2023 was two steps forward, one step back. KAR took its cash...

2023 was two steps forward, one step back. KAR took its cash earnings and invested in an asset which will increase overall production.

A trade off is the increased debt, diluted shareholders (unless you participated in the CR by offering up more in BOD worship) and increased risk profile.

Share buybacks work because they reduce shareholdings while the asset value remains the same, which in turn inflates the share price. The asset value represents a P/E function of earnings.

The value of contingent assets does not contribute to earnings and therefore the Who Dat purchase has affected the KAR share price accordingly. Neon looks fantastic but contributes almost nought except life of resource expectation. Now similarly, will Who Dat ... hopefully. Life of Resource SHOULD (in theory at least) increase the P/E function. Who Dat still to prove up some, in that respect though.

Patience.


The Black Swan in 2023 was increased USA Oil production output.

While some of that increase is accounted for by reclassification of some Natural Gas liquids as Oil output, new technology has accelerated Shale Oil production.

Many analysts have described it as putting a larger straw in your milkshake. The resource remains the same but extraction has increased.

Some suggest the 2023 M&A by Chevron, Exxon and now Occidental of what are essentially tier 2 and 3 resources, is because that is the best available. The top producers will at least be available to allay production costs of those resources through scale.

So the analogy now suggests a larger straw put into a milkshake that is only half full. The overall effect though is to achieve the stated aim ... of lowering world Oil prices ... for now.

Further, the US$100b in Oil M&A has seen those sales by private operators. Analysts have suggested those operators pumped up 2023 production, to achieve the best sale price. Who Dat?

Who Dat has promised increased production and promising resource expansion opportunities. Lets hope so.

Still, Who Dat is not a Tight (Shale) Oil resource. Further, the recent sale of GOM leases in Dec23 was met with very strong demand. The Biden Administration has maintained the 2025 ban on further GOM leases.


For mine, nothing material went wrong for KAR last year. Its a pity the share price doesn't reflect this. The lower Brazil production in the final quarter of CY23 disappointing though. Hopefully resolved now.


Again, the recent investment by Warren Buffett into Occidental is a strong Oil investment tip, IMHO.

While 2023 was a year of record US production, the final quarter has seen a marginal fall. How long can their Tight Oil viagra keep it up?


Place ya bets. Come in spinner.