A New Era Begins for the Energy Industry
Our new website is about to go live... A new era begins for the energy industry... The latest from OPEC... U.S. shale oil returns... 'They're about to find out how efficient the U.S. producers have become'...
A quick announcement to begin today's Digest...
As many of you know, we launched "beta" access to our redesigned Stansberry Research subscriber website last fall. Since then, subscribers have had the opportunity to test-drive the new design and features.
Thanks to your participation and feedback, we've made great strides in refining the design and working out the bugs over the past several months... And we are now pleased to announce our new website will go live starting tomorrow.
What does this mean for you? You will continue to log in to your account at www.stansberryresearch.com as usual.
If you previously opted in to the beta release, you will automatically be granted access to the new members site. If you did not opt in to the beta – or have not logged in to the subscribers-only website for some time – you will be asked to reset your password. This is part of our new and enhanced account-security features.
From there, you will see a brief overview video explaining how to navigate the new site and use all its new features. If you experience any problems, please be sure to check the Help section for frequently asked questions ("FAQs") regarding the new site. And of course, you can also reach out to our dedicated customer service team if needed.
We hope you enjoy all of the improvements we've made to help you get the most out of your Stansberry Research subscriptions. And please let us know what you think at feedback@stansberryresearch.com.
This morning, President Donald Trump signed two executive orders...
The orders were to "advance" the construction of the Keystone XL and Dakota Access oil pipeline projects.
As Bloomberg reported, it's not yet clear what "mechanism" the orders would use to advance the projects, both of which were blocked by the Obama administration. But today's actions are a clear sign that the recent era of heavy-handed energy regulation is over. As Trump himself put it in an earlier meeting this morning...
Our friends that want to build in the United States, they go many, many years and then they can't get the environmental permit over something that nobody ever heard of before. And it's absolutely crazy. I am, to a large extent, an environmentalist. I believe in it. But it's out of control... We're going to make a very short process, and we're going to either give you your permits or we're not going to give you your permits, but you're going to know very quickly... And generally speaking we're going to be giving you your permits.
We're going to make the process much more simple for the oil companies and everybody else that wants to do business in the United States.
Elsewhere in the energy markets, OPEC continues to talk up oil prices...
Following the group's latest meeting on Sunday, Saudi Arabia Minister of Energy Khalid al-Falih told reporters that its coalition of 24 OPEC and non-OPEC producers have cut production by a total of 1.5 million barrels per day since January 1. This is about 80% of the 1.8 million barrels per day they agreed to cut last December.
Al-Falih said Saudi Arabia has already exceeded its target – it promised to cut production by 500,000 barrels per day – as had Algeria and Kuwait. Others, like Iraq and Venezuela, have not yet reached their promised cuts. He said he hoped all 24 countries in the agreement would reach their targets in the next month, and predicted global oil supplies would return to "normal" levels by mid-year.
"Compliance is great – it's been really fantastic," he said. "Based on everything I know, I think it's been one of the best agreements we've had for a long time."
Of course, Al-Falih is speaking his "book"...
Saudi Arabia is OPEC's biggest producer and most influential member. Predictably, it has a lot to lose if the agreement unravels.
According to the International Energy Agency, it's still far too soon to tell if OPEC has cut production as significantly as Al-Falih says. In the meantime, while several members appear to be cooperating today, history suggests this is unlikely to last long.
More important, we're seeing more and more signs that OPEC's latest move to cut production may backfire... just as its gamble to flood the world with oil did in 2015.
In short, U.S. shale production is quietly bouncing back...
OPEC cuts – or rather, the expectation of OPEC cuts – have pushed prices high enough in recent months to make many U.S. producers profitable again. And they're ramping up production faster than many analysts expected.
As you can see in the following chart, U.S. oil production has already reversed much of last year's decline...
And it could be headed even higher. According to oil-services provider Baker Hughes (BHI), rig count – the number of active oil rigs operating in the U.S. – soared by 29 last week to a total of 551...
This is the largest weekly increase in nearly four years. And it pushed the active rig count to its highest level in 14 months.
According to a note from investment bank Goldman Sachs analysts on Monday, the current rig count implies a year-over-year production increase of 315,000 barrels per day from U.S. producers. This would completely erase last year's declines.
