Agro Resilience Kit (ARK)

💰Europe’s 3 oil majors made $ 28bn in 3 months. That’s 2.4 times a year ago. 🔹 Shell $ 10.8bn, up from $ 5.4bn 🔹 TotalEnergies $ 9.1bn, up from $ 4.0bn 🔹 bp $ 8.5bn, up from $ 2.2bn Brent averaged $97 in the quarter, $7 less than in Q2. The extra came from refining. Margins went from about $10 a barrel before the war to $33 to $47. Their refineries earned about $ 13bn, against under $ 2bn a year ago. Hear me out on the part that matters for shareholders. These margins won’t stay this high. Each company publishes what $1 of margin is worth to it. Using those numbers, a return to pre-war margins cuts about 18% from Shell’s and TotalEnergies’ quarter, and 39% from bp’s. They’re also spending the cash in different ways. Shell raised its buyback to $ 5 bn. bp sent $ 8.4bn to its lenders and has no buyback until 15 December. My new article runs all 3 side by side across 10 charts, shows which one holds up best when refining margins come down, and where I land on each: themerchantsnews.substack.co…

🛢️3 oil majors made $ 28bn in 3 months Most of the extra came from refining. Shell, TotalEnergies and bp made $ 28bn in Q3, up from $ 11.6bn a year ago. Brent fell $7 from the quarter before, to an average of $97. The extra came from refining, where margins jumped from about $10 a barrel before the war: $SHEL $42 $TTE $33 $BP $46.70 Their refining divisions earned about $ 13bn, up from under $ 2bn. This week Brussels called it a “wake-up call”. Europe now imports its diesel. The refineries still running are being paid for the shortage. The 3 companies used the cash in different ways: 🔹 Shell paid owners $ 5.3bn and raised its buyback to $ 5bn 🔹 TotalEnergies paid $ 3.7bn 🔹 bp paid shareholders $ 1.3bn and its lenders $ 8.4bn Q4 already looks different. Freight is eating the diesel margin, and futures price it 1/3 lower by end-2027, though still about 5 times normal. My new article puts the 3 results side by side and works out, using each company’s own sensitivities, what a return to pre war margins would cut from each. It also gives my view on each company: themerchantsnews.substack.co…

The world pays $ 39bn more for less LNG. That’s a spot buyer tax. Rystad says importers will spend at least $ 256bn on LNG this year, up from $ 218bn before the war. They’ll get 61 Mt less gas for it. Hear me out on who’s paying. 🇪🇺 Europe buys about 65% of its LNG spot. Its bill rises $ 12bn while it takes 24 Mt less. East Asia buys only about 15% spot, mostly on oil linked contracts. Its bill rises about 10%, the smallest jump outside the Middle East. Africa’s bill roughly triples, from $ 3.5bn to $1 0.7bn, led by 🇪🇬 Egypt. So the buyers who signed long-term contracts are paying the least extra. The ones that bet on cheap spot cargoes are paying the most. The money goes to whoever holds the cargoes. In my latest article I follow that $ 39bn link by link, from the US producer to the trader to the storage tank, and name the 2 companies I think the market hasn’t priced yet: themerchantsnews.substack.co…

$ 5.6bn in 1 quarter. A year ago Phillips 66 made $133m. That’s a 42-fold jump and the highest quarterly profit in its history. Q3 numbers: -Net income $ 5.62bn, up from $133m -Adjusted EPS $14.08, against an $11.73 consensus (LSEG) -Refining margin $38 a barrel, up from $24.08 in Q2 -Diesel and jet made up a record 41% of output The extra money came from diesel. The Iran war and Ukraine’s drones took fuel off the market, and US refiners are running at multi-year highs. There’s also a freight edge. Phillips 66 chartered more than 40 tankers before rates jumped, and has 40 more coming at below-market rates, Reuters reports. Traders shipping fuel to Europe and Asia pay today’s rates. Valero, HF Sinclair and Phillips 66 all posted record quarters, 3 out of 3. The refiner sits between crude and diesel and keeps the spread. My latest article applies the same test to gas, where the spread is wider. Do not miss my latest article. Link:themerchantsnews.substack.co…

🇫🇷🛢️TotalEnergies made $ 9.1bn in Q3. The release shows what drove it. Its refining business returned 157% on the capital it uses. Every $1 of capital in its refineries earned $1.57 over the last 12 months. The European refining margin went from $8.40 to $33.20 a barrel in a year, 4 times higher. Each extra $1 is worth about $300m a year to TotalEnergies. The numbers: 🔹Adjusted net income $ 9.1bn, up from $ 4.0bn 🔹Refining and chemicals $ 3.6bn, up from $ 0.7bn 🔹LNG $ 1.9bn, more than double 🔹Gearing 9.1%, down from 17.3% The guidance for next quarter matters too. TotalEnergies expects its LNG price to rise above $14/MMBtu in Q4, from $12.28 now. It also says global oil product stocks are “at their lowest levels”. That’s the company’s own wording. Europe’s refining margin has quadrupled in a year, and for now the old refineries still running are the ones that capture it.

