2/17/06 The Expected And The Unexpected
Dell’s sales outside the United States increased 21 percent, compared to 10 percent in the U.S. market. The company said first-quarter earnings would be 39 cents to 41 cents per share excluding a cost of 3 cents per share for stock compensation. Analysts had forecast 42 cents per share. In addition, Dell said first-quarter would be $14.2 billion to $14.6 billion, slightly below analysts' prediction of $14.73 billion. Chief Executive Kevin Rollins stated "we are not seeing anything fundamentally that's slowing the market down. We just think ... with the normal seasonality changes and the size of our company, this is a good forecast for the market."
New construction of U.S. homes soared 14.5% in January to a seasonally adjusted annual rate of 2.276 million, aided by the warmest weather of any January on record. It's the highest rate for seasonally adjusted starts since March 1973. The percentage gain was the largest in nearly 12 years, the Commerce Department said Thursday. Starts of new single-family homes rose 12.8% to a record seasonally adjusted annual rate of 1.819 million in January. The gain in housing starts far exceeded the 2.02 million pace expected by economists. Building permits - which are less affected by monthly weather disruptions - rose 6.8% to a seasonally adjusted annual rate of 2.217 million.
The U.S. Treasury is suspending reinvestment of some government securities to avoid hitting the current debt limit, the department said Thursday. The government is now on track to hit the limit in mid-March. "Without this action, we would reach the debt limit today," Treasury spokeswoman Brookly McLaughlin said Thursday. Treasury frees up $65.266 billion as a result of suspending reinvestment in the government securities investment fund. This is business as usual under the Bush administration.
Peter Schiff: “At inception, the Fed was simply charged with providing for "an elastic currency," which meant expanding the money supply during periods of economic growth and contracting it during periods of recession. Its current "mandate" has simply rendered the Fed as nothing more than an engine for perpetual inflation. Unfortunately for all of us, this is one goal it never fails to achieve.”
Brazil exempted foreign investors from a capital-gains tax on local government bonds in a bid to lure more capital to the country's $465 billion debt market.
According to the WSJ, and certainly expected, Icahn will nominate only five directors at Time Warner's next annual meeting, not enough to ensure control. Will this lead to an
agreement with the company’s board of directors? I stay clear of all Icahn deals. Do you remember greenmail?
As expected, Time Warner Inc. Chief Executive Richard Parsons is looking at Univision Communications Inc. as the Spanish-language broadcaster considers a sale, according to an interview published in the Wall Street Journal today. Parsons has trouble just managing his company. The board should think twice about making another acquisition. Do you remember AOL?
I have been a long-time booster of Toyota’s stock; however, I never imagined this taking place-- Shares in Toyota Motor Corp. hit a record high on Friday, sending the auto maker's market value above $200 billion -- more than that of Wal-Mart Stores.
According to Caijing, a financial magazine, a Chinese government delegation is due to visit Iran as early as March to formally sign an agreement allowing China Petrochemical Corp., or Sinopec, to develop Yadavaran. The deal would complete a memorandum of understanding signed in 2004. In exchange for developing Yadavaran, one of Iran's largest onshore oil fields, China would agree to buy 10 million tons of liquefied natural gas a year for 25 years beginning in 2009, the report said, citing Sinopec board member Mou Shuling. The deal is thought to be potentially worth about US$100 billion (euro84 billion).
As expected, President Bush on Thursday asked Congress to approve an additional $72.4 billion in war-related spending for fiscal 2006, along with $19.8 billion for ongoing hurricane recovery efforts on the Gulf Coast. (The cost of this war is fast approaching $500 billion. At the start of the war, Mitch Daniels, then director of the Office of Management and Budget, said costs would be between $50 billion to $60 billion.) How many of those dollars won’t reach their intended destination? Have you ever heard of fraud?
Abraham Maslow: “The neurosis in which the search for safety takes its clearest form is in the compulsive-obsessive neurosis. Compulsive-obsessive to frantically order and stabilize the world so that no unmanageable, unexpected or unfamiliar dangers will ever appear.”
Investors pulled an estimated $552 million from U.S. stock mutual funds in the week through Wednesday, reversing an inflow of $1.3 billion a week earlier, TrimTabs Investment Research said Thursday. International funds added $2.9 billion in the week. Investors also withdrew $397 million from bond funds, versus additions of $487 million a week earlier, TrimTabs said.
In the latest Harris Poll, 40 percent of U.S. adults rate Bush’s job performance positively, and 58 percent rate it negatively. (Are these 40% brain dead?) In other findings, approval of the way Congress is handling its job is unchanged, with a quarter (25%) of adults giving a positive rating and 71 percent giving a negative rating. (Are these 25% brain dead?) However, adults think the state of the country has weakened slightly, with 32 percent saying things are going in the right direction, and 59 percent saying things have pretty seriously gotten off on the wrong track (compared to 33% and 54%, respectively in January). (Are these 32% brain dead?)
Geoff Burns, Pan American Silver’s President and CEO: “Pan American has not and will not hedge any of its silver production."
Bernanke predicted a soft landing for housing. I’d be a fool to believe a prediction made by a government official?
Did you take note that Bernanke substituted “domestic investment” for “savings”?
Sir Robert Baden-Powell: “A Scout is never taken by surprise; he knows exactly what to do when anything unexpected happens.”
Friday, February 17, 2006
Thursday, February 16, 2006
The Way It Is
2/16/06 The Way It Is
HP said it expects net income to be between 43 cents and 45 cents a share on revenue of between $22.4 billion and $22.6 billion. That compares to analysts' expectations for earnings of 45 cents a share on revenue of $22.61 billion. HP said it cut 1,800 jobs in the quarter as part of a plan to reduce its workforce by 15,300. The market has viewed the results quite differently than I have, and the stock has risen to $33+ in pre-market trading.
Richard Daughty, The Mogambo Guru: "Of course, the slimy United States Treasury, in full "Screw you!" mode continued to, illegally, increase the total indebtedness of the USA by criminally, continuously, and consciously breaking the law by issuing (as of Valentine's Day) $21 billion more debt than they are allowed! Note the exclamation point to show special emphasis, as I never thought that I would live to see such blatant, provable, criminal lawlessness in the government of the United States."