But this number could go even higher if the rig count keeps rising...
And if the latest data from U.S. producers are any indication, this is likely, too. As the Wall Street Journal reported on Friday...
Preliminary capital-spending plans released in recent weeks by more than a dozen American shale drillers, including Hess Corp. and Noble Energy Inc., show an average 60% budget increase for the group...
Many more energy firms will announce capital budgets in the coming weeks, and early indications are that they expect to spend more, as well as pump more oil and natural gas this year.
What's behind the surprising rebound in U.S. crude-oil production?
As we've discussed in previous Digests, shale producers have continued to get more and more efficient as technology has improved. They can now profitably produce oil at prices they couldn't even a year or two ago. More from the Journal (emphasis added)...
Several U.S. oil producers, including Pioneer Natural Resources Co. and EOG Resources Inc., have said that advanced technology and efficiency gains implemented during the oil-price downturn will allow them to not just survive but thrive at $55 a barrel.
Spending by oil and gas producers world-wide is expected to jump 7% in 2017, according to Barclays PLC, a British bank which recently surveyed 215 energy companies about their plans.
U.S. onshore oil and gas producers will lead the way, particularly as larger shale drillers ramp back up, said J. David Anderson, a Barclays analyst. He estimates that spending among American exploration and production companies will rise more than 50%, setting off a wave of activity that may surprise OPEC and other foreign competitors. "They're about to find out how efficient the U.S. producers have become," Mr. Anderson said.
Dave Lesar – chief executive at oil-services firm Halliburton (HAL) – appears to agree...
On the firm's latest earnings call this week, he told analysts that the North American oil and gas industry has officially "rounded the corner," even as the rest of world is still in decline. As the Financial Times news outlet reported yesterday...
Lesar told analysts on a call to discuss Halliburton's 2016 earnings that in North America the "animal spirits" of the oil and gas production companies that are its customers had "broken free," and it was starting to bring equipment out of storage to meet demand.
We're also seeing major deals in the sector for the first time in years...
Last week, Noble Energy (NBL) agreed to buy Clayton Williams Energy (CWEI) for $2.7 billion, giving it access to more than 120,000 acres in the Delaware Basin, part of the shale-oil-rich Permian Basin in West Texas and New Mexico.
One day later, oil giant ExxonMobil (XOM) agreed to pay up to $6.6 billion for 275,000 acres – holding as much as 3.4 billion barrels of oil and gas – on the New Mexico side of the Delaware Basin.
Don't be surprised to see more deals in the Permian Basin – the "crown jewel of the world's oil and gas industry," as Pioneer Natural Resources Chairman and CEO Scott Sheffield has called it – as this trend continues.
In the meantime, this could be bad news for OPEC's new plan to keep prices elevated...
Recovering U.S. production could quickly offset a significant percentage of OPEC's cuts and push prices lower.
And should members fail to live up to their promises in coming months, all bets are off. Higher-than-expected oil supplies – combined with the speculative extreme in the crude-oil futures market – suggests prices could plunge.
New 52-week highs (as of 1/23/17): Apple (AAPL), CONE Midstream Partners (CNNX), Alphabet (GOOGL), Altria (MO), Northern Dynasty Minerals (NAK), and iShares MSCI Global Metals & Mining Producers Fund (PICK).
The e-mails continue to pour in... In today's mailbag, more subscriber feedback on Stansberry's Credit Opportunities... the first installment of our annual Report Card... and the recent Flex Alliance controversy. Send your questions, comments, and concerns to feedback@stansberryresearch.com.
"Porter, you asked for feedback on how subscribers have done with your [Stansberry's] Credit Opportunities letter and our bond purchasing experiences, so here goes: Before subscribing, I had never purchased a corporate bond. To be completely truthful, I was totally ignorant to the investment case for them. Believing in you and your research, I became a charter subscriber and read everything you wrote on the subject. I learned quite a lot, then started buying the recommendations as I could get into them, eventually getting into five different bonds at prices better than your initial recommendation price.
"The returns have been absolutely phenomenal. All of my holdings are trading significantly above my purchase price, but the best part is the income in a time where good income investments are few and far between... Now that I know the risk/reward case for discounted bonds, it will be making up a significant portion of my total portfolio allocation when the opportunity is ripe for buying again at heavily discounted prices.
