M&A Oil Strike

Plus: Health insurers want to know if you’re getting your steps in. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

February 13, 2023

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TOGETHER WITH

Good morning (especially to Chiefs fans).

Some 18.8 million Americans are expected to miss work today in what is widely considered one of the most ‘unproductive’ days on the calendar, according to a recent poll by the Workforce Institute at UKG.

Absent or distracted workers (who isn’t pulling up their favorite highlights/commercials today?) will cost the economy some $6.5 billion this Super Bowl Monday, according to outplacement company Challenger, Gray & Christmas. On the positive side, legal Super Bowl betting was estimated to reach $16 billion. Net-net, GDP always comes out on top from America’s holiest day.

Morning Brief

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It’s boom time for oil M&A.

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Ski resorts’ biggest competition: climate change.

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Get your steps in, or your health insurer will hear about it.

Energy

US Oil Players Prepare for M&A Spending Spree

The oil industry is known for its boom-bust cycles. But now, some of oil’s biggest players are looking to eliminate the bust part of the equation and boom-and-grow.

After a year of record profits, many of the oil industry’s top companies are turning around and scouring for deals to spend their cash on, according to a new report in the Financial Times. The looming dealmaking frenzy would put an end to a protracted dry spell, even if it does come at a time of widespread fears that some of the best oil fields are starting to run dry.

Back to the Well… For Now

Altogether, titans Exxon, Chevron, Shell, BP, and TotalEnergies scored nearly $200 billion in profits last year, roughly the size of Greece’s economy. Meanwhile, US shale producers generated over $150 billion in free cash flow, an all-time record for the closely watched metric, according to consultancy group Rystad Energy. That’s the boom. Now here comes the bust the industry is so keen to avoid with deft dealmaking: Rystad projects that number to contract to $120 billion this year, and producers fear that prime acreage — particularly in the prolific Permian Basin and Eagle Ford Basin — is not as bountiful as it once was.

But those fields remain highly fragmented, sliced up and shared by major companies, single-rig independent drillers, and everything in between. The big players, who paid off billions in debt last year, are primed to buy smaller operations. The small fish, meanwhile, are looking to sell high before rising interest rates cut off access to equity and debt markets. “[Major producers are] out there shopping for more inventory. And we’re back in the business of selling Permian businesses with prime locations to sophisticated parties at real valuations,” Pete Bowden, global head of energy banking at Jefferies, told the FT.