Oily E&P

Has Covid-19 forced you to wear glasses and a mask at the same time? You may be entitled to condensation. Vin Diesel only eats two meals a day to keep in shape for making movies: Breakfast and breakfurious A genie granted me one wish, so I said “I just want to be happy.” Now I’m living in a cottage with 6 dwarves and working in a mine. Robert Burns: “The best-laid schemes o’ mice an’ […]

Mike Masters was the first American to score a goal at Wembley. But we had a different Mike Masters on Happy Hour last night, the hugely successful hedge fund manager who had a swimming scholarship to Tennessee, and started Masters Capital in 1994. He became highly prominent in 2008, testifying to Congress on oil speculation. Mike Masters: the market is obsessed with post-COVID recovery, but is not thinking enough about the decade prior to COVID […]

Make a good call, they always play out really fast and leave you wondering what’s next. We left last year predicting a bad January but a good year for markets, and a good year for oils. Markets have been quite the ride, notably yesterday the NASDAQ was crazy, while the oils have been good. In our cross plot of performance shown below, it is clear that some 2021 laggards are ripping this year, notably refining. […]

This morning! PSX Phillips 66 Call 11am ET fireside with Greg Garland, Chairman & CEO, Mark Lashier, President & COO, and Jeff Dietert, IR.  This note has a brief history of PSX. Register here: https://www.sankeyresearch.com/2022-refining-conference/ There have not been Friday jokes for quite some time. You will never believe the theme: What’s the most positive thing about 2022 so far? COVID tests. We are mystified that people are so angry about Djokovic being an anti-vaxer. His […]

Happy New Year! Dan Loeb was complaining on Twitter that we hardly got any time off here: “Even prize fighters get 6 months off between fights, NFL players a week. Only 2 days off between years makes me want to join a union”. He was also welcoming New York’s new mayor; I am completely with Dan on both these matters. By the same token it feels as if neither of us will be joining Gettr.com […]

Thinking about the year ahead, one of my favourite Twitter follows @Raisingthebar47 published the following deliberately non-consensus list of things that will happen energy in 2022. The list is interesting, notably for natgas theorists, but also because it represents what could be considered a list of unexpected events for the year; it was just a quick checklist of things to consider: Natgas back to <$2.50/mcf MVP cancelled/pushed to ’23 (Mountain Valley Pipeline) Oil hits <$50/bbl […]

A couple of stories over the past week have highlighted the precarious nature of global oil supply Outage in Libya 300kb/d Force majeure declared in Ecuador, cutting exports by at least 200kb/d Upstream Online 20th December 2021 Production from four Libyan oilfields has been shut in, causing NOC, the state oil company, to declare force majeure on crude exports from two ports the Zawia and Mellitah terminals. NOC said in a statement on Monday that […]

Not talking about COVID, just to say I am feeling 100% fine. This Omicron will hopefully be the largest and fast mass vaccination programme in history, whether by God or Government. Nice chart this morning from Greg Wachsteter, who kindly said I could publish. No more comment on COVID, I think the conclusion here is pretty obvious; this chart is therefore bullish S&P Energy. Sankey-Laffer curves. The presentation attached today, made me think what a […]

It was a long trip to Texas, and it is good to be back in Brooklyn; this note is a short reminder to myself where markets are, having been running around. For example my time on Wall Street this past week, was Wall Street, Midland. What a comeback for oil last week, since the brutal air drop after Thanksgiving. We need to establish a level here, most would consider that the oil equity group is […]

Sankey Research dinner with Steve Chazen TONIGHT this Thursday in Houston. Join! RSVP Magnolia CEO Steven Chazen, CFO, Chris Stavros Houston 9th December 6pm. Chazen is clearly one of the greatest oil executives in history, a mythical figure. The approximate story that he told me over the years, is that he was a dog handler in the Vietnam War; the dog whisperer; PhD in geology; worked on the moon programme as a geologist. He told […]