🚨Shell just made $ 10.8bn in 3 months. That’s its best quarter since 2022, almost double last year’s $ 5.4bn and above the $ 10.3bn analysts expected. The surprise came from refining. Shell’s refining margin hit a record $42 a barrel, up from $24 last quarter and $11.60 a year ago. Its fuels business alone earned $ 3.8bn. Here’s what the quarter produced: 🔹$21.0bn of operating cash flow 🔹$16.3bn of free cash flow 🔹$5bn of buybacks for the next 3 months, up from $ 3bn 🔹Net debt cut to $ 39.7bn, from $ 52.6bn in Q1 The part that matters for the long run is gas. During the quarter Shell closed its ARC Resources deal and took the final investment decision on LNG Canada Phase 2. Its gas production goes from 772k to more than 1m barrels of oil equivalent a day next quarter. The Iran war shut Qatar’s exports. Shell is adding LNG supply on the Pacific coast of 🇨🇦 Canada, with no strait in the way. The refinery margin pays for this year. The gas decisions set what Shell earns in 2030. One thing to know before Q4: Shell will book a non-cash loss of about $ 6.4bn on its Dutch pension plan. That will hit reported profit. Cash and buybacks aren’t affected.

☢️Constellation, the biggest US nuclear operator, got a conditional loan of up to $ 5bn from the Energy Department. The money upgrades 8 plants in Illinois, Maryland and Pennsylvania to add nearly 1.1 GW. That’s enough for more than 930,000 homes, the department says. Operators swap in more efficient turbines and parts, or refuel with slightly more enriched uranium, to get more power from the same reactor. No new plant, no new transmission line and no new licence from the regulator. New licences have taken years in the past. At Byron in Illinois, 2 reactors producing about 2.35 GW could add 150 MW. “All the infrastructure is here we’re just changing out some turbines and getting more energy out of it,” Energy Secretary Chris Wright said. This is the second deal this month. Vistra got about $ 4.2bn in October for the same kind of upgrades. The reason is demand. US power use is growing for the first time in decades, driven by AI data centres, electric transport and crypto mining.

Russia has more shale oil in the ground than the US. America gets almost all of it out. The top five, in technically recoverable shale oil: Russia 74.6bn barrels United States 74.4bn China 32.2bn Argentina 27.0bn Libya 26.1bn Russia and the US hold about the same amount. The difference is everything that comes after the geology. The US built the rigs, the fracking crews, the pipe and the capital markets to unlock it. Sanctions have cut Russia off from the Western oilfield services and kit its shale needs, so Bazhenov stays mostly in the ground. China’s shale sits deep in complex rock, and its access to the best US drilling technology keeps narrowing. Argentina is the one outside the US making it work. Vaca Muerta is in full commercial development. Shale is a technology play first and a geology play second.

$1,000 in Chevron in 2006 is worth about $4,474 today after inflation, dividends reinvested. The same $1,000 in BP is worth $1,261. Gold sits in between at $4,141, and it never paid a dividend. Over 20 years: -Chevron +347% -Gold +314% -Petrobras +224% -ExxonMobil +203% -Shell +161% -Occidental +133% -BP +26% The commodity was the same. The company decided the return. Dividends did most of the work. Without them, BP and Petrobras would show real losses. (Petrobras’ number came before Monday’s 22% drop after Lula’s win, so it’s lower now) My new article asks whether oil can keep you rich, and ranks the four fields where the cash is going next. themerchantsnews.substack.co…

🛢️The world burns 103.5m barrels of oil a day. The West isn’t the main buyer anymore. Non-OECD countries use 58.5m b/d. The OECD uses 45.0m. Asia-Pacific alone burns 39.1m b/d, the biggest block on the map. That’s where the next barrel of demand comes from. Inside that block sits one buyer big enough to move the whole market: China🇨🇳 China’s crude imports fell to 7.12m b/d in June, the lowest in about a decade. Last year they averaged about 11.6m. Before the war, China had built an estimated 1.2-1.3bn barrels of commercial and strategic stocks. Since then it has cut refinery runs, curbed fuel exports and lived off those tanks. That works until the tanks run low. When China comes back to buy, it lands on a market with Brent over $110.

🛢️Not all oil is worth the same. 🇨🇦A Canadian barrel sells for about $28 less than an American one. The reason starts with what’s in the barrel. Crude is graded on 2 things: how heavy it is (density) and how much sulphur it carries. Canadian WCS and Venezuelan Merey are heavy and sour: thick, with a lot of sulphur. Saudi Arab Medium and Russian Urals sit in the middle. US WTI Midland from the Permian is light and sweet: thin, with very little sulphur. All the above can become gasoline, diesel and jet fuel. What changes is the work it takes to get there. Heavy sour crude needs refineries with cokers and hydrotreaters to break it down and strip the sulphur. Those units cost billions and only some refineries have them. Most of the plants built for Canadian heavy sit in the US Midwest and Gulf Coast. So Canada sells almost 9 in 10 exported barrels to one country, and to refineries designed around its crude. That leaves little room to bargain. The discount is the price of that dependence. Someone collects that $28 on every barrel. In my latest article I follow the money: -which refiners turn cheap heavy crude into full-price diesel -what Trans Mountain changed by opening a route to Asia -why Pacific Link and the British Columbia vote matter for the discount -which listed companies sit on each side of the spread The full article is here: themerchantsnews.substack.co…