NnnnotSoSmart

Good discussion by Veriten this morning: "This Is Like Quantum Mechanics: If You Think You Understand It, You Don’t” Featuring Dr. Lars Schernikau and Rob West Dr. Lars Schernikau, energy economist, entrepreneur, commodity trader, strategic advisor, and the author of “The Unpopular Truth about Electricity and the Future of Energy” AND Rob West, Founder and Lead Analyst at Thunder Said Energy (TSE). Rob started TSE in 2019 and provides unique and thought-provoking analysis on energy transition research and technologies. https://veriten.com/stream/cobt-212/

"The emergence of the “Magnificent Seven” has dominated all investment thinking. Owning these seven mega-cap growth stocks has become mandatory for survival in today’s invest- ment world. These seven stocks alone now constitute almost 30% of the S&P 500’s weighting and advance daily in price. Waking up after a fitful night’s sleep, dominated no doubt by worries over underperformance tied to being underweight this group, a portfolio manager gazing into the mirror, might debate what “Magnificent Seven” stocks must be purchased the coming day. “NVIDIA has pulled back a little here; the stock is expensive here, but everyone agrees AI will be taking over the world....” On the other hand, they muse: “ Microsoft looks a bargain at only 30x earnings [only twice its long-term earnings growth!] and aren’t they doing AI too—look, they just hired that AI guru from chatGPT to run their AI business ?” Then again, “Meta’s multiple is below its estimated growth rate and thankfully, Mr. Zuckerberg has stopped wearing those silly glasses—isn’t the Metaverse just another form of AI?” Or maybe Amazon: “Now there’s a great way to play AI—even though the stocks trade at a PE of 40, everyone forgets that almost all their earnings come from server farms and cloud computing—remember: you want to own the retailers of picks and shovels, not the miners—I think my grandfather told me that.” Google and Apple are also considered. Ultimately, our sleep-deprived investor considers Tesla – maybe both the stock and the product. “After all, the IEA reiterated how EVs are taking over the world. Everyone in my neighborhood has a gleaming $100,000 Model S – one certainly does not want to be left out. It’s settled then: today, I buy Tesla—both the car and the stock.” Seldom, if ever, would our investor think about energy." 2023.Q3 GR Market Commentary.pdf

Hasn't WEB said on many occasions that he has never sold a share of Berkshire stock? We should take him at his word until proven otherwise.

Arjun Murti: Energy M&A Q&A

More Oaktree commentary on state of credit markets: Full Return World with Howard Marks and Armen Panossian https://www.oaktreecapital.com/insights/insight-podcast/market-commentary/full-return-world-with-howard-marks-and-armen-panossian

“A Forecast, Not A Scenario” Featuring Chris Birdsall, Exxon Mobil Corporation "Today we had the pleasure of visiting with Chris Birdsall, Director of Economics and Energy at Exxon Mobil Corporation. Chris joined Exxon as an engineer in 1996 and has served in several areas of the organization including manufacturing, technology, and commercial roles over the past 27 years. For the last five years, Chris has lead a team of economists, modelers, and researchers responsible for the research and data that shapes Exxon Mobil’s Global 2050 Outlook report (linked here). It was our pleasure to visit with Chris and learn more about his team, their views on long-term energy demand and supply, and have a chance to discuss all of the inputs and assumptions in an ambitious undertaking like this report." https://veriten.com/stream/cobt-203/

Howard Marks' Latest Memo: Further Thoughts on Sea Change "Unless there are serious holes in my logic, I believe significant reallocation of capital toward credit is warranted" https://www.oaktreecapital.com/docs/default-source/memos/further-thoughts-on-sea-change3dda4540-569f-4415-9a5b-004fbabf06d4.pdf?sfvrsn=c3cc5166_4 Audio version: https://www.oaktreecapital.com/insights/memo-podcast/further-thoughts-on-sea-change

In that spirit, I recommend listening to this morning's XOM/PXD merger webcast. Darren Woods goes into quite a bit of details on the technology that they plan to deploy in the Permian. https://event.webcasts.com/viewer/event.jsp?ei=1639028&tp_key=f993bbd804

Deja vu' all over again? Potentially same thing happened before the Yom Kippur War? From an Israeli paper... Mossad Reveals New Details About Key Egyptian Spy Who Warned Israel That Yom Kippur War Was Imminent https://www.haaretz.com/israel-news/2023-09-07/ty-article-magazine/.premium/mossad-reveals-new-details-about-egyptian-spy-who-warned-yom-kippur-war-was-imminent/0000018a-6fce-dd96-ab8b-ffce59530000 Article attached. Mossad Reveals New Details About Key Egyptian Spy Who Warned Israel That Yom Kippur War Was Imminent.pdf

Haven't heard about this in our media yet: https://www.timesofisrael.com/egypt-intelligence-official-says-israel-ignored-repeated-warnings-of-something-big/ Egypt Warned Israel Days Before Hamas Attack: Viewer Comment: "Intelligence failure" You're assuming it was a failure and not intentionally allowed to happen in order to give them the political leeway to do a full invasion of Gaza."