Busted flat in Baton Rouge, waiting for a train… ExxonMobil has called a historic snap analyst meeting for this Wednesday 1st December. The first meeting under a new, externally appointed, CFO, former Diageo executive, Kathryn Mikells. She is now in charge of finance, strategy, communication, and investor relations (IR). Kathy already refreshed her first earnings call, Q3 2021, interjecting, freely commenting, communicating; the company also gave clear guidance over what to expect from this update […]

Very tricky to call, indeed! OPEC/Saudi surely will act if markets don’t bounce – my Middle East Intelligence says Saudi is worried about the price but wants to see the market follow through Monday. Fascinating real-time week coming up, we think there might be a unilateral cut by Saudi if the market continues to collapse. But for OPEC to do a cut, is extremely complicated. The easy out, given they have to do something unless […]

Presentation today, and commentary below: Thursday evening annoucement: major sellside meeting by ExxonMobil: “updates to their company plan” on Wednesday December 1st. Sellside invited. Virtual. Big deal for ExxonMobil. We had pondered how ExxonMobil would manage their annual capex announcement, due in December, vs their traditional strategy update due next March. We pondered if plans would be ready in time for a December update, given the scale of board and management change that has occurred […]

Big upcoming events for us: Happy Hour this week with former FERC Chairman Neal Chatterjee, along with Aaron Cutler, both now partners at major DC law firm Hogan Lovells. Aaron at 5pm, Neal at 5:30pm. Both have deep multi-decade Washington energy experience at the highest level – Neal was former Chief of Staff for Senator McConnell, Senate Republican Leader. It is obviously vital to understand the shifting energy landscape in Washington. These are the experts […]

BREAKING Major European gas news, Germany regulator suspends approval of Nordstream 2. Bullish news on Shell Corning glance on high glass prices BREAKING Watchers.News: Natural gas prices in Europe soared again on Tuesday, November 16, 2021, as the German Federal Network Agency — Bundesnetzagentur — suspended the process of certifying the new Russian gas pipeline called Nord Stream 2. The pipeline was completed in September 2021 and is designed to bypass Ukraine and connect Russia […]

Saturday: there’s an unrelenting element to being a stock analyst. “You are only as good as your last note.” The need to constantly publish is relentless. With that in mind, it has been my intention to write an oil book. Something that can sit on a shelf. One of my favourite oil books is Anthony Sampson’s “The Seven Sisters”, which provides a brilliant, and concise, history of the seven major oil companies that formed the […]

Just spent £100 on a belt that doesn’t fit. Huge Waist. The misuse of the word literally drives me figuratively insane. The sky was looking ominous so I asked Siri, “Surely, it’s not going to rain today?” She replied, “Yes it is, and don’t call me Shirley.” That was when I realized I’d left my phone on Airplane mode. Major geopolitical tension continues in Europe against the backdrop of natgas prices trading at $25/mmbtu before […]

Heading to a group meeting with new EOG CEO Ezra Yacob this afternoon, this note takes a look back at the history of the company from my perspective. As the oil age continues, and as global oil supply gets visibly tight against the remarkable 100mb/d of demand globally (>1,000 barrels per second of global oil consumption), we think the market will begin to pay more attention to inventory levels and reserves replacement rates. There was […]

Quick note today as I have two events. One of my favourite parties, this morning an NY Marathon party in Carroll Gardens adjacent to the running route, which starts at 9am. It is the only party I know of that starts at 9am on a Sunday. And then to the NY Giants game playing the Raiders at Meadowlands 1pm. You can get there easily, getting out involves multiple trains. It is a family tradition to […]

Ezra’s first quarter as EOG CEO and he lofts it out of the park – massive increase in regular dividend, big special, buyback, he is in NYC next week, take a victory lap Pioneer wanes yesterday after weak buyback guidance Apache on fire We like Denbury on CO2 negative oil, and encourage Oxy carbon ventures Sunrun – we expected either a crashing miss or wild beat and massive stock reaction; we got neutral Delek beats; […]

