CLR

CLR:

• market cap: $17 billion
• dividend: eighty cents;
  
• P/E: 20
  
• current share price, November 5, 2021: $46
• target, November 5, 2022: $50

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Thoughts On The Decision To Enter The Permian; and,
Thoughts On The Deal

Items that need to be addressed.

Why Harold Hamm invested $3.25 billion of his own money to do this deal?

• FOMO.
• YOLO.
  
• what does he have to lose?
• owns 90% of CLR outstanding shares.
• oilmen are natural traders, risk takers,  
• the Permian: the swing producer.

Harold Hamm has been on a "quiet" acquisition binge.

Interesting way to value the mineral acres? Kosher?

Look at his competitors: APA, DVN, PXD, EOG, OXY.

• market caps
• dividends, earnings, etc.
• OXY: 10,000 drilling locations. $38 billion deal with Anadarko.
• CLR: 1,000 drilling locations. $3.25 billion deal.

ESG.

Cynicism, in a good way.

Bankers. Financing. Access to "debt." Does he want more debt. Several cycles ago, Harold Hamm was very clear that he was going to take "debt" off the CLR balance sheet.

US Secretary of Energy under Brandon.

"Here, hold my beer."

Hedging, not hedging.

Perceived spot price of oil going forward. Backwardation. Contango.

• is anyone asking that question: is there a "norm" for the average length of time for either backwardation or contango? Or is that even a "reasonable" question. My hunch, "not."
• time to buy oil: during contango
• time to buy refiners: during backwardation
• the minerals always seem to be better than expected; it's the execution that's always the problem (after posting that, someone else mentioned the same thing on twitter).
•  Example: Alpine prospect for Apache; looks like it turned out to be much better than expected;

Environment: from a reader elsewhere explaining why operators like CLR enter the Permian rather than entering riskier locations:

US oil growth was a major factor in destabilizing OPEC from 2014-2019. Covid took care of 2020 of course. And prior to that in the 80s, US production and North Sea production destabilized OPEC. Yes, there is a cartel, duh. But the way to destabilize it is to encourage ex-cartel production.

Brandon has taken a lot of anti-domestic actions. And not just the actions, themselves but how they affect companies forward looking views on how safe it is to invest in US oil productions. Anyone feel like building a gathering pipeline after Keystone decision? Sure some will get built. But fewer. Same thing with pads, roads, seismic, exploration drilling, etc. It's raised the hurdle rate significantly. And shale is not just pure infill drilling--there are systemic investments also.

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Twitter Links

Casey Merriman, CLR been on the quiet acquisition front. Link here.

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Previous Links At The MillionDollarWay Blog

$8,000 / acre? November 4, 2021.
The 6.0 earthquake in the oil sector, November 4, 2021.
Damn the torpedoes, November 3, 2021.