Baker Hughes said it expects 2006 revenue to rise 19% to 21% from $7.19 billion in 2005. Income from continuing operations is expected to be in the range of $3.40 to $3.60 a share.
Steve Saville: "Central banks -- the engines of inflation -- never have to reflate because they never permit deflation to occur. To maintain the inflation is, in fact, the reason for the existence of central banking, meaning that if it ever became impossible for a central bank to maintain the inflation there would be no reason for that bank's continued existence. Fortunately for the central bankers of the world, the current monetary system provides them with unlimited scope to create money from nothing. This means they will continue to have jobs as long as the current monetary system remains in place."
Capital flows into the United States fell to $56.6 billion in December, a seven-month low, after hitting a revised $91.6 billion in November, the Treasury Department said Wednesday. In December, net capital flows fell below the trade deficit for the first time since April 2005.
Tyson is cutting 1,665 jobs at two plants in Nebraska.
March crude closed under $58/brl for first time since November. Remember supplies build during winter months. Before you know it, the nice driving weather will arrive. Then watch the supplies decline.
According to the results of a forthcoming survey conducted by Watson WyattWorldwide and the National Business Group on Health, employers expect health care benefit costs to increase a median 8 percent this year, down from the 10 percent increase they expected in 2005. The vast majority of employers surveyed - 86 percent - also said their health care benefit costs came in at or below budget in 2005. Employers expect prices to increase about 8 percent again in 2007. U.S. per capita spending on health care remains twice that of many other industrialized countries. In addition, the price increase in health benefits continues to outpace the rate of growth in wages and other business costs.
Bush: “We have slowed Medicare growth down from 8.1 percent a year to 7.7 percent a year. In other words, we found ways to reform the system so that we can slow the growth rate down to make Medicare more affordable for future generations. We're not putting the car in reverse, we're just finding the speed limit. Same thing with Medicaid -- it grows -- slow it down from 6.9 percent year to 6.6 percent a year.”
A consortium lead by Cerberus Capital Management and Citigroup's private-equity arm is the front-runner to buy a majority stake in General Motors Acceptance Corp. the financing arm of General Motors Corp. (GM), according to a report in the Wall Street Journal. Other private-equity firms may join the Cerberus consortium. I would like to say a word about GM. Sometimes it is necessary to pay more attention to what is happening in the options market than in the underlying stock. That is the case with GM. There is overriding negativity in GM reflected in the options. For example, the $17.50 strike price for the March 2006 puts is at 50 cents. In other words, someone who pays 50 cents for those puts needs to have the stock drop from the present $22 to $17 just to break even, and that does not include commissions. There are only 21 trading days remaining until those puts expire. In other words, the stock needs to go down at least one-quarter point for 21 consecutive trading days for someone to make a smidge of money. I have sold those puts at 50 to 60 cents in the last week. I will continue to do so.
Goldcorp Inc.last evening said gold sales in 2005 totaled 1.34 million ounces, compared to 427,600 ounces in 2004. Cash costs per ounce in 2005 were less than $25, compared to $115 in 2004, the Vancouver, British Columbia-based company said. This is the company whose shares I have suggested for purchase for the last three plus years.
The nationwide average price for self-serve regular gasoline is $2.274, which is nearly 5 cents lower than the middle of January, but still more than 38 cents higher than one year ago.
George Will: “Terrorism is not the only new danger of this era. Another is the administration's argument that the president alone, as commander in chief, may conduct the nation's foreign affairs.”
Washington Mutual announced Wednesday it will eliminate 2,500 jobs. The latest cuts come in WaMu's home-loan business, which will close 10 of the 26 offices nationwide that handle administrative support.
Net private sector flows into U.S. securities hit a record $934 billion last year, up from $681 billion in 2004 and $585 billion in 2004.
However, there are flashing yellow lights. Central banks only purchased a net $115 billion of U.S. securities in 2005, down more than half from the $236 billion bought the year before, and significantly, central banks' net purchases of U.S. Treasury securities slumped to $61.2 billion from $201 billion the year before, the lowest since 2002. As our trade deficit rises in 2006 from last year’s $725 billion, I believe there is a real question as to whether new foreign capital flows will be enough to offset our growing deficit, and that does not include our burgeoning budget deficit.
Due to the record warm weather, utility output plummeted 10.2% in January, the largest monthly decline on record.
Marsoft: “After falling to their lowest levels in more than two years during the third quarter of 2005, dry bulk freight rates bounced back in the fourth quarter. However, the gains were much more modest than those seen during late 2003 and late 2004, and thus did little to reverse the negative tone that swept over the market in the third quarter. As a result, period charter rates for most ship types continued to fall in the fourth quarter, and ship prices generally declined by another 5-10% relative to their third quarter levels.”
Brett Steenbarger: “New 20 and 65 day highs rose to 887 and 584; new 20 and 65 day lows dropped to 495 and 149. We continue to make new price highs; as long as we do so and expand the number of stocks making new highs, the trend remains bullish.”
Gartner Inc.sees 2006 global semiconductor revenue increasing 9.5% to $257.7 billion from $235.3 billion in 2005, and estimates revenue growth slowing to 7% in 2007, followed by a cyclical peak in 2008.
HP said it expects net income to be between 43 cents and 45 cents a share on revenue of between $22.4 billion and $22.6 billion. That compares to analysts' expectations for earnings of 45 cents a share on revenue of $22.61 billion. HP said it cut 1,800 jobs in the quarter as part of a plan to reduce its workforce by 15,300. The market has viewed the results quite differently than I have, and the stock has risen to $33+ in pre-market trading.
Richard Daughty, The Mogambo Guru: "Of course, the slimy United States Treasury, in full "Screw you!" mode continued to, illegally, increase the total indebtedness of the USA by criminally, continuously, and consciously breaking the law by issuing (as of Valentine's Day) $21 billion more debt than they are allowed! Note the exclamation point to show special emphasis, as I never thought that I would live to see such blatant, provable, criminal lawlessness in the government of the United States."
Baker Hughes said it expects 2006 revenue to rise 19% to 21% from $7.19 billion in 2005. Income from continuing operations is expected to be in the range of $3.40 to $3.60 a share.