Love my Glock(s). I'll get the book. Thanks for the point out.

On a related note, OXY owns 39% in a company called Net Power (NPWR). By virtue of BRK's ~25%+ position in OXY, Berkshire now owns ~ 10% of NPWR. NPWR has developed technology to produce "zero emission" power using natural gas as fuel. The first commercial scale installation will be to supply power for OXY's first direct air capture (DAC) unit in west Texas. https://netpower.com/press-releases/net-power-announces-its-first-utility-scale-clean-energy-power-plant-integrated-with-co2-sequestration/ NPWR IPO'd in June. https://www.bloomberg.com/press-releases/2023-06-08/net-power-completes-merger-with-rice-acquisition-corp-ii-to-accelerate-clean-natural-gas-power-generation More detailed presentation on the company and technology here: https://d1io3yog0oux5.cloudfront.net/_1658a8372bf11a36555133c52282b2c5/netpower/db/3583/33173/pdf/netpower+analyst+day+presentation.pdf According to the slides the technology has a huge addressable market replacing old gas fired power generation globally. No doubt Greg Abel watching at this one for application at BHE. Could provide "clean" back up for all BHE's intermittent wind installations.

Always thought Cole Smead was just Daddy's (Bill's) boy. This interview changed my mind. He's not an empty suit. https://rosebros.ca/blogs/podcast/cole-smead The interview with Dan Pickering was excellent as well: https://rosebros.ca/blogs/podcast/137-dan-pickering-pickering-energy-partners-compounding-at-20-the-value-of-trust-in-business-what-makes-a-good-energy-investment

Arjun is excellent. He is now employed by Veriten. Some may find Veriten's podcasts interesting on all things energy. You can register to get weekly e-mail updates of podcasts on their website. https://veriten.com/streams/cob-tuesday/

Buffett keeps buying OXY: https://www.sec.gov/Archives/edgar/data/1067983/000095017023030512/xslF345X03/ownership.xml OXY continues to redeem the preferred. Preferred share count down from 93,532 shares on May 30 to to 91,964 on June 28. https://www.sec.gov/Archives/edgar/data/1067983/000089924323014128/xslF345X03/doc4.xml

Seth Klarman apparently edited the new edition. He was interviewed on CNBS this morning: https://www.cnbc.com/video/2023/06/27/legendary-investor-seth-klarman-on-investing-challenges-weve-been-in-an-everything-bubble.html https://www.cnbc.com/video/2023/06/27/legendary-investor-seth-klarman-on-investing-look-for-the-most-inefficient-pockets-in-the-world.html

Lack of revenue/earnings growth doesn't mean it's not worth owning. Could still be worth more than it's selling for. I don't know, but I like all of their products. Their margins have been consistently good over the years. The world's still gonna need Sticky notes and Scotch Brite pads.

3M - Elephants in the room - lawsuits. Ear plug (200,000+) lawsuits and "forever" chemicals. Forever chemicals doesn't sound temporary. All sounds so scary. How does one quantify liabilities? Thanks,

Speaking of chocolate. More nibbling of OXY by Buffett. BRK bought another 4,660,809 OXY shares for $272,996,222. Average price paid: $58.57/share. https://dataroma.com/m/rt.php https://www.sec.gov/Archives/edgar/data/1067983/00... He's apparently not interested in "buying control" but he sure keeps buying.

Berkshire nibbles more OXY: Bought 2,165,792 shares for $125,746,875. Average price paid: $58.06/share. Berkshire now owns 213,872,911 shares of common. Plus warrants and preferreds. https://www.dataroma.com/m/rt.php https://www.sec.gov/Archives/edgar/data/1067983/000089924323013028/xslF345X03/doc4.xml Buffett (at the recent AM): "And we will not be making any offer for control of Occidental. But we love the shares we have. And we may or may not own more in the future." We now know the appetite is still there for the common priced under $60/share.

Cuz Charlie said recently: "I think having a big position in the Permian Basin through those 2 companies, it’s likely to be a pretty good long-term hold." https://steadycompounding.com/investing/djco23/ But wait...Buffett just sold some Chevron in Q1. Well, at least Charlie and Buffett's sister kept their royalty interests for a long time.

No need to imagine. The ROW has been drilling for shale oil and gas around the world. So far, no other Permian Basins have been found. But they'll keep trying. Oil and gas exploration, including horizontal drilling, has been going on in the Beetaloo Basin since the 1980's. So far, not much to show for it. A few minor puffs of gas: https://www.hydrocarbons-technology.com/projects/beetaloo-gas-field-northern-territory-australia/ I see that the Australian Government has only recently approved hydraulic fracturing in the Beetaloo. We'll see how it works out, if and when the environmentalists allow it. https://www.theguardian.com/australia-news/2023/apr/19/beetaloo-basin-inquiry-calls-for-national-plan-to-offset-vast-emissions-expected-from-gas-projects The Beetaloo Basin hydrocarbon resource is tiny compared to the Permian. Using the same methodology posted for the Permian Basin above, the USGS estimates the Beetaloo has technically recoverable mean resources of 429 million barrels of continuous oil and 8 trillion cubic feet of continuous gas. https://pubs.usgs.gov/fs/2019/3013/fs20193013.pdf The Permian has 175 times the recoverable oil and 38 times the recoverable gas. Since the Permian basin sits under mostly fee (private) lands, the environmentalists hold little sway over oil and gas operations. Operating on private land provides a "moat" to Permian operators, protecting them from irrational environmentalists and Federal bureaucrats. One of the many reasons Warren and Charlie like it so much.

