Investing Links Roundup

• Founded in 2013, NAH has been the most active helium driller in Saskatchewan with over 50 wells drilled to date. The Company plans to have a continuous capital investment program, which will include acquisition of additional third-party and proprietary seismic data, drilling up to 30 wells per year, and concurrently building additional helium processing facilities as new fields are developed. Over the past several years, NAH has discovered eight new helium fields and acquired rights to explore for and produce helium on a land base of approximately 9 million contiguous acres, primarily in Saskatchewan, Canada as well as the states of Utah, Arizona and Montana, USA. The Company currently sells helium on long term contracts to several of the largest industrial gas companies. NAH owns and operates multiple helium purification facilities including Canada’s largest facility (Battle Creek), providing reliable, long-term North American supply of this scarce resource to meet growing demand. [North American Helium Inc]
• A cynic (who, me?) would note that the Fed shifted from weekly to monthly reporting for M2 on 2/11/21, which was almost exactly the time when money demand started to fall and inflation started to rise. It's almost as if the Fed wanted to bury the bad news before anyone noticed. My posts around that time were arguing strongly in favor of avoiding cash at all costs and buying just about anything because I thought inflation would surprise to the upside. My motto back then was "borrow and buy" and it was an excellent strategy. [Scott Grannis]
  
• It remains my view that the overwhelming best thing traditional energy companies—upstream, midstream, downstream, and oil services—can do is to ensure the world has abundant deliverable oil, gas, and refined products to meet the world's demand for those products. The purpose of oil and gas companies is to profitably produce (or support the production of) oil and gas. Full stop. As far as so-called "energy transition" spending goes, companies should invest where and when they have competitive advantage. It is possible that some newer energy technologies can make sense for oil & gas companies to pursue. An example might be the renewables fuels investments made by various refiners. It is also clear that society is moving toward requiring all companies in all sectors to reach "net zero" Scope 1 emissions. In pursuing that goal, it is possible investment in new technologies may make sense. However, the idea that traditional energy companies MUST transition to companies focused on future technologies is an absurdity that I suspect is already in the process of passing (see recent change in tone by certain Euro Majors). [Super-Spiked]
• Canadian Natural generated approximately $19.8 billion in adjusted funds flow in 2022, resulting in free cash flow of approximately $10.9 billion, after total dividend payments and base capital expenditures excluding net acquisitions and strategic growth capital. We were able to deliver significant returns to shareholders in 2022, totaling approximately $10.5 billion through $5.6 billion in share repurchases and $4.9 billion in dividends, including the special dividend of $1.50 per common share paid in August 2022. This equates to approximately $9.25 per share in direct returns to shareholders in 2022. In 2022, the Board of Directors approved two separate raises to our quarterly dividend, for a combined increase of 45%, to $0.85 per common share. Subsequent to year end, the Board of Directors approved a 6% increase to the quarterly dividend to $0.90 per common share from $0.85 per common share, demonstrating the confidence that the Board of Directors has in the sustainability of our business model, our strong balance sheet and the strength of our diverse, long life low decline asset base. The Company has a leading track record of 23 consecutive years of dividend increases. [Canadian Natural Resources Limited]
• Oil and natural gas prices have since slid below levels before the invasion. Costs such as equipment and labour continue to escalate, however, prompting the biggest operators to brace for a smaller cash haul in 2023. “We’ve seen anywhere between 30 and 50 per cent inflation — depending on which cost category you’re talking about — that’s what we’re walking into in 2023,” Jeff Ritenour, chief financial officer of Devon Energy, one of the biggest shale operators, told analysts on its earnings call. [FT]
• By these measures, we count four areas (excluding energy, which is in a world of its own) that could be argued are cheap: telecoms, banks, transports and real estate. The latter three categories are all cyclicals, which probably should go on sale when recession risk is elevated (the bigger question is why other cyclicals aren’t following suit). But consider telecoms. This is a capital-intensive, commoditised, oligopolistic industry with just three notable companies — AT&T, Verizon and T-Mobile, all of which are low-beta, defensive names. There are the makings of a value play here, including depressed valuations (10 times forward earnings) and good dividend yields (AT&T and Verizon offer 6-7 per cent). But not an easy one; debt loads are heavy and competition for market share is fierce. Irene Tunkel at BCA Research figures that telecoms will get more compelling the closer we get to a recession. [FT]
• Norway's Equinor is close to reaching a deal to buy Suncor Energy's British North Sea oil and gas assets for around $1 billion, three sources familiar with the matter told Reuters on Wednesday. [Reuters]
• Oil and natural gas prices have since slid below levels before the invasion. Costs such as equipment and labour continue to escalate, however, prompting the biggest operators to brace for a smaller cash haul in 2023. “We’ve seen anywhere between 30 and 50 per cent inflation — depending on which cost category you’re talking about — that’s what we’re walking into in 2023,” Jeff Ritenour, chief financial officer of Devon Energy, one of the biggest shale operators, told analysts on its earnings call. [FT]
• EOG Resources Inc. said it would spend about $1.4 billion more than last year, but that its oil production would rise by only about 3% in 2023. Pioneer Natural Resources Co. said it would augment its budget by nearly $1 billion, but its production would increase by less than 7% from 2022. And Marathon Oil Corp. said that although its expenses would jump by up to 35%, its production would remain flat. [WSJ]
  