Steve Saville: "Central banks -- the engines of inflation -- never have to reflate because they never permit deflation to occur. To maintain the inflation is, in fact, the reason for the existence of central banking, meaning that if it ever became impossible for a central bank to maintain the inflation there would be no reason for that bank's continued existence. Fortunately for the central bankers of the world, the current monetary system provides them with unlimited scope to create money from nothing. This means they will continue to have jobs as long as the current monetary system remains in place."
Capital flows into the United States fell to $56.6 billion in December, a seven-month low, after hitting a revised $91.6 billion in November, the Treasury Department said Wednesday. In December, net capital flows fell below the trade deficit for the first time since April 2005.
Tyson is cutting 1,665 jobs at two plants in Nebraska.
March crude closed under $58/brl for first time since November. Remember supplies build during winter months. Before you know it, the nice driving weather will arrive. Then watch the supplies decline.
According to the results of a forthcoming survey conducted by Watson WyattWorldwide and the National Business Group on Health, employers expect health care benefit costs to increase a median 8 percent this year, down from the 10 percent increase they expected in 2005. The vast majority of employers surveyed - 86 percent - also said their health care benefit costs came in at or below budget in 2005. Employers expect prices to increase about 8 percent again in 2007. U.S. per capita spending on health care remains twice that of many other industrialized countries. In addition, the price increase in health benefits continues to outpace the rate of growth in wages and other business costs.
Bush: “We have slowed Medicare growth down from 8.1 percent a year to 7.7 percent a year. In other words, we found ways to reform the system so that we can slow the growth rate down to make Medicare more affordable for future generations. We're not putting the car in reverse, we're just finding the speed limit. Same thing with Medicaid -- it grows -- slow it down from 6.9 percent year to 6.6 percent a year.”
A consortium lead by Cerberus Capital Management and Citigroup's private-equity arm is the front-runner to buy a majority stake in General Motors Acceptance Corp. the financing arm of General Motors Corp. (GM), according to a report in the Wall Street Journal. Other private-equity firms may join the Cerberus consortium. I would like to say a word about GM. Sometimes it is necessary to pay more attention to what is happening in the options market than in the underlying stock. That is the case with GM. There is overriding negativity in GM reflected in the options. For example, the $17.50 strike price for the March 2006 puts is at 50 cents. In other words, someone who pays 50 cents for those puts needs to have the stock drop from the present $22 to $17 just to break even, and that does not include commissions. There are only 21 trading days remaining until those puts expire. In other words, the stock needs to go down at least one-quarter point for 21 consecutive trading days for someone to make a smidge of money. I have sold those puts at 50 to 60 cents in the last week. I will continue to do so.
Goldcorp Inc.last evening said gold sales in 2005 totaled 1.34 million ounces, compared to 427,600 ounces in 2004. Cash costs per ounce in 2005 were less than $25, compared to $115 in 2004, the Vancouver, British Columbia-based company said. This is the company whose shares I have suggested for purchase for the last three plus years.
The nationwide average price for self-serve regular gasoline is $2.274, which is nearly 5 cents lower than the middle of January, but still more than 38 cents higher than one year ago.
George Will: “Terrorism is not the only new danger of this era. Another is the administration's argument that the president alone, as commander in chief, may conduct the nation's foreign affairs.”
Washington Mutual announced Wednesday it will eliminate 2,500 jobs. The latest cuts come in WaMu's home-loan business, which will close 10 of the 26 offices nationwide that handle administrative support.
Net private sector flows into U.S. securities hit a record $934 billion last year, up from $681 billion in 2004 and $585 billion in 2004.
However, there are flashing yellow lights. Central banks only purchased a net $115 billion of U.S. securities in 2005, down more than half from the $236 billion bought the year before, and significantly, central banks' net purchases of U.S. Treasury securities slumped to $61.2 billion from $201 billion the year before, the lowest since 2002. As our trade deficit rises in 2006 from last year’s $725 billion, I believe there is a real question as to whether new foreign capital flows will be enough to offset our growing deficit, and that does not include our burgeoning budget deficit.
Due to the record warm weather, utility output plummeted 10.2% in January, the largest monthly decline on record.
Marsoft: “After falling to their lowest levels in more than two years during the third quarter of 2005, dry bulk freight rates bounced back in the fourth quarter. However, the gains were much more modest than those seen during late 2003 and late 2004, and thus did little to reverse the negative tone that swept over the market in the third quarter. As a result, period charter rates for most ship types continued to fall in the fourth quarter, and ship prices generally declined by another 5-10% relative to their third quarter levels.”
Brett Steenbarger: “New 20 and 65 day highs rose to 887 and 584; new 20 and 65 day lows dropped to 495 and 149. We continue to make new price highs; as long as we do so and expand the number of stocks making new highs, the trend remains bullish.”
Gartner Inc.sees 2006 global semiconductor revenue increasing 9.5% to $257.7 billion from $235.3 billion in 2005, and estimates revenue growth slowing to 7% in 2007, followed by a cyclical peak in 2008.
Wednesday, February 15, 2006
Gift Cards And EnCana
2/15/06 Gift Cards And EnCana
Having replaced apparel as the holiday gift purchase of choice, gift cards-a swiftly growing subset of the larger prepaid card market-have grown into a $35.3 billion industry, according to The U.S. Prepaid and Gift Card Market, a new report from market research publisher Packaged Facts, a division of MarketResearch.com, a leading provider of industry-specific market research reports. What's more, Packaged Facts projects that the overwhelming popularity of gift cards across generations will continue to drive card sales upwards of 5% annually to surpass the $47 billion mark by 2010. Holiday season sales of gift cards alone jumped from $17.34 billion in 2004 to approximately $18.48 billion in 2005, and sales are expected to continue to climb.
Yesterday, retail sales for January rose 2.3%. Wall Street pundits were totally surprised by the gain. Obviously, they are schmucks. I have written over and over again that the holiday retail landscape has changed due to gift cards, and 40% of the gift cards are redeemed in January. We saw that in the Wal-Mart results. Sales are not recorded until the cards are redeemed. February retail sales will tell a very different story for an additional reason- the unseasonably warm weather in January will not be a factor in February.
