Sunday Night Links

• You will watch your parents die and be buried. You will watch your newborn child emerge in a messy circus of heaving grunts and high-pitched wailing. You will watch your dreams and projects dashed, only to wake the next day and greet the fruits of your failure anew and cobble a life out of them all the same. You will punctuate the cavalcade of events with moments of transcendent meaning that will linger in memory like fading signposts during that final moment: your death. Navigating that journey without a religious tradition is like trying to cross open country without a path: you can do so, but you’ll do lots of stumbling and very likely lose your way. Trying to get through dense woods—a serious depression, the death of a loved one—without a marked trail requires the most arduous labor for the merest progress. Furthermore, if you tackle these wilds in their raw and uncleared state, you will almost certainly do so alone. Going off-trail means a hard solitary journey, while the marked trail involves communal groups headed in your same direction. What some might describe as a cultural rut—some timeworn lane that limits movement—might just be the only thing that guides you through this daunting wilderness of life whose many paths all end in the same destination. [Antonio García Martínez] 
• Dorchester Minerals, L.P. announced today the Partnership’s second quarter 2022 cash distribution. The distribution of $0.969012 per common unit represents activity for the three-month period ended June 30, 2022 and is payable on August 11, 2022 to common unitholders of record as of August 1, 2022. [Dorchester Minerals, L.P.]
• At a recent investor conference, management stated that they are not interested in further reducing leverage to achieve credit upgrades. The reasoning is that the incremental benefit from a higher credit rating will not offset the shareholder value created from higher leverage. For now, I agree with that sentiment considering the strong energy environment and most importantly, MMP’s leverage is by no means high. If the company needs to reduce leverage in the future, it will be doing so from a strong starting point relative to peers due to the low starting number. MMP has differentiated itself from peers in its surprising commitment to its unit repurchase program. [Magellan Midstream Partners, L.P.]
• Canadian oil deposits are close to the surface. Their volumes are easier to estimate, so their reserve calculations are of higher integrity. The three major E&Ps have multiple decades of inventory. They produce most of their oil through surface mining or by injecting steam underground and pumping oil to the surface. And they don’t have decline rates anywhere near as high as U.S. producers. While their projects can have multi-billion-dollar upfront capital costs, once they’re operational, they transition to steady, low-cost operations. Shareholders can benefit from the stable free cash flow and lower taxes from high depreciation costs that are a legacy of their projects’ massive upfront development costs. [HFIR MLPs]
• The FFO/EV yield of 14% is very impressive considering how much of Prairie Sky's acreage is still undeveloped, and considering the quality of their capital allocation and corporate governance. Since the current earnings and FFO/EV yield are attractive enough to justify the current price, you are getting quite a lot of future production "for free". Stacking barrels. Something that is obviously nice about a pure royalty business is that it virtually always makes money. Their worst quarter for funds from operations since January 2020 was the second quarter of 2020. They still had $21 million (CAD) of FFO that quarter. PrairieSky has 60 full time employees at their head office in Calgary. Their enterprise value is thus $60 million per employee, and their FFO is $8 million per employee. [CBS]
• We are witnessing the unraveling of three pseudo-scientific scams: efficient market hypothesis, global warming (now "climate change") hypothesis, and the saturated fat / heart disease hypothesis. In each case, publicly funded researchers fell in love with a plausible idea and pushed it on the public, despite mounting evidence that it was wrong, and at great cost to society. Taubes' Good Calories, Bad Calories is the story of how this happened in the area of nutrition. [CBS]
  
• The consistent trend of growing velocities for ZYN continued during the quarter, both in the western region where ZYN was initially launched in 2016, as well as in regions outside the west where the brand was marketed in a broader scale from April 2019. Nicotine pouches continue to demonstrate not only exciting commercial prospects, but also their potential to significantly contribute to improve public health. As slide 10 illustrates, the nicotine pouch category is rapidly growing relative to cigarette. Measured by volume and according to IRI data and we make one can of nicotine pouches equivalent to one pack of cigarettes, nicotine pouch volume for the year-to-date period was well above the 10% benchmark in the west and exceeded 4% on a national level. Based on indications of average weekly consumption levels for consumer ranging from two to three cans, our estimate of the number of ZYN users related to the number of cigarette smokers on a national level is in the range of 5% to 7%, and we expect the number of nicotine pouch users to continue to grow. We also expect that weekly consumption rates per adult consumer will increase as adult consumers adopt nicotine pouches more fully. [Swedish Match AB]
• Across industries, the commodity cycle is well known. Constrained supply from underinvestment in capacity catch producers wrong-footed into an exogenous surge in demand. Higher prices and profits lead managers to increase supply, all coming online at roughly the same time and driving out the very profits they are chasing. [Lewis Enterprises]