OPEC Meeting live debating: who is Brandon? Continental shareholders overwhelmingly love the $3.3bn deal for marginal acreage in a new basin Meanwhile at seller Pioneer $1bn more than the asking price for non-core acreage; $3.02 special Final natgas injection number of the week (withdrawls start next week for winter)? The Biden Administration does not seem to understand oil, and more particularly how much spare capacity there is in OPEC. Here’s a quick lesson in global […]

Mega-theme, ESG backlash: progressive Dem agenda whacked by Virginia governor Republican backlash Mega-theme, short wind, long coal: second 2021 profit warning from Vestas Mega-theme, global energy crisis: European gas prices bouncing on Russia natgas supply outages Mega-theme, Renaissance of US E&P: Devon with great results, COP is about as good, Pioneer after market tonight ESG backlash: the general disarray in the current US administration has been exacerbated by the major swing of Virginia voters to […]

There was a funny Tweet about Joe Biden’s shut-eye at COP26 yesterday: “It’s not nodding off if you say “Amen” when you open your eyes again”. Two major developments caught our attention yesterday. First, Canadian PM Trudeau promises to reduce emissions from the oil & gas sector to net-zero by 2050. Second, with major implications for the US E&P industry, the WSJ reports that the EPA is greatly increasing its methane limits, a move which […]

Jolly Halloween, Halloween is one of America’s greatest stealth exports. Now huge in UK, for example. In today’s presentation – Suncor strong Q4 to date in big catch up trade; oils outperform during inflation per Fidelity; growth won the past couple of weeks over value, even after Amazon and Apple missed; Big Oils have the highest free cashflow yields and dividend yields of the S&P500 Titans – by far; massive week of oil earnings ahead, […]

Last night on Happy Hour I was complaining that my calls are stone-cold right now, and sure enough, the theory that Chevron would have a messy quarter just got blown out of the water. Actually, I will take it, because my thesis all year has been long oils / short Big Tech, and these past two weeks, with feeble earnings from Oil Service, Kinder, Range Resources, EQT, badly received results from Hess (raising capex for […]

Hess results look in line. We argue that as the market prices oil terminal value back in, on the failing energy transition, Hess’ Guyana position will re-value higher. Structurally bullish Hess. Range $RRC increases 2022 hedges d’oh. “Wake me up at the end of 2022 on this one”. Negative. Short Neste and long Equinor, both reported – two companies at opposite ends of the valuation spectrum Well, for a highly anticipated week of quarterly results, […]

Huge week for earnings on deck this week, just about 50% of the market cap of the S&P500 reports,  and to celebrate, the traditional Sunday Sankey is back with a full presentation attached. Sample slide: Bloomberg lists Kuwait’s oil production capacity as 3.08mb/d. In the slide shown in the Sunday Sankey presentation today from the authoritative MEES, Kuwait’s production capacity has dropped by more than 500,000 b/d over the past three years to just 2.63mn […]

Key points: Clients are focused on OPEC spare capacity and demand growth, but also, rightly, North American supply growth, which is the most price elastic component of global oil supply. Halliburton results yesterday naturally raise questions over US production growth; the company stated that it sees 20% rise next year in North American revenues, which includes “solid pricing gains”. This would imply Halliburton expects US E&P capex to be ~10% higher next year; not a […]

Mega-theme: the backlash against the nonsense elements of ESG Mega-theme: LNG Friday, so here’s a longer joke (?): Conspiracy theory: The UK climate protest group Insulate Britain are so completely bone-headed and infuriatingly disruptive (blocking the key London ring road, M25), that I can only assume they are a British Government/MI6 counter-environment group that is working to increase public opposition to the environmental movement in the sensitive run up to COP26 on 1st November in […]

Good Morning, Finally back in Brooklyn after some 6 weeks getting my mother set up with full-time 24/7 care. Quite how we managed it, is a complex question, but essentially for free, the UK National Health Service now provides round-the-clock in-home care. Finally achieving that, freed me up to get back to my real desk in Brooklyn, here I am. Main point today is to note Happy Hour this week at 5pm Thursday has Gordon […]