The aging of the worldwide population and a focus on lifestyle treatments that revitalize youthfulness and stave off skin damage are the driving forces behind a healthy prescription dermatological drug market, which should see sales jump to $11.1 billion by2010, according to a new study from market research firm Kalorama Information, a division of MarketResearch.com, the leading provider of industry-specific market research reports. With 2005 sales reaching $8.4 billion, The Worldwide Market for Prescription Dermatological Drugs predicts that sales in the anti aging, photo damage, hair treatment, psoriasis, and skin cancer segments will grow further at a rate of 5.7% over the next four years as consumer demand for newer and better derma drugs continues to increase as the aging population struggles to deal with a myriad of skin disorders and diseases.
Online job ads rebounded sharply in January to 2,162,000 new unduplicated online job ads posted for the calendar month, according to The Conference Board Help-Wanted OnLine Data Series(TM). The January total was up 529,000, an increase of one-third from the December low. January's total was slightly higher than the August 2005 monthly peak of 2,131,000. April 2005 is the earliest monthly data available in this data series. In January, there were 1.44 online job ads per 100 persons in the U.S. labor force, compared to 1.09 in December and 1.21 in November. Although the data series does not have sufficient history to allow for seasonal adjustments, Ken Goldstein, Labor Economist at The Conference Board, noted that a large portion of the declines in November and December followed by the bounce back in January reflect seasonal patterns seen in other employment data. The monthly figures reported in the Help-Wanted OnLine Data Series are the sum of the number of unduplicated new first-time online job ads for each day of the calendar month. "The fact that the January number is back up to the higher level we saw in August 2005 indicates that the demand for labor is holding steady and seems to have weathered the hurricane and energy-related effects of last Fall," says Goldstein. "The January online help-wanted ad volume is consistent with what we are seeing from the Consumer Confidence Survey. In January, consumers were more upbeat about current economic conditions, and they were especially more positive about the job market."
EnCana Corp, North America’s largest producer of natural gas, is located in Calgary. The only other time I have ever suggested the purchase of a Canadian company was PetroKazakhstan. EnCana’s key landholdings are in western Canada, the United States Rocky Mountains, Ecuador, the United Kingdom central North Sea, offshore Canada's East Coast and the Gulf of Mexico. EnCana has interests in midstream operations and assets, including natural gas storage, NGLs gathering and processing facilities, power plants and pipelines. Last November, the company announced that it is developing plans to significantly expand production from its estimated 5 billion to 10 billion barrels of recoverable oilsands resources, assets that have the potential to reach a production rate of 500,000 barrels of oil per day in the next 10 years. Last December, EnCana stated more than 20 companies expressed interest in a potential oilsands partnership and mentioned a shortlist would be finalized in the early stages of 2006. As natural gas dropped from $15 per million BTUs to the current $7+, and as crude declined from $68 per barrel to the current $59+, the price of EnCana’s stock declined by 15% in the last two weeks to $41+, or a market cap of $35 billion. It should be noted that 5 months ago the stock was just shy of $60. A year ago at this time the shares traded at $35+. The U.S. depends on natural gas for roughly 22% of its energy requirements or about equal to that of coal. Oil is higher at 41%. Looking long-term, a diversified portfolio should have participation in natural gas, and EnCana would clearly be my top choice.
2005 Highlights
Financial
- Cash flow per share diluted increased 57 percent to $8.35
- Operating earnings per share diluted up 73 percent to $3.64
- Net earnings per share diluted up 3 percent to $3.85
- Generated $2.7 billion in free cash flow
- Return on capital employed of 17 percent
- Purchased 55.2 million EnCana shares at an average share price of
$34.85 under the Normal Course Issuer Bid
- Reduced shares outstanding by 4.5 percent
Operating
- Natural gas sales of 3.23 billion cubic feet per day (Bcf/d), up 8
percent
- Oil and natural gas liquids (NGLs) sales of 227,100 barrels per day
(bbls/d), down 13 percent
- Key resource play production up 18 percent; oilsands production
exceeded 50,000 bbls/d in December 2005
- Operating costs of 68 cents per thousand cubic feet equivalent (Mcfe)
- Upstream capital investment in continuing operations of $6.2 billion
- Net divestitures of $2.1 billion in non-core upstream assets,
resulting in net upstream capital investment of $4.1 billion
Reserves
- Drill bit additions and revisions of 4.8 Tcfe of proved reserves,
including 1.9 Tcfe of bitumen
- Proved reserves increased 18 percent to 18.5 Tcfe
- Reinstated 363 million barrels of bitumen to proved reserves
- Finding and development (F&D) costs averaged $1.29 per Mcfe,
excluding bitumen reinstatement
- Production replacement of 271 percent, excluding bitumen
reinstatement
- Average three-year reserve replacement cost of $1.22 per Mcfe
Strategic events
- Sold Gulf of Mexico assets for $2.1 billion
- Sold natural gas liquids business for $625 million
- Agreements reached to sell Ecuador assets for $1.42 billion and
Brazil oil discovery for $350 million
- Announced plans to expand in-situ oilsands production to more than
500,000 barrels per day by 2015
2006 objectives
- Grow sales from continuing operations between 4 and 9 percent,
natural gas sales between 6 and 10 percent
- Complete downstream initiative in support of high-growth in-situ
oilsands production to more than 500,000 barrels per day by 2015
- Complete sales of Ecuador and Brazil assets
- Complete the sale of natural gas storage business
2006 capital forecast trimmed $800 million; gas sales forecast was reduced by
75 million cubic feet per day.
Looking to 2006, the North American oil and gas industry continues to run
at a fevered pace. The inflationary pressures of 2005 are expected to continue
this year with cost inflation once again above 15 percent. Given these
circumstances, EnCana has decided to reduce drilling in areas where costs have
increased the most, resulting in a $500 million reduction in its previously-
announced 2006 upstream capital investment forecast. In addition, EnCana's
2005 gas sales exit rate was lower than planned due to fewer wells drilled by
year-end. The combined impact on 2006 gas sales is a reduction of about 75
million cubic feet per day from EnCana's previous forecast. The changes are
reflected in EnCana's updated corporate guidance. The $500 million upstream
capital reduction includes $200 million invested in late 2005 for acceleration
of drilling coalbed methane wells and expansion of in-situ oilsands programs,
and in 2006, $100 million for exploration and $200 million for development
programs. A further $300 million of capital previously assigned to building
the second segment of the Entrega Pipeline is not expected to be required as
EnCana has entered into an agreement to sell Entrega, which is expected to
close in the first quarter of 2006. In total, the company is reducing its 2006
capital investment plans by about $800 million, or 12 percent.