Yes..OXY and Chevron have rights to large portions of this "technically recoverable" oil and gas. U.S. Geological Survey assessed undiscovered, technically recoverable continuous mean resources: Permian (Delaware and Midland Basins): 70.5 Billion barrels of oil and 300 Trillion cubic feet of gas. 46.3 billion barrels of oil and 281 trillion cubic feet of gas in the Wolfcamp shale and Bone Spring Formation of the Delaware Basin in the Permian Basin Province, southeast New Mexico and west Texas. https://pubs.usgs.gov/fs/2018/3073/fs20183073.pdf 20 billion barrels of oil and 16 trillion cubic feet of gas in the Wolfcamp shale in the Midland Basin part of the Permian Basin Province, Texas. https://pubs.usgs.gov/fs/2016/3092/fs20163092.pdf 4.2 billion barrels of oil and 3.1 trillion cubic feet of gas in the Spraberry Formation of the Midland Basin, Permian Basin Province, Texas. https://pubs.usgs.gov/fs/2017/3029/fs2017173029 .pdf CHARLIE MUNGER: And there’s a lot more oil down there, if anybody can figure out another magic trick. That’s all we need is another magic trick. That "magic trick" could likely be enhanced oil recovery (EOR) for the shales using CO2 injection.

Rough transcript of Pabrai's comment on OXY: (57:11 min) Question regarding Berkshire's foray into OXY Q: (paraphrasing)"Could we get your thoughts on what you understand about Charlie Munger and Warren Bufffet's foray into Occidental? Because for the longest time they had avoided materials and very cyclical commodities. And then now they enter into Occidental and keep increasing their stakes. What do you think of that (OXY) as an investment?" Pabrai:" Yeah, so I think both of them have been investors in oil and gas for a very long time. Munger made an investment into what eventually became one of his biggest mistakes, because he didn't buy enough, Belridge Oil in 1977. So, you know that's like 46 years back. Charlie will tell me things. You know I have a good friendship with Charlie. I usually see him four or five times a year for dinner and I used to play a lot of bridge with him. You know some times I'd be at his place and he'd tell me...and you know he's living in you know Hancock Park in L.A...he's says that "you know we are sitting on top of an oil field." Then he'd explained to me that whole area actually was an oil field. But because so many humans moved in and the real estate prices became more expensive, it became more attractive to build homes and sell the real estate that way, than it did to drill for oil. L.A. basically developed without extracting the oil so to speak. So it still sits there. One time I was talking to him and he (Charlie) mentioned that he would like to have an investment in Exxon and be able to get a commitment from the management that they would do no more Capex, and they would simply run all the fields with the cashflow going to shareholders. And he had calculated it would be a tremendous investment. And of course oil companies don't think that way. But OXY thinks that way. So, I think the OXY investment...if you study Occidental what you'll find is they really don't have exploration going on. So, if we look at the whole fracking business, you know the Permian Basin and all of that, basically when you drill a well you've got a 90% plus shot of what's going to come out. The probabilities (of success) are really high. And it's not like what used to be conventional oil and gas. So here you've got very definitive metrics going on. And so OXY basically has no...almost no...speculative drilling going on. And so, in effect, it looks like a CD. They're clipping the coupons. What OXY is doing is they've got a huge gusher of cashflows coming out. And that huge gusher of cashflows is only going into buybacks and dividends. So it's all being pumped out to shareholders. And he loves that. And then they've made an investment in Chevron. I think the reason they made the investment in Chevron is also because Chevron also has a very large position in the Permian Basin. And if OXY had been large enough he wouldn't have gone to Chevron. Just like bought all the U.S. airlines. You know a while back he bought all...because he couldn't make one bet because the size of the capital is so large.....So, I think the Chevron bet is heavily a bet based on this non-exploration risk (high probability of success). You know the oil business lately, and of course UT Austin knows this really well, with the $8 billion every year that's coming into the UT endowment, bigger than Harvard's....... So the bet with Chevron and OXY is a coupon clipping bet. And so I think Buffett looked at what U.S. Treasuries were paying him and he doesn't want downside. So he looked at OXY as U.S. treasuries on steroids. And I think that's why he went with that bet." (OXY question starts at 57:11 min)

Not behind a paywall: https://stocks.apple.com/AUUUVmaKkQ5SQ_oa9XLFTqA