"In closing, I can't thank you enough for the enlightenment you bring to anyone who is willing to learn. I doubt I would have ever added this 'tool' (buying corporate bonds) to my investment toolbox were it not for you and your ever-more-valuable investment franchise. It's still a wonder you let people like me get lifetime access to your material for a mere pittance compared to the outstanding value coming from your side of the table." – Paid-up subscriber Ryan M.
Porter comment: Ryan, thanks so much for your kind note. It truly made my day. And thanks, even more, for your loyal support of my business. You've given me the best job in the world and I'm grateful.
"Porter, I was able to buy 3 of the bonds available so far in [Stansberry's Credit Opportunities] recommendations. Many bonds just weren't available through the two brokers I deal with. Of those, all 3 have been outstanding winners, with [one] being the stellar performer, at about 125% capital gain if memory serves. To say I'm pleased with SCO is an understatement. I can't wait to get the even juicier discounts coming our way as the credit cycle matures into something a wee bit more 'contagious'. 'Fallen angels' will be 'dropping like flies' at some point, into our target bargain territory. Cheers... a loyal subscriber to the most honest and high-integrity major research service." – Paid-up subscriber Leigh A.
"Hi Porter, I only bought one bond recommended by your newsletter. [I] was intrigued because of the short maturity time frame and the 'story' you shared as part of the recommendation. Obviously this worked out. Your team deserves a lot of credit because I actually read in another newsletter or article recently that they were recommending the actual stock, so they must have really turned it around.
"The only downside is the fact you have to call someone. I know how stupid that sounds, but you get so lazy being able to buy stocks on line that making a phone call to the broker seems like too much effort. I was using an investment advisor, and of course he tried to talk me out of it, but they haven't performed well at all over the last 3 years, so I don't pay much attention to them anymore. Based on my confidence in your publications, [I] have moved half of my available funds into a self directed Fidelity account and did much better." – Paid-up subscriber Rick V.
"Hello, I wanted to give Porter and his team a giant CONGRATULATIONS for your superb work at both the Investment Advisory and [Stansberry's Credit Opportunities]. I don't short stocks, it is not in my temperament and in this regard I have company in Buffett and Munger. So I did really well with your Advisory. SCO returns have been spectacular. Currently I have 5 bonds in my portfolio. (Many of the bonds you recommended soared out of the buy range). I have sold 2 of the bonds so far. Every single bond you recommended has been a home run... Regarding Extreme Value, it has been quite good to me, because, again, I don't short stocks. Perhaps Dan Ferris should follow Buffett's lead and don't short stocks anymore... " – Paid-up subscriber Bobby J.
"Lets be fair! [Dan] Ferris closed out the 3rd best trade EVER for all of Stansberry products in 2016. Timely sale of Constellation Brands, up over 630% earns top grade (and top profit) for my portfolio(s)! Let's look at the value of the portfolio including cash . . . and the grade needs to be adjusted upward." – Paid-up Stansberry Alliance member Steve Murray
Porter comment: Steve, I've known Dan since 1998. I'm not giving Dan an "F" for anything in life. He's a meta-genius. But looking only at the stocks he picked over the past 17 months, what grade would you award?
"Porter, I have been following the back-and-forth over Anselmo's complaints regarding your decision (quite correct) not to allow Flex Alliance members access to Portfolio Solutions products. Perhaps I can help...
"Think of your entire operation as a collection of culinary experts. Anybody can buy anything at any time. Buying any SINGLE newsletter is like getting advice from your Wine expert on the best Bordeaux, or from a chef on Main courses, or your baker on great desserts, or a nutritionist on overall healthy eating, etc. Flex Alliance is a ticket for five such advisories. If a Flex Alliance member so chooses, they might prepare a daily meal of three appetizers, have a glass of wine, and finish it off with a dessert. Not very healthy, mind you, but the customer is king and it's their body.