EnCana's 2006 natural gas sales are expected to increase by about 8 percent
With fewer wells planned this year, EnCana's 2006 natural gas sales are
expected to increase 8 percent, at the midpoint of revised guidance - a growth
rate similar to what was achieved in 2005. EnCana's North American oil and
NGLs sales forecast is unchanged and remains about the same as 2005, with
additional volumes expected to come on stream near year-end from an expansion
of steam-assisted gravity drainage (SAGD) production at Foster Creek.
More than 90 percent of 2006 gas sales has floor price protection
To help assure strong financial performance, EnCana put in place, during
the fourth quarter of 2006, put options on about 1.6 billion cubic feet per
day of 2006 planned gas sales at an average strike price of NYMEX $8.42 per
thousand cubic feet. All in, about 93 percent of EnCana's forecast 2006 gas
sales is hedged with a combination of put options and fixed price hedges with
an average price of NYMEX $7.30 per thousand cubic feet.
Net capital investment in 2006 forecast at $2.8 billion
EnCana has a series of non-core asset divestitures well underway that are
expected to generate between $3 billion and $3.4 billion this year, with
proceeds designated to share purchases and debt reduction. With a capital
investment forecast between $5.8 billion and $6.2 billion, the company expects
its 2006 net capital investment to be about $2.8 billion.
Today, the company reported results for 2005, a 57 percent increase in 2005 cash flow per share to US$8.35 per share diluted, or $7.4 billion, compared to 2004. Total
operating earnings per share in 2005 increased 73 percent to $3.64 per share
diluted, or $3.24 billion. Net earnings per share increased 3 percent to
$3.85 per share diluted, or $3.43 billion. EnCana replaced 271 percent of its 2005 production and increased total proved reserves by 18 percent to 18.5 trillion cubic feet of gas equivalent (Tcfe) by adding 4.5 Tcfe, compared to production of 1.7 Tcfe. For the fourth quarter, earnings excluding special items were $1.46 against 62 cents. A survey of analysts by Thomson First Call produced a consensus estimate of $1.24.
For more aggressive investors, they might consider selling the March 35 puts. If the stock were put to you, the cost per share (excluding commissions) would approximate $34.60. In addition, one might combine the purchase of the stock with the sale of the aforementioned put. That is even more adventuresome.
James Altucher: “I recently posted a job listing on internet noticeboard Craigslist. The job posted simply said, “need a researcher. Knowledge of internet, investing, writing.” Of the 300+ responses I received at least two-thirds had higher degrees…and most had some experience at one of the big banks: Goldman Sachs, CSFB, Morgan Stanley, and J.P. Morgan…So what was so great about this job? The wages- $12 an hour.”
Having replaced apparel as the holiday gift purchase of choice, gift cards-a swiftly growing subset of the larger prepaid card market-have grown into a $35.3 billion industry, according to The U.S. Prepaid and Gift Card Market, a new report from market research publisher Packaged Facts, a division of MarketResearch.com, a leading provider of industry-specific market research reports. What's more, Packaged Facts projects that the overwhelming popularity of gift cards across generations will continue to drive card sales upwards of 5% annually to surpass the $47 billion mark by 2010. Holiday season sales of gift cards alone jumped from $17.34 billion in 2004 to approximately $18.48 billion in 2005, and sales are expected to continue to climb.
Yesterday, retail sales for January rose 2.3%. Wall Street pundits were totally surprised by the gain. Obviously, they are schmucks. I have written over and over again that the holiday retail landscape has changed due to gift cards, and 40% of the gift cards are redeemed in January. We saw that in the Wal-Mart results. Sales are not recorded until the cards are redeemed. February retail sales will tell a very different story for an additional reason- the unseasonably warm weather in January will not be a factor in February.
The aging of the worldwide population and a focus on lifestyle treatments that revitalize youthfulness and stave off skin damage are the driving forces behind a healthy prescription dermatological drug market, which should see sales jump to $11.1 billion by2010, according to a new study from market research firm Kalorama Information, a division of MarketResearch.com, the leading provider of industry-specific market research reports. With 2005 sales reaching $8.4 billion, The Worldwide Market for Prescription Dermatological Drugs predicts that sales in the anti aging, photo damage, hair treatment, psoriasis, and skin cancer segments will grow further at a rate of 5.7% over the next four years as consumer demand for newer and better derma drugs continues to increase as the aging population struggles to deal with a myriad of skin disorders and diseases.
Online job ads rebounded sharply in January to 2,162,000 new unduplicated online job ads posted for the calendar month, according to The Conference Board Help-Wanted OnLine Data Series(TM). The January total was up 529,000, an increase of one-third from the December low. January's total was slightly higher than the August 2005 monthly peak of 2,131,000. April 2005 is the earliest monthly data available in this data series. In January, there were 1.44 online job ads per 100 persons in the U.S. labor force, compared to 1.09 in December and 1.21 in November. Although the data series does not have sufficient history to allow for seasonal adjustments, Ken Goldstein, Labor Economist at The Conference Board, noted that a large portion of the declines in November and December followed by the bounce back in January reflect seasonal patterns seen in other employment data. The monthly figures reported in the Help-Wanted OnLine Data Series are the sum of the number of unduplicated new first-time online job ads for each day of the calendar month. "The fact that the January number is back up to the higher level we saw in August 2005 indicates that the demand for labor is holding steady and seems to have weathered the hurricane and energy-related effects of last Fall," says Goldstein. "The January online help-wanted ad volume is consistent with what we are seeing from the Consumer Confidence Survey. In January, consumers were more upbeat about current economic conditions, and they were especially more positive about the job market."
