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Friday Sankey 12/4/20

What is the most dangerous part of a car? The nut holding the steering wheel. Who is this Pavlov guy? I cannot place him. But his name rings a bell. Using a cinnamon stick to stir your Christmas party drink is not a religious act. It’s egg nog stick. They call it the Labrador market – delighted with everything it bounds after. NASDAQ yay! Bitcoin yay! Copper yay! And thus, as we said in our […]

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8:50 AM

Morning Darren

ExxonMobil’s press release last night entitled “ExxonMobil to prioritize capital investments on high-value assets” begs the cynic to ask “what exactly would you say you were doing before?” Well, here is the history answer and it is not pretty. But, this is all looking backward, we will look forward directly in this note with a strategy suggestion. And by “what were you doing before?” we mean this is a twenty-year question. Brief conclusions: the $20bn […]

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9:10 AM

Morning Sankey 11/24/20

The oils continue to be lively driven by the surprising up-move in Brent & WTI crude prices, that has come at a point that looked by some measures to be max bearish. If you recall, over the last days of October, Brent fell from $43/bbl to $37/bbl and looked like it might have a run at $30/bbl, COVID resurging, Europe shutting down. Libya roaring back with 1mb/d incremental light-sweet supply. That bearish Atlantic Basin picture […]

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8:18 AM

Morning Sankey 11/18/20

There are lots of interesting stories out there to consider, hoping to publish on Iran later this week, a sort of primer. Also in this note: UK Energy Policy, Bitcoin, Non-OPEC Guyana & Norway. As tweeted yesterday on my Sankey Research Twitter @crudegusher it only takes a 10% rotation OUT of Tesla into oils, to generate $36bn of buying pressure on this emasculated S&P Energy sector with a $694bn market cap. Energy (S&P ex utilities) […]

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9:02 AM

Morning Ex-Wife?

In a moment of desperation this morning I texted Silvio, my former associate, for a question on which he can always help. He called back as always but was on the bus heading through the Lincoln tunnel. I told him I was having a major problem; but the call broke up. He texted me “Sorry to hear you are having a nightmare your ex-wife… couldn’t hear the rest, call me whenever you want, hope you […]

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9:36 AM

Morning Sankey 11/11/20

Well for sure my timing in the Sunday Sankey making the uber-bear call for oil was completely destroyed one day after I made it, on Monday, by Pfizer’s announcement of a 90% effective COVID vaccine. My old joke is that I am never wrong, it’s just sometimes my timing can be WAY off. And the question of this note, given oil dynamics next move is positive, is timing of entry. Clearly the market was coiled […]

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8:16 AM

Morning Sankey 11/6/20

Reminder that we still do “Quote of the Day” as the header on Sankeyresearch.com where this note was just published. Today in history, 1860, Abraham Lincoln was elected President, with just 40% of the vote, to become the first Republican President. Noted that his second inaugural address (you can read his long-hand original, easy to find online) is one of the all-time great oratories and a masterpiece of unity in the face of division. Unfortunately, […]

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8:56 AM

Waving or Drowning Sankey

With the first debate in late September followed by President Trump contracting COVID shortly after in early October, the market dynamic this year, in our view, has been 1) to rip off the March lows on Fed US$ printing, 2) then falter on election uncertainty and COVID resilience, then 3) resume ripping on more Fed printing, and then 4) finally, for October and Q4, increasingly price a “Blue Wave” as of October/Q4. Essentially the dynamic […]

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9:19 AM

Morning Sankey 11/3/20

Thoughts and sympathy for the victims of terrorism in historic and noble Vienna yesterday. A city close to the heart of anyone involved in global oil. We are many; terrorists are few. Rest in Peace. A momentous day, and I am not referring to the fact that November 3rd is National Sandwich Day. Yesterday on Twitter Arjun Murti, former Goldman Sachs legendary lead oil analyst, now Warburg Pincus adviser and ConocoPhillips board member, pointed out […]

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8:49 AM

Sunday Sankey 11/1/20

Good day, A quick note today, there are slides highlighting yesterday’s note on XOM that got a lot of traction. There was criticism for not specifically calling out Rex Tillerson, and skepticism on my bull call for refining in summer 2021. Let’s be honest, I made the call for summer 2020, and that worked great when we made the call in April. But turned out to be a disaster by May. We were a year […]

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2:02 PM

Friday Saturday Sankey

Yesterday was tricky to publish a worthy note, until conference calls were complete. So this is the Friday Sankey on a Saturday. Happy Halloween! If life gives you melons you may be dyslexic What’s Sherlock Holmes’ favourite tree? A lemon tree Daddy, do all fairy tales start with “Once upon a time”? “No kid, there’s a whole series of fairly tales that start with “If elected, I promise…”” There were two key takeaways from ExxonMobil’s […]