"Portfolio Solutions is akin to a culinary magazine... Stansberry's Food & Wine, if you will. The customer gets a fully integrated product complete with advice on all things food-related from ALL of your experts, including most importantly, a daily meal planner complete with shopping list, recipes, caloric & nutritional content etc. Portfolio Solutions is not just another newsletter, then, but a quantum leap above that. Thus, it is more than fair to charge what you do for it, but also justifies not allowing access to Flex Alliance members. Regards." – Paid-up subscriber W. Gordon
"Can all (well some) of the Flex Alliance members please stop their whining? I have been a Flex member for a number of years. While the cost was rather significant, it has been a great value for me. It has taken me a while to develop a good investing strategy, but the access to many of the publications through my membership over the past few years has got me to a much better place as an investor.
"As to the issue of the cost and access to the Portfolio Solutions, I initially had the same questions that many are asking. Will I get any credit for the large outlay I made to become a Flex Alliance member? I called customer service to find that the answer was yes. In fact, I thought the offer was more than fair and essentially gave me full value for what I spent years ago. To those who think that one of the 3 bundles should count as one of your 5 Flex selections, you need to get a clue. Nothing is free and Porter and his team are running a for-profit business. To expect as a Flex Alliance member to have access to virtually everything that Stansberry publishes, and as such, be put on par with full Alliance members is simply not a reasonable expectation. I have not yet decided whether I will pay to get access to one of the Portfolio offerings, but if I do not, it won't be because the offer was unfair." – Paid-up subscriber Marty V.
"Hi Porter, after reading the comments of the Flex Alliance member and your response regarding the Portfolio Solutions product, I have to say that I see both sides and agree somewhat with both arguments.
"First, I must say that I have enjoyed the benefits of being a Flex Alliance member both for my personal portfolio and those I professionally manage. Like the Flex Member who you referenced I, too, was a bit taken back when you were forced to penalize every Flex member for the dirty deeds of a few but I understood and respected your position. For the record, one of the reasons I upgraded to Flex Alliance was so that I could make switches without delay – that was a big sales point in the pitch I received. It's not my style to be switching and jumping back and forth thus this change was not a deal killer in my mind. When I joined I was also told that there were only a few things that I wouldn't have access to. I was very specifically told that my Flex Alliance membership would include any future new research related product/s and the membership should be looked at as sort of a heirloom investment that would be mine and my heirs so long as the annual $199.00 fee was paid.
"Porter, I'm proud to tell you that I enjoy your products and have made some of them the cornerstone of my business. I've been using your firms research for years and in essence putting together my own 'Portfolio Solutions' portfolio's. Whether you give me access to them or not isn't going to change my opinion of the work you and your folks do. Call me 'Old School' but I believe my word is my bond and I know yours is too. I'll respect whatever decision you ultimately make, but do believe you might be best served thinking of a better way to take care of those that were told what I was told by your sales staff. (Possible solution – I'd gladly pay a bit more annually for access to those portfolio's.) Here's to a great Year!" – Paid-up Flex Alliance Member Tom O.
Porter comment: Tom, I'm glad you've enjoyed our work and I hope you'll continue to use it. I will do as I promised and continue to provide you access to any five products (research publications) you want.
Likewise, I'm happy to allow you to select, as one of your choices, the new Stansberry Newswire, which is the only new research publication associated with our new Stansberry Portfolio Solutions offer. If I were to sell access to the Newswire as a stand-alone product, I would charge at least $100 per month, perhaps more. Thus, I hope you'll see that I've just added yet another $1,000-plus potential benefit to your subscription, without charging you a penny more.
On the other hand, if you, for any reason, believe that my efforts to sell a group of research publications (seven, nine, or all of them) in a unique offer is in some way tantamount to offering you five in total, then I apologize sincerely for the misunderstanding. Out of fairness, I can't allow you to access virtually all of our work for a relative pittance compared with what others have paid.
However, because I remain constantly willing to accept full responsibility for any potential misunderstanding, I'm happy to apply a FULL credit for everything you've paid to my company, including all annual fees, toward the purchase of any new subscription you prefer.
I simply can't imagine what more I can do to satisfy any member who is even remotely perturbed by our efforts to further serve our clients in any way. Seriously... what more could I possibly do? Getting any one of five newsletters is not the same thing as receiving the full financial benefits of virtually all of them. You get that, right?
Regards,
Justin Brill
Baltimore, Maryland
January 24, 2017