EnCana Corp, North America’s largest producer of natural gas, is located in Calgary. The only other time I have ever suggested the purchase of a Canadian company was PetroKazakhstan. EnCana’s key landholdings are in western Canada, the United States Rocky Mountains, Ecuador, the United Kingdom central North Sea, offshore Canada's East Coast and the Gulf of Mexico. EnCana has interests in midstream operations and assets, including natural gas storage, NGLs gathering and processing facilities, power plants and pipelines. Last November, the company announced that it is developing plans to significantly expand production from its estimated 5 billion to 10 billion barrels of recoverable oilsands resources, assets that have the potential to reach a production rate of 500,000 barrels of oil per day in the next 10 years. Last December, EnCana stated more than 20 companies expressed interest in a potential oilsands partnership and mentioned a shortlist would be finalized in the early stages of 2006. As natural gas dropped from $15 per million BTUs to the current $7+, and as crude declined from $68 per barrel to the current $59+, the price of EnCana’s stock declined by 15% in the last two weeks to $41+, or a market cap of $35 billion. It should be noted that 5 months ago the stock was just shy of $60. A year ago at this time the shares traded at $35+. The U.S. depends on natural gas for roughly 22% of its energy requirements or about equal to that of coal. Oil is higher at 41%. Looking long-term, a diversified portfolio should have participation in natural gas, and EnCana would clearly be my top choice.
2005 Highlights
Financial
- Cash flow per share diluted increased 57 percent to $8.35
- Operating earnings per share diluted up 73 percent to $3.64
- Net earnings per share diluted up 3 percent to $3.85
- Generated $2.7 billion in free cash flow
- Return on capital employed of 17 percent
- Purchased 55.2 million EnCana shares at an average share price of
$34.85 under the Normal Course Issuer Bid
- Reduced shares outstanding by 4.5 percent
Operating
- Natural gas sales of 3.23 billion cubic feet per day (Bcf/d), up 8
percent
- Oil and natural gas liquids (NGLs) sales of 227,100 barrels per day
(bbls/d), down 13 percent
- Key resource play production up 18 percent; oilsands production
exceeded 50,000 bbls/d in December 2005
- Operating costs of 68 cents per thousand cubic feet equivalent (Mcfe)
- Upstream capital investment in continuing operations of $6.2 billion
- Net divestitures of $2.1 billion in non-core upstream assets,
resulting in net upstream capital investment of $4.1 billion
Reserves
- Drill bit additions and revisions of 4.8 Tcfe of proved reserves,
including 1.9 Tcfe of bitumen
- Proved reserves increased 18 percent to 18.5 Tcfe
- Reinstated 363 million barrels of bitumen to proved reserves
- Finding and development (F&D) costs averaged $1.29 per Mcfe,
excluding bitumen reinstatement
- Production replacement of 271 percent, excluding bitumen
reinstatement
- Average three-year reserve replacement cost of $1.22 per Mcfe
Strategic events
- Sold Gulf of Mexico assets for $2.1 billion
- Sold natural gas liquids business for $625 million
- Agreements reached to sell Ecuador assets for $1.42 billion and
Brazil oil discovery for $350 million
- Announced plans to expand in-situ oilsands production to more than
500,000 barrels per day by 2015
2006 objectives
- Grow sales from continuing operations between 4 and 9 percent,
natural gas sales between 6 and 10 percent
- Complete downstream initiative in support of high-growth in-situ
oilsands production to more than 500,000 barrels per day by 2015
- Complete sales of Ecuador and Brazil assets
- Complete the sale of natural gas storage business
2006 capital forecast trimmed $800 million; gas sales forecast was reduced by
75 million cubic feet per day.
Looking to 2006, the North American oil and gas industry continues to run
at a fevered pace. The inflationary pressures of 2005 are expected to continue
this year with cost inflation once again above 15 percent. Given these
circumstances, EnCana has decided to reduce drilling in areas where costs have
increased the most, resulting in a $500 million reduction in its previously-
announced 2006 upstream capital investment forecast. In addition, EnCana's
2005 gas sales exit rate was lower than planned due to fewer wells drilled by
year-end. The combined impact on 2006 gas sales is a reduction of about 75
million cubic feet per day from EnCana's previous forecast. The changes are
reflected in EnCana's updated corporate guidance. The $500 million upstream
capital reduction includes $200 million invested in late 2005 for acceleration
of drilling coalbed methane wells and expansion of in-situ oilsands programs,
and in 2006, $100 million for exploration and $200 million for development
programs. A further $300 million of capital previously assigned to building
the second segment of the Entrega Pipeline is not expected to be required as
EnCana has entered into an agreement to sell Entrega, which is expected to
close in the first quarter of 2006. In total, the company is reducing its 2006
capital investment plans by about $800 million, or 12 percent.
EnCana's 2006 natural gas sales are expected to increase by about 8 percent
With fewer wells planned this year, EnCana's 2006 natural gas sales are
expected to increase 8 percent, at the midpoint of revised guidance - a growth
rate similar to what was achieved in 2005. EnCana's North American oil and
NGLs sales forecast is unchanged and remains about the same as 2005, with
additional volumes expected to come on stream near year-end from an expansion
of steam-assisted gravity drainage (SAGD) production at Foster Creek.
More than 90 percent of 2006 gas sales has floor price protection
To help assure strong financial performance, EnCana put in place, during
the fourth quarter of 2006, put options on about 1.6 billion cubic feet per
day of 2006 planned gas sales at an average strike price of NYMEX $8.42 per
thousand cubic feet. All in, about 93 percent of EnCana's forecast 2006 gas
sales is hedged with a combination of put options and fixed price hedges with
an average price of NYMEX $7.30 per thousand cubic feet.
Net capital investment in 2006 forecast at $2.8 billion
EnCana has a series of non-core asset divestitures well underway that are
expected to generate between $3 billion and $3.4 billion this year, with
proceeds designated to share purchases and debt reduction. With a capital
investment forecast between $5.8 billion and $6.2 billion, the company expects
its 2006 net capital investment to be about $2.8 billion.
Today, the company reported results for 2005, a 57 percent increase in 2005 cash flow per share to US$8.35 per share diluted, or $7.4 billion, compared to 2004. Total
operating earnings per share in 2005 increased 73 percent to $3.64 per share
diluted, or $3.24 billion. Net earnings per share increased 3 percent to
$3.85 per share diluted, or $3.43 billion. EnCana replaced 271 percent of its 2005 production and increased total proved reserves by 18 percent to 18.5 trillion cubic feet of gas equivalent (Tcfe) by adding 4.5 Tcfe, compared to production of 1.7 Tcfe. For the fourth quarter, earnings excluding special items were $1.46 against 62 cents. A survey of analysts by Thomson First Call produced a consensus estimate of $1.24.