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2:51 PM

Morning No EPS note

SHANGHAI, Oct 29 (Reuters) – China’s major state-owned banks have been swapping U.S. dollars for yuan this week, traders said on Thursday, suggesting monetary authorities are trying to rein in the sharply appreciating currency. Those operations in the onshore currency swap market have caused the value of the yuan to fall in the forwards market, tamping expectations that it will appreciate further and simultaneously making it more expensive for investors to borrow yuan. Two other […]

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7:51 AM

Morning CEOs

Today: how many CEOs per barrel? The calculation was triggered by BP results this morning, which underline our description that the oil market has settled at an equilibrium of “exquisite pain” – sustaining almost exactly $40/bbl since the beginning of Q3 (Brent broke $40/bbl for the first time post-COVID on 5th June and has hugged the price ever since). This is the planning assumption that we believe oils have to assume as their base case. […]

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9:10 AM

Debate Sankey 10/23/20

It is Friday in Fall, a great time of year in the US. The guy who stole my diary has died. My thoughts are with his family. My wife is kicking me out because she’s fed up with my South American animal puns… ‘OK,’ I said, ‘Alpaca my bags.’ I once met someone who refused to talk to people unless the conversation was about fashion. He was very clothed-minded. Happy hour yesterday evening we were […]

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9:43 AM

Morning Sanknews 10/22/20

News: France quashes a major US LNG export contract on US methane emissions/fracking. Quite where this leaves Russia and Algeria has not been specified by the French. Story broke on Politico Pro. In 2016 a French minister had highlighted that US LNG contained fracked gas, so to speak, and that France bans fracking. We all remember Hess and the Paris Basin, seen to be one of the great fracking opportunities in the world, it will […]

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9:17 AM

Pioneer-Parsley & History

Breaking news: WSJ October 18th 2020 Pioneer Natural Resources is in talks to buy Parsley Energy, according to people familiar with the matter, as a wave of consolidation takes hold in the beleaguered oil patch. Word from the oil field is the deal was due to be announced last week and got sidelined by COP-CXO. (Twitter). M&A stories in the WSJ are considered the most reliable of any business new source. Last week they were […]

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8:11 AM

Conoco Poncho

$EOG was the name most speculated about as likely to MAKE a takeover in the wake of the Conoco-Concho story yesterday; the stock that reacted most was $XEC, perceived as the most likely next TAKE over company. Continental CLR is seen as needing to deal, $MRO too, $OVV potentially to offer a blizzard of stock, $FANG and Parsley $PE potentially to join the consolidation fray one way or the other; $CDEV is due to be […]

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9:22 AM

Chevron for ExxonMobil?

Chevron for ExxonMobil merger? The numbers and strategy make sense. Reduced costs, reduced capex, get through the dividend mess, and upgrade the overall player in ESG terms (mega-company suggested new name: “Chevron”). All year XOM has been breaking bad levels, and the latest is that its market cap fell below Chevron’s yesterday. Just a reminder on scale, with market caps equal at ~$140bn: XOM Capital employed $236bn and a feeble 6% ROCE in 2019. $31bn […]

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9:15 AM

Mega-Theme: Standard Oil vs Big Tech

Client email: Paul, a question to you as a student of history. My recollection is that Rockefeller got even richer when US government broke up his monopoly? Copying my tech colleague who may be pondering what happens if US government attempts to break up their monopolies… Sankey: From recollection the quick answer is yes, the sum of the parts was greater than the whole. I’ll check now but it certainly happened at a time of […]

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8:48 AM

Tesla vs ExxonMobil Porcupine Battle I

Looking at the future of US gasoline demand, I got sucked into the history of Tesla’s SEC filings essentially with a view to replicating my notorious chart of ExxonMobil’s volumes since 2000, vs their annual analyst meeting target for volumes. The dreaded porcupine chart, which has no more inappropriate quill than the last, which was repeated at the March 2020 analyst meeting at peak COVID in NYC. ExxonMobil’s volumes vs their analyst meeting targets As […]

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10:25 AM

Sunday Sankey 10/4/20

Obviously, the week ahead will be dominated by the twin horsemen of COVID and bailout. We are making history. In this note, XOM is now worth less than Jeff Bezos, even after his divorce. Nextera has become the largest energy stock in the US. We also show XOM compared to Big Tobacco, to show this is not all ESG. The oil market looks rough, as we had warned all summer, it would be post Labor […]

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11:24 AM

EU sure about that?

