energy Corp | VLO | 3.37% |
EOG Resources Inc | EOG | 3.28% |
Kinder Morgan Inc Class P | KMI | 2.92% |
Occidental Petroleum Corp | OXY | 2.67% |
Name | Symbol | % Assets |
---|---|---|
TC Energy Corp | TRP.TO | 8.47% |
Enbridge Inc | ENB.TO | 8.22% |
Kinder Morgan Inc Class P | KMI | 7.89% |
Williams Companies Inc | WMB | 6.26% |
Enterprise Products Partners LP | EPD | 5.95% |
Atmos Energy Corp | ATO | 4.56% |
NiSource Inc | NI | 4.37% |
Cheniere Energy Inc | LNG | 3.97% |
Magellan Midstream Partners LP | MMP | 3.80% |
ONE Gas Inc | OGS | 3.73% |
Name | Symbol | % Assets |
---|---|---|
Schlumberger Ltd | SLB | 22.18% |
Halliburton Co | HAL | 17.48% |
Baker Hughes Co Class A | BKR | 8.58% |
National Oilwell Varco Inc | NOV | 4.76% |
Helmerich & Payne Inc | HP | 4.45% |
Transocean Ltd | RIG | 4.15% |
TechnipFMC PLC | FTI | 4.01% |
Core Laboratories NV | CLB | 2.98% |
Apergy Corp | APY | 2.97% |
Patterson-UTI Energy Inc | PTEN | 2.57% |
Name | Symbol | % Assets |
---|---|---|
National Oilwell Varco Inc | NOV | 5.56% |
Halliburton Co | HAL | 5.33% |
Baker Hughes Co Class A | BKR | 5.28% |
Core Laboratories NV | CLB | 5.27% |
Patterson-UTI Energy Inc | PTEN | 5.12% |
Helmerich & Payne Inc | HP | 5.07% |
Schlumberger Ltd | SLB | 4.91% |
Transocean Ltd | RIG | 4.65% |
Nabors Industries Ltd | NBR | 4.51% |
TechnipFMC PLC | FTI | 4.34% |
Name | Symbol | % Assets |
---|---|---|
Schlumberger Ltd | SLB | 20.29% |
Halliburton Co | HAL | 11.12% |
Baker Hughes Co Class A | BKR | 7.01% |
National Oilwell Varco Inc | NOV | 5.45% |
Tenaris SA ADR | TS.MI | 5.22% |
Helmerich & Payne Inc | HP | 4.58% |
TechnipFMC PLC | FTI | 4.58% |
Apergy Corp | APY | 4.53% |
Patterson-UTI Energy Inc | PTEN | 4.52% |
Core Laboratories NV | CLB | 4.33% |
Name | Symbol | % Assets |
---|---|---|
ConocoPhillips | COP | 14.31% |
Phillips 66 | PSX | 12.23% |
Marathon Petroleum Corp | MPC | 9.83% |
EOG Resources Inc | EOG | 9.39% |
Valero Energy Corp | VLO | 5.41% |
Hess Corp | HES | 4.33% |
Pioneer Natural Resources Co | PXD | 4.26% |
Cheniere Energy Inc | LNG | 3.66% |
Diamondback Energy Inc | FANG | 3.56% |
Concho Resources Inc | CXO | 3.45% |
Name | Symbol | % Assets |
---|---|---|
PBF Energy Inc Class A | PBF | 3.15% |
Marathon Petroleum Corp | MPC | 3.00% |
Phillips 66 | PSX | 2.84% |
Valero Energy Corp | VLO | 2.83% |
Delek US Holdings Inc | DK | 2.73% |
HollyFrontier Corp | HFC | 2.67% |
Hess Corp | HES | 2.60% |
Murphy Oil Corp | MUR | 2.50% |
Cabot Oil & Gas Corp Class A | COG | 2.47% |
ConocoPhillips | COP | 2.40% |
Name | Symbol | % Assets |
---|---|---|
Reliance Industries Ltd ADR | RIGD.BO | 8.82% |
Phillips 66 | PSX | 8.34% |
Marathon Petroleum Corp | MPC | 7.57% |
Valero Energy Corp | VLO | 6.97% |
Neste Corp | NESTE | 6.35% |
Omv AG | OMV | 5.23% |
JXTG Holdings Inc | 5020 | 5.20% |
Polski Koncern Naftowy ORLEN SA | PKN | 4.71% |
Galp Energia SGPS SA | GALP | 4.54% |
HollyFrontier Corp | HFC | 4.41% |
Name | Symbol | % Assets |
---|---|---|
Enbridge Inc | ENB.TO | 8.89% |
Kinder Morgan Inc Class P | KMI | 8.59% |
TC Energy Corp | TRP.TO | 8.48% |
Williams Companies Inc | WMB | 8.00% |
ONEOK Inc | OKE | 6.89% |
Cheniere Energy Inc | LNG | 6.46% |
Targa Resources Corp | TRGP | 4.99% |
Antero Midstream Corp | AM | 4.63% |
Energy Transfer LP | ET | 4.54% |
Equitrans Midstream Corp | ETRN | 4.48% |
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