For more aggressive investors, they might consider selling the March 35 puts. If the stock were put to you, the cost per share (excluding commissions) would approximate $34.60. In addition, one might combine the purchase of the stock with the sale of the aforementioned put. That is even more adventuresome.
James Altucher: “I recently posted a job listing on internet noticeboard Craigslist. The job posted simply said, “need a researcher. Knowledge of internet, investing, writing.” Of the 300+ responses I received at least two-thirds had higher degrees…and most had some experience at one of the big banks: Goldman Sachs, CSFB, Morgan Stanley, and J.P. Morgan…So what was so great about this job? The wages- $12 an hour.”
Tuesday, February 14, 2006
Soft Landing?
2/14/06 Soft Landing?
Last week we had a downward revision from Toll Brothers. Yesterday, after the close,
KB Homes released some disappointing news.
"There are signs that consumer demand in the United States for residential housing at current prices is softening," KB Home said in its 10K, which was filed with the Securities and Exchange Commission on Friday.
"In the first two months of the (fiscal) year (December and January), we have experienced an increase in home order cancellations and a decline in net orders for new homes when compared to the same period last year."
If this trend continues, "we may be required to moderate our revenue guidance for fiscal year 2006," KB Home said.
However, the company said it doesn't expect to change its earnings-per-share guidance for fiscal 2006 as the company has accelerated its share buyback program. In December, KB Home's board authorized the repurchase of 10 million shares. Since then, the company has repurchased 2 million shares in addition to the 2 million shares it bought back during its fiscal fourth quarter under the previous authorization program.
In December, the company said it expected to generate earnings of $11.25 a share in fiscal 2006, up 18% from fiscal 2005.
Does the stock at $65 reflect the current slowdown? Will the home order cancellations continue at the present pace or accelerate? If the pace remains the same, it will be a soft landing. One must remember that about 40% of all new jobs created in the U.S. over the last 2 years were housing-related.
The EU is threatening to reimpose US trade sanctions unless Congress eliminates the vestiges of a tax break for US exporters that was ruled illegal by the WTO.
Nouriel Roubini: “Orwellian Chutzpah and Doublespeak in the Economic Report of the President: the US Current Account Deficit Becomes the "US Capital Account Surplus.”
Waste and fraud marked the government's Hurricane Katrina assistance programs, with 10,000 mobile homes going unused and scattered cases of emergency money spent on nude dancing in Houston, tattoos, and gambling, according to an audit. Up to 900,000 of the 2.5 million applicants who got emergency cash after Hurricane Katrina based their requests on duplicate or invalid Social Security numbers, or false addresses and names, auditors said Monday. Waste and fraud are the hallmarks of this administration.
More than 57% of practicing Michigan doctors plan to retire by 2020. Don’t worry. By 2020, you might not have insurance coverage to visit a doctor.
Adam Oliensis: “The SPX has now completed trading-day # 842 since its October 2002 low. The tops in 1966 and 1994 came on trading days #847 and #839, respectively. So we are currently inside the envelope for the formation of an SPX top created by these two prior cycles. And what will determine just how relatively benign or malignant the (likely) imminent retrenchment is? In our view it will depend on the extent and duration of the inversion of the Yield Curve.”
Yesterday was a low volume trading day; however, there was a growing expansion of the new low list. One should never forget that you can lose your ass on low volume. (Remember 1974?) In the end, a foundation for continued advance must be based on broad participation. A handful of strong issues cannot support an entire market. That we saw with Google and Apple. Ever since those two issues ran into selling, the market has been pissing into the wind.
John Lubbock: “What we see depends mainly on what we look for.”
Last week we had a downward revision from Toll Brothers. Yesterday, after the close,
KB Homes released some disappointing news.
"There are signs that consumer demand in the United States for residential housing at current prices is softening," KB Home said in its 10K, which was filed with the Securities and Exchange Commission on Friday.
"In the first two months of the (fiscal) year (December and January), we have experienced an increase in home order cancellations and a decline in net orders for new homes when compared to the same period last year."
If this trend continues, "we may be required to moderate our revenue guidance for fiscal year 2006," KB Home said.
However, the company said it doesn't expect to change its earnings-per-share guidance for fiscal 2006 as the company has accelerated its share buyback program. In December, KB Home's board authorized the repurchase of 10 million shares. Since then, the company has repurchased 2 million shares in addition to the 2 million shares it bought back during its fiscal fourth quarter under the previous authorization program.
In December, the company said it expected to generate earnings of $11.25 a share in fiscal 2006, up 18% from fiscal 2005.
Does the stock at $65 reflect the current slowdown? Will the home order cancellations continue at the present pace or accelerate? If the pace remains the same, it will be a soft landing. One must remember that about 40% of all new jobs created in the U.S. over the last 2 years were housing-related.
The EU is threatening to reimpose US trade sanctions unless Congress eliminates the vestiges of a tax break for US exporters that was ruled illegal by the WTO.
Nouriel Roubini: “Orwellian Chutzpah and Doublespeak in the Economic Report of the President: the US Current Account Deficit Becomes the "US Capital Account Surplus.”
Waste and fraud marked the government's Hurricane Katrina assistance programs, with 10,000 mobile homes going unused and scattered cases of emergency money spent on nude dancing in Houston, tattoos, and gambling, according to an audit. Up to 900,000 of the 2.5 million applicants who got emergency cash after Hurricane Katrina based their requests on duplicate or invalid Social Security numbers, or false addresses and names, auditors said Monday. Waste and fraud are the hallmarks of this administration.
More than 57% of practicing Michigan doctors plan to retire by 2020. Don’t worry. By 2020, you might not have insurance coverage to visit a doctor.
Adam Oliensis: “The SPX has now completed trading-day # 842 since its October 2002 low. The tops in 1966 and 1994 came on trading days #847 and #839, respectively. So we are currently inside the envelope for the formation of an SPX top created by these two prior cycles. And what will determine just how relatively benign or malignant the (likely) imminent retrenchment is? In our view it will depend on the extent and duration of the inversion of the Yield Curve.”