With so many long term forecasts being thrown around over the past month on energy demand and emissions, this analyst has been deeply cynical after 30 years of following long term energy modelling. The worst long term forecasts are already wrong when they are made. That is close to being the case currently as companies use a 2018 or 2019 base year, skipping the little matter of 2020, which has seen, for example, an enormous […]

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8:29 AM

Total Podium End Quarter

It was an especial pleasure to see a leader speaking at a podium with a TOTAL command of the current complex situation, with a complete grasp of facts and figures, a near-term and long-term vision that is both pragmatic and exciting. The fact that the entire presentation was delivered with charm and wit in the speaker’s second language, made it all-the-more impressive. I am of course speaking of TOTAL’s CEO Patrick Patrick Pouyanné , at the […]

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5:45 PM

Morning Titanic Sankey

Three analyst meetings in two weeks: BP, Apple, Tesla. Confirmed by Tesla Battery Day: the Big Oils need to pursue a strategy of “orderly liquidation” in line with our “Renaissance of US E&P” thesis. Cut capex, reduce growth, return cash to shareholders. Orderly liquidation. Shrink to grow value. We are advising a refiner to go private, we have been for years, arguably we have been for all refiners. No growth capex, buy back stock until […]

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9:17 AM

Sunday Sankey 9/20/20

Good day! A chill September wind is blowing across Brooklyn Heights, as summer officially ends and fall very much starts. The market is feeling chills too, with COVID continuing to present a major challenge to policy-makers globally. We remain extremely frustrated by the excessive lock down requirements in New York despite effectively zero COVID. With massive testing, less than 1% positives are being found, and essentially no deaths (statistically speaking). This past week we quoted […]

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11:37 AM

Morning Sankey Wainscott

The US government Bureau of Ocean Energy Management (BOEM) has projected that some 2,000 offshore wind turbines will generate 22GW of power by 2030 for the US. Its hardly surprising that BP has bought into this spectacular growth, which fits right into their low carbon shift in the 2030 timeframe. Reminder, in a September 10th press release, BP announced it would pay $1.1bn for a 50% stake in Equinor’s 2 GW Empire Wind, located off […]

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8:25 AM

Morning WKHS Sankey

Spoke to a top Portfolio Manager yesterday who summed it up, “Why buy a company with a dubious track record, in transition, and that could be Shell as much as BP? Service is dead – have you seen BP and Shell’s deepwater plans? They cancelled. E&P looks bad with the current oil market, look at EOG re-valuing to be in line with the group; we only get strong oil balances by end 2021. Refining margins […]

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9:19 AM

Morning Sankey 9/14/20

Start your engines, or rather, share your computers as part of our future, for the longest analyst meeting in history starting this morning at 8:30am Eastern Time, as BP commences “BP Week.” We have five hours today, followed by three hours each on Tuesday and Wednesday. To kick things off, BP has released its World Energy Outlook. One of these outcomes fits our world view for energy to 2050. Can you guess which one it […]

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7:54 AM

Sunday Sankey 9/13/20

“One thing I know for sure, In the battle between humans and the environment, the environment will win.” This has been one of my standard lines for more than a decade. It sits alongside “environmentalism is a luxury” in terms of the parameters for considering the subject of alternative energy. Another an old line: “the only barrier of entry to being an oil analyst is units.” In this edition of the Sunday Sankey we lay […]

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10:50 AM

Afternoon Sankey

There is a conspiracy theory, totally unsubstantiated, that Nikola Tesla was in New York the day the Hindenburg airship crashed in 1937, and that had been asked to use an ion gun to bring down the airship and preserve the US helium monopoly, while denigrating flammable hydrogen, that the Hindenburg was forced to use, owing to the US monopoly. This of course is a wild, somewhat meaningless and certainly unsubstantiated conspiracy theory, but it fits […]

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2:19 PM

Synthetic XOM

A client pointed out that DOW stock has been on a bit of a tear recently, while XOM cannot catch a bid. This is a reasonable point, and the same could be said of Phillips 66 PSX, which has also been languishing, despite its chemicals exposure. That stock shrugged off a bad 2019 for chemicals margins, which then got truly abysmal with COVID. Subsequently controversy/risk around the Dakota Access Pipeline has ailed PSX, with the […]

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6:39 PM

Where is oil as Laura hits? Morning Sankey 8/27/20

Corporate newsflow remains quiet, with the market awaiting more details on the historic announcement from BP on its climate change plans, due September 14th-16th. Several major US oil investors consider this BP move a 100-year strategy shift for big oil. Notably the stunning -40% oil and gas production reduction, as a strategy pillar. US investors remain cynical, the most negative seeing the announcement as a smokescreen for the dividend cut. Elsewhere re-injection issues for ExxonMobil/Hess […]

