Thursday Night Links

• It’s a transition away from more than a decade of “gee-whiz” projects—think self-driving cars, flying cars, metaverses and crypto—all fueled by seemingly limitless cash and venture-backed meal-replacement slurries. The task at hand now: the sometimes-boring but always-important work of building and expanding businesses that actually make money, by delivering things people and companies want and need. [WSJ]
• US shale companies are doing exactly what they said they would. They are focused on returning capital back to shareholders via dividends and share buybacks. And they are remaining disciplined. US shale oil companies are seeing newer wells getting gassier. The crude oil weighting is decreasing, while the NGL weighting is increasing. As a result, US shale will likely never return back to its old glory. In fact, we would almost go as far as saying that most companies can't produce all out even if they wanted to. For starters, shareholders would revolt if they even attempted to, and second, the inventory depletion rate won't be sustainable. Setting aside the equipment constraints, lack of workers, and other restraints, it's safe to say by now that US shale won't be back to the way it grew in 2018. For oil bulls, that's one less headache you have to worry about going forward. [HFI Research]
• The transaction is immediately and significantly accretive to Marathon Oil's key financial metrics, expected to drive a 17% increase to 2023 operating cash flow and a 15% increase to free cash flow. The transaction was acquired at approximately 3.4x 2023 EBITDA and a 17% free cash flow yield, accretive relative to Marathon Oil's 2023 stand-alone metrics at the same price deck (4.7x EV/EBITDA, 13% FCF Yield). [MRO] 
• U.S. oil-supply growth is being hindered by “rapidly escalating” equipment costs and supply-chain snags, ConocoPhillips Chief Executive Officer Ryan Lance said. The “extremely tight” market for oilfield workers, particularly in the Permian Basin of West Texas and New Mexico, also is squeezing the energy industry and frustrating efforts to expand oil production, Lance said during a conference call with analysts on Thursday. Lance, one of the longest-serving major US oil-company CEOs, also cautioned the federal government against any significant changes to the tax structure. Tweaking the tax code could have dire long-term consequences for oil and natural gas investments, he added. His comments come just days after US President Joe Biden suggested taxing the oil industry’s so-called windfall profits, which the president called “war profiteering.” Lance said calls for windfall taxes are “not a helpful conversation right now.” [Bloomberg]
• I expect Altria to continue to leverage its superior distribution and data capabilities to manage the secular decline of its legacy business as it invests in new opportunities, all while returning significant capital to shareholders. So far this year, the company has returned $6.4 billion to shareholders via dividends and buybacks. Most spectacularly, the company will likely generate ~$12 billion in operating income this year while only deploying $175-225 million on CapEx. That’s worth keeping in mind as other companies attempt to race away from the fact they’ve been overspending with little to show for it. [Devin LaSarre]
  
• Rare reef tenderloin roast smoked on the Traeger wood pellet grill.  The combo of Pat LaFrieda beef and the Traeger is unstoppable. They also have good recipes; my long-suffering wife used their roasted beef tenderloin with mustard cream sauce and it was perfect. They know which pellets to use and the internal thermometer takes the guesswork out of the timing (and I’m easy as it is virtually impossible to undercook it for me). If you don’t have a Traeger, you seriously should get one. It isn’t cheap but it is a great value. You can easily claw it out of the restaurant and alcohol budget in short order. [Chris DeMuth]
• The first volunteer continued eating bland food from the machine for a total of seventy days, losing approximately seventy pounds. After that, he was sent home with the formula and instructed to drink 400 calories of it per day, which he did for an additional 185 days, after which he had lost two hundred pounds —precisely half his body weight. The researchers remarked that “during all this time weight was steadily lost and the patient never complained of hunger.” This is truly a starvation-level calorie intake, and to eat it continuously for 255 days without hunger suggests that something rather interesting was happening in this man’s body. Further studies from the same group and others supported the idea that a bland liquid diet leads people to eat fewer calories and lose excess fat. [Isegoria]
• Mutual incomprehension results from the right mixture of inter-lingual proximity and unintelligibility. In the Middle Ages, for example, when the monks’ knowledge of Greek was waning, they would write in the margin of texts they could not translate, in Latin: “Graecum est, non legitur” (“This is Greek to me, I can’t read it”). Greek, an elite language even in Roman times, has remained the West’s most popular shorthand for gobbledygook throughout the time of Shakespeare, who coined the original expression “it was Greek to me” (in Julius Caesar, Act I, Scene II). [link]
• Investors in growth stocks were double counting - the companies were over-earning and these earnings were being capitalized at high multiples. Now that they are past peak cycle, the earnings are falling and they are being re-rated, and the shares are plunging. The NASDAQ is down 31% year-to-date. (Interestingly, the equal weight S&P 500 is down 14% YTD and SPY is down 19%.) So those are the big three "growth" examples. We have to put that in quotes now because their earnings are declining. They still have a combined $2.6 trillion market capitalization (down from $5 trillion at the peak!) and collectively they do not generate much cash (thanks to Amazon's cash burn and Facebook's "Metaverse" bet). Someday, the ex-growth companies expenses will be slashed, their earnings will bottom, and by then they will undoubtedly trade at cheap multiples. But that may take a long time since Facebook and Google are dual share class corporate governance disasters. And the knock-on effects of those SG&A cuts will ripple far and wide - any prospective investment should be evaluated for such exposure. (It would be interesting to compare what percentage of tech employees use nicotine versus energy sector employees.) [CBS]
• Audi has always occupied an interesting niche in the luxury car market. It doesn’t project the same sporty edge as BMW, nor does it exude the same stolid prestige as Mercedes-Benz. Instead, Audi sits somewhere in the middle. Its modern offerings providing effortless pace alongside pleasant comfort and an air of stealthiness, all without asking too much of the driver. [Road and Track]
• Blue Checks became conflated with political respectability, with Twitter deleting the Blue Checks of Richard Spencer and other Bad People in 2018 for their Badness. Hence, Twitter wound up with the situation where, say, associate editors at Teen Vogue had Blue Checks but Charles Murray, a major force in American intellectual life since the mid-1980s, did not. [Sailer]