• The SPR has a drawdown rate of 4.2mn b/d, while its fill rate is about 685,000 b/d. "We were designed to get the oil out quickly, not necessarily to get it in quickly," he said. The department must also schedule refill plans around ongoing maintenance at its underground storage facilities in Texas and Louisiana. The department's Bayou Choctaw storage site in Louisiana is offline for maintenance, with similar work planned for other facilities, Roark said. [link]
• Now a few comments regarding inflation. It continues to seem to improve somewhat. Recall back in the fourth fiscal quarter, which ended last August, our estimated year-over-year price inflation was 8% for that prior fiscal year. During Q1, the estimate on a year-over-year basis was about -- came down to 6% to 7%. In Q2, we estimate that the equivalent year-over-year inflation number has come down to 5% to 6% range and even a little lower than that toward the end of the quarter according to the buyers. We continue to see some improvements in many items. Commodity prices are starting to fall not to back to pre-COVID levels and some examples, but continue to provide some relief, things like chicken, bacon, butter, steel, resin, nuts. [Costco Wholesale Corporation]
• Marlboro maker Altria Group Inc. is in advanced talks to buy e-cigarette startup NJOY Holdings Inc. for at least $2.75 billion and plans to divest its stake in Juul Labs Inc., according to people familiar with the matter. The deal for NJOY, one of the few e-cigarette makers whose products have clearance from federal regulators, could be announced as soon as this week... [WSJ]
• Our momentum continued in FY22, with our business delivering top-line growth of 11.2% with a volume increase of 2.3%. Revenue per hl increased by 8.6%, accelerating in the second half of the year driven by revenue management initiatives and continued premiumization. As a result of our record high volumes and top-line growth across all operating regions, our reported revenue is now approximately 5.5 billion USD ahead of FY19 pre-pandemic levels with volumes 5.8% ahead. [Anheuser-Busch InBev SA/NV] 
• Altria Group, Inc. announces that we have exchanged our entire minority economic investment in JUUL Labs, Inc. (JUUL) for a non-exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property (Agreement). “We believe exchanging our JUUL ownership for intellectual property rights is the appropriate path forward for our business,” said Billy Gifford, Altria’s Chief Executive Officer. “JUUL faces significant regulatory and legal challenges and uncertainties, many of which could exist for many years. We are continuing to explore all options for how we can best compete in the e-vapor category.” As of December 31, 2022, the carrying value and estimated fair value of our JUUL investment was $250 million. We will record the financial impact of the Agreement in the first quarter of 2023 and intend to treat any such amounts as a special item and exclude it from our adjusted diluted earnings per share. [Altria]