The class system in the USA is: never been to Disney; been to Disney once; goes to Disney annually. Why did Chewbacca crash the Millennium Falcon when he first piloted it? He made a Wookiee mistake. Besides watermelon, there should be windmelon, firemelon, and earthmelon: the four elemelons We had Kathleen Kelley on Happy Hour last night; formerly senior oil market advisor to Saudi Oil Minister Khalid Al-Falih. He is now Minister for Investment of […]

Marketing in The City – Denbury highlighted by Europe Being long (client) and short (Pioneer $PXD) European natural gas Europeans worried as always about US E&Ps growing – EOG seen as likely to ramp A note on re-repricing options with special dividends Shell profit winning & warning – but no unknown unknowns HAPPY HOUR TONIGHT WITH KATHLEEN KELLEY – OPEC EXPERT. 5PM Eastern. Marketing in The City of London yesterday, I sat down to lunch […]

The headlines from yesterday’s OPEC meeting were “oil jumps to its highest level since 2014”. We finally made it back, and goodness me, it was a long road. Of course, the WTI price we have attained today with a super-bullish backdrop is completely different from what we faced in October/November 2014. At the time, we had peaked at $107/bbl in mid-2014, after a sustained period 2010-2014 when oil traded in a range with $80/bbl as […]

Key points: CHK new CEO EQT issues stock & hedging status Enbridge Line 3 starts tomorrow delivering oil, good for Canadian oils Emissions intensity of global oil producers Quote of the day: “I just know the the more control there is, the less growth there is. The great lesson of the twentieth century is that central planning doesn’t work” – Rick Warren (Drucker-Warren Dialogue, 2003) after @buckquivas on Twitter Chesapeake raises Domenic “Nick” Dell’Osso Jr […]

Jolly Sunday to you, Global energy crisis: Having written at length about this eight days ago in the note “Germany & UK vs the USA”, all week I have been reading about the global energy crisis led by the UK and Germany. Everyone makes the same points, last year cold global winter leading to low natgas storage, lack of wind in Europe, nuclear shutdowns, Asia squeeze, Russia squeeze etc. The one I talked about in […]

Certain cities, like New York, London, and Paris, are an experience, like being in a movie, so strong is their identity. The same goes for San Francisco, the very name a romantic invocation of California and the Pacific, Gold Rush. The beauty of the Bay, the Golden Gate Bridge. Beautiful physically, and host to massive tech companies such as Uber and Twitter, with huge property prices, there are some major problems, the greatest of which, […]

Greetings from London, You live in the UK and have avoided death by COVID? FT: In the UK, 4m households were unable to afford to adequately heat their homes even before the latest energy price crisis. Some 10,000 deaths a year are linked to living in a cold home, according to the charity National Energy Action. If that represents around 100 deaths per day over the average of four winter months, high energy prices are […]

In this note, natgas hedging exposure (oops) and a China focus. My S&P500 sentiment Twitter survey yielded a result that is spectacularly unhelpful, lol. Pretty much 50:50 bullish/bearish. All I can say is that it seems I got the categories right, given an almost exact balance between the four choices. One observation made by a major market maker to me this past Friday was that the market absorbed a ton of paper last week, between […]

Enjoy the last weekend of summer, beautiful day here in London, readying ourselves for next week with a slew of oil corporate oil & energy newsflow in “conference season” starting with this week’s traditional “Lehman Conference”, as we oil old schoolers know it. For my entire career, the Lehman conference has occupied the oil/energy week after Labor Day. Post-Labor Day, for me, as a research analyst, opens the Wall Street year, back when it culminated […]

Good morning from London Great week last week for all our favourite sectors, the Oils, Metals & Mining, Refining, as well as recovery play JETS (exchange traded fund ETF performance is shown below for past week/year to date). Last week firmly re-establishes oils – almost even including MLPs – into the position of market leadership this year. Other leading sectors year to date, but not the past week, are Retail, Homebuilders and Communication Services.  See […]