Yesterday was a low volume trading day; however, there was a growing expansion of the new low list. One should never forget that you can lose your ass on low volume. (Remember 1974?) In the end, a foundation for continued advance must be based on broad participation. A handful of strong issues cannot support an entire market. That we saw with Google and Apple. Ever since those two issues ran into selling, the market has been pissing into the wind.
John Lubbock: “What we see depends mainly on what we look for.”
Monday, February 13, 2006
Mistaken Identity
2/13/06 Mistaken Identity
How do you know it’s time to change leadership? When there is an incident of mistaken identity and the Veep takes a 78-year old lawyer for an insurgent quail.
China's consumption of crude oil will rise between 5.4% to 7% this year, according to estimates from the National Development and Reform Commission. China is expected to import 44% of its oil needs this year, according to the commission.
Robert McHugh: “There is a either a .382 or .618 ratio relationship for every single meaningful top or bottom since January 14th, 2000 with another top or bottom since January 14th, 2000…In other words, if we say 2/24/06 is a likely turn date, it means that 2/21/06 to 3/1/06 also may calculate to a phi mate approximate .382/.618 ratio.”
According to Brad Setser, “someone is going to need to lend the US about $1 trillion this year --- and next year - even if the US economy slows modestly.” In my view, that places the U.S. on a collision course with a train wreck.
Keep a vigilant eye on the rising number of new lows. It might very well give a clue to the near-term direction of the equity market. Many of the daily swings have their genesis in computer-generated trades. However, the computer cannot mask the relationship of new highs and new lows and the overall breadth of the market. Until I see a material change, selling into strength makes the most sense.
John Hussman: “This is a market where risk is best held close to the vest.”
This week there will be a good deal of data released: industrial production, capacity utilization, producer prices, retail sales, and housing starts. Not to be forgotten is Bernanke’s testimony to Congress on Wednesday. Don’t get bogged down on the data and the verbiage. It’s historical data and the normal BS on monetary policy, price stability, and the yield curve. Volatility might increase as we move towards option expiration on Friday. It’s a good week to build a snowman as well as to provide some loving warmth on Valentine’s Day, which hopefully comes every day of the year to your loved ones.
How do you know it’s time to change leadership? When there is an incident of mistaken identity and the Veep takes a 78-year old lawyer for an insurgent quail.
China's consumption of crude oil will rise between 5.4% to 7% this year, according to estimates from the National Development and Reform Commission. China is expected to import 44% of its oil needs this year, according to the commission.
Robert McHugh: “There is a either a .382 or .618 ratio relationship for every single meaningful top or bottom since January 14th, 2000 with another top or bottom since January 14th, 2000…In other words, if we say 2/24/06 is a likely turn date, it means that 2/21/06 to 3/1/06 also may calculate to a phi mate approximate .382/.618 ratio.”
According to Brad Setser, “someone is going to need to lend the US about $1 trillion this year --- and next year - even if the US economy slows modestly.” In my view, that places the U.S. on a collision course with a train wreck.
Keep a vigilant eye on the rising number of new lows. It might very well give a clue to the near-term direction of the equity market. Many of the daily swings have their genesis in computer-generated trades. However, the computer cannot mask the relationship of new highs and new lows and the overall breadth of the market. Until I see a material change, selling into strength makes the most sense.
John Hussman: “This is a market where risk is best held close to the vest.”
This week there will be a good deal of data released: industrial production, capacity utilization, producer prices, retail sales, and housing starts. Not to be forgotten is Bernanke’s testimony to Congress on Wednesday. Don’t get bogged down on the data and the verbiage. It’s historical data and the normal BS on monetary policy, price stability, and the yield curve. Volatility might increase as we move towards option expiration on Friday. It’s a good week to build a snowman as well as to provide some loving warmth on Valentine’s Day, which hopefully comes every day of the year to your loved ones.
Sunday, February 12, 2006
Hurdles
2/12/06 Hurdles
According to David Lazarus, over the next 75 years, the Social Security system is forecast to be about $4 trillion in the hole. In the same time frame, Medicare's deficit is expected to reach almost $30 trillion. Spending on Medicare now represents 2.7 percent of the overall economy, according to government figures. By 2050, that total will jump to 9.3 percent of the nation's gross domestic product. Lazarus observed that “Bush's proposed cutbacks mean spending for Medicare would rise by an average 7.5 percent annually over the next decade. Without the changes, annual spending would go up 7.8 percent.”
It is obvious that all jobs do not reflect equal pay. Therefore, it is important to view the composition of job gains. In January, 46,000 new construction jobs were generated. Forget about the warm weather and the reasons for the unusual level of hiring during the winter. Those 46,000 jobs represent about 24% of the net new job gains in January. According to government statistics, construction pays 17% above the national average. As such, that 245 skewed the increase pay per hour for all workers, and that has been the case for at least the last year. Hopefully, the Fed can do the same math. After all, Bernanke has a doctorate degree.
Eddie Lampert: “In investing, you constantly make decisions under conditions of uncertainty.”
According to David Lazarus, over the next 75 years, the Social Security system is forecast to be about $4 trillion in the hole. In the same time frame, Medicare's deficit is expected to reach almost $30 trillion. Spending on Medicare now represents 2.7 percent of the overall economy, according to government figures. By 2050, that total will jump to 9.3 percent of the nation's gross domestic product. Lazarus observed that “Bush's proposed cutbacks mean spending for Medicare would rise by an average 7.5 percent annually over the next decade. Without the changes, annual spending would go up 7.8 percent.”
It is obvious that all jobs do not reflect equal pay. Therefore, it is important to view the composition of job gains. In January, 46,000 new construction jobs were generated. Forget about the warm weather and the reasons for the unusual level of hiring during the winter. Those 46,000 jobs represent about 24% of the net new job gains in January. According to government statistics, construction pays 17% above the national average. As such, that 245 skewed the increase pay per hour for all workers, and that has been the case for at least the last year. Hopefully, the Fed can do the same math. After all, Bernanke has a doctorate degree.
Eddie Lampert: “In investing, you constantly make decisions under conditions of uncertainty.”
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