The crowds are bigger this year than last. I guess I should not be surprised. A building on fire draws a crowd too. The test will be next year if oil stays at these depressed levels. I doubt if the crowds will come back to watch the smoldering ruins. We came to EnerCom looking for shorts and bargains. We have not been disappointed. Every producer is a short.
There were two notable things today from Continental Resources, CLR, the biggest producer in the Bakken (North Dakota). CLR is increasing production guidance with reduced production cost and CAPEX. This theme is recurrent; more oil for less dollars. Continental’s President said the Company is cash flow neutral at $50 per barrel of oil. At $60 cash flow positive. Considering oil is at $42, doesn’t seem like they are going to make money any time soon. All the more ironic since Harold Hamm, their CEO in a very public announcement called a bottom in the price of oil last March at $48 per barrel and lifted all of the Company’s hedges.
More bad news for Uncle Warren’s railroad, Burlington Northern. 70% of Continental’s oil producing capacity is now on pipeline. This improves their cost differential from what they get paid and the market price of WTI. Last year 70% was shipped by rail. Shipping by rail is expensive and when oil was $100 per barrel, it made more sense. Bad news for railroads and businesses dependent on them, like Trinity and Greenbriar.
Luncheon break today. Again desert off the menu. Democrat Governor John Hickenloope of Colorado was the keynote speaker. He thanked the audience for their support. Oil and gas is big business in Colorado and he had many fans there. He quipped that it wasn’t so bad having a Democrat in their camp and that lifting the ban on exporting crude oil would have to be a bipartisan issue. Hickenloope reminded the audience that he was the only Governor ever that was a professional geologist. Hickeloope is the kind of Democrat that could garner conservative support and reach across the aisle if he had Presidential ambitions.
The second keynote speaker was Christopher Hill, former Ambassador to Iraq. He reminded the audience of how f’cked up the Iraq situation was. He also said the Iran deal was a done deal and would go through without question. More salt on the wounds. Hill sounded very much like the Democratic talking points about the Iran nuclear deal which should be no surprise since President Barack Obama nominated Christopher Hill for the post of U.S. Ambassador to Iraq.
The other depressing moment of the day for oil bulls was when CIBC World Markets senior oil analyst, Katherine Spector provided her forecast for the future price of oil and natural gas. No rise in price for the foreseeable future although she did say when sentiment gets this negative as it is now there is some reason to believe a bottom could be in.
The gloom is pervasive. Downtown Denver marijuana dispensaries will be doing well tonight.