Welcome to mid-August, I am taking it easy for a couple of weeks. Good week ahead for fishing offshore Ixtapa on the Pacific. Really nothing on the calendar next week for oil analysts unless we stretch to retail such as Walmart, Home Depot, and Target, all reporting. Roblox is an interesting company. A call last week from the White House for OPEC+ to produce more oil and for the FTC to investigate high pump prices […]

August is upon us, with results effectively over, I am back in Brooklyn having dropped Harry for pre-season college soccer in Boston, trip review from a gasoline perspective closes this note. Speaking on sons and August, yesterday Max, who is yet to go back to college in Atlanta, was on CNBC. That is him ludicrously stationed in shot in the background of my Fast Money segment, pretending to work. You can see the clip here. […]

The US has negative unemployment, by one measure. The confirmation of that on Friday led to an interesting market reaction. The data point on negative unemployment released before the market was that there are 8.6 million people considered out of work in the US and nearly 10 million job openings. This could be a moot point in the EU where movement of labour is much more challenged by language and culture, but in the US, […]

With EOG rounding out oils’ earning season after the market yesterday, we had the final disappointment as oil prices test downside support levels breaking $70/bbl (Brent, WTI already broke into the upper $60s.) Expectations of an excess cash return special or splashy buyback announcement by EOG were dashed. Nothing. Just good free cashflow in a $70/bbl+ tape and the promise to pay down more debt by 2023. This is not the first disappointing Q2 earnings, […]

In this note: the analyst who simply thanked Pioneer, with Devon, Oxy, and ConocoPhillips all cheering battered oil investors, and really strong macro news for Big Integrated Oils (ExxonMobil etc) with their lagging exposure to soaring global natgas prices that are pushing up refining margins. Global demand strength is also bullish for the oils, regardless of the market’s deep reluctance to capitalize OPEC market management. First, Tellurian offers shares: 35,000,000 shares of its common stock […]

Just as your correspondent was pondering the upside surprises in capital discipline and cash return to shareholders from “4P” premium Permian pure-plays Pioneer ($PXD) and Diamondback ($FANG) announced yesterday evening, and waiting for a similar positive result from ConocoPhillips, than my friends at HollyFrontier announce a $1.8bn deal to marry perennial bridesmaid Sinclair Oil, the MidCon refiner that started life in 1916 and has been private since 1976. HollyFrontier is on a roll, completely counter-cyclically […]

We found ourselves standing on the North Slope, Alaska, above the Arctic Circle, surveying the endless flat tundra. There there is no sunlight from October to early March; total darkness over half the year. For the rest of the year, the sun does not go down – no darkness. That place, my friend, is Far North. The nearest city is Anchorage, 1,000 miles south, itself as distant as Perth Australia; palpably remote; strange and distant […]

SAVE the DATE: Sankey/Jan Stuart summit, Vienna, December 2021 OPEC meeting. Likely December 2nd.  World Petroleum Conference in Houston December 5th – 9th forces their hand to an early in-person Vienna meeting early December. I plan on attending both, and Jan and I will host a “thought leadership” drinks party in Vienna on the eve of the meeting. Join please! Save the date. 2nd Spoke to a big player who trades Utilities, and he said […]

When we wrote The Renaissance Thesis of US E&P in 2017, we argued that oil companies had to stop pursuing growth, reduce capex, increase returns and free cashflow and stop hedging. We also highlighted that management pay relative to performance was an insult to shareholders (those shareholders that remain). The anti-hedging argument was originally made successfully to the refiners. In fact, the overall thesis on E&P was based on success earlier in the decade, changing […]

Greetings, It is all about the presentation this week; please click on the attached file for a look at what is in store for the week ahead – earnings; OPEC chat; what to buy when US natgas prices hit $4/mmbtu, which they did this past week; factor performance disconnection; and our only solution since we wrote The Renaissance Thesis of US E&P in 2017, namely hard cash return to shareholders. These oils have to bribe […]