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8:35 AM

Sunday Sankey 8/23/20

This week we can hardly avoid the elevated market levels, the all-time record of growth over value, and the general unease on Wall Street at the nature of current markets. I had the privilege and pleasure of chatting to a favourite client and senior world-famous investor yesterday, quarantined as he is in the Hamptons, and he said in his long career he has never seen anything like this, but that you have to assume that […]

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12:14 PM

ESG Monster Problems: Gorgon and Three Gorges

This will be the first year our family doesn’t vacation in Hawaii because of COVID. Normally it is because we can’t afford it. What is Britain’s biggest export? Independence days. I was overtaken by a car being driven by a sheep in a swimsuit. I think it was a lamb bikini. We’ve had some impact research this week, based on feedback, but there is an altruistic side to everything we do, and, much as you […]

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9:39 AM

The Net Debt Free Cash Acid Test

Good thing that Oxy reporting tonight “exceeded guidance and continued to deliver operational excellence” otherwise they might have reported an even more epically abysmal result. Even with the aforementioned exceeding and excelling, the company reported a net loss attributable to shareholders for Q2 2020 of $8.4bn, or $9.12/share. Excluding writedowns (why? they happen on a recurring basis), the adjusted loss was $1.6bn, or $1.76 per diluted share. Anyway, with Oxy having reported, Sankey Research can […]

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8:18 AM

Sunday Sankey 8/9/20

In this week’s edition of the Sunday Sankey we bring you the mega-bear argument for tech (it’s a commodity business), comments on BP’s remarkable transition which coincided with continuing remarkable transition among US E&Ps – mostly. Tomorrow Oxy reports and there is a group that is now in the debt service zombie mode, which will fight to maintain production levels… to pay debt service. But on the positive side, PXD Pioneer took leadership on what Cimarex tagged “Shale 3.0”, see within. We were critical of EOG in this regard in a note published yesterday and linked within. Great stuff on China from Oilx, our favourite oil intelligence consultancy/data provider, and Saudi Arabia cuts production… in Iraq… in Iran? Amazing. Continue reading

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9:51 AM

Morning Sankey 8/6/20

Yesterday ExxonMobil slipped a 20% reserves writedown warning into the 10Q. Didn’t mention it on the earnings call last Friday. Were they assuming nobody reads a 10Q? It was almost as bad as Oxy re-raising executive pay in an 8K last Friday evening after the market closed after a long week of earnings. Continue reading

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8:57 AM

Morning BP wow

BP sensationally announced further details of a major strategy shift this morning. The company has absolutely committed to the energy transition, certainly relative to the other big oils, above all relatively to the US big oils. Reminder: Aramco has the lowest carbon intensity per barrel produced by far of any major oil producers. Note: ExxonMobil just committed to no new debt and sustained dividend, where by extension if oil prices do not rise, they will […]

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7:45 AM

Morning Speedway

Huge deal from XOM on Friday, committing to no more debt and paying its dividend. The revelation that the company is 70% retail owned was an update to a number we have spoken about many times, that XOM was 50% retail held. Our number was stale! The imperative to pay dividend is clear, the commitment highly meaningful. Arguably XOM may now need to liquidate to pay dividend, which is actually what the market wants. We […]

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8:55 AM

Sunday Sankey 8/2/20

Our usual round up of the continuing power of growth stocks over value stocks, concerns about the US$, the fact that the oil market is weakening again, watching hurricane season into seasonal slowdown. We cover XOM, CVX, refining, markets, “The New 1950s” and much more besides within! Continue reading

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10:21 AM

Morning Sankey 7/31/20

If you ever wanted a sense of what it would be like to have your house in foreclosure, and have the neighbour tell you in passing they are moving permanently to a $200m yacht, yesterday was that day for oil analysts. Oil specialists’ darling ConocoPhillips surprised the market with its sales… and so did Apple, Amazon, and Facebook. Continue reading

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7:20 AM

Morning Sankey 7/10/20

The market seems toppy, if it sells off on a judge ruling on the long-running debate over President Trump’s tax returns, which is what happened yesterday. The ruling extends the to-and-fro and is seen as unlikely to result in a release before the election. Yet the S&P500 sold off… but the NASDAQ, as ever, rose regardless. Later in the day, a potentially more market-unfriendly series of headlines somehow had less negative effect: CNBC reports Presidential […]

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8:30 AM

Shell writes down, so XOM?

Not that we ever had any great confidence in Shell, but the dividend cut so early in the COVID crisis was a shock. Reminder: we believe the entire investment case of the Megamajors pertains to dividend, and we value the stocks as such. That’s why BP’s announcement yesterday of a $5bn petchem sale to Ineos was so positive. If these companies want to pursue a net zero emissions target, the most shareholder-friendly path is to […]

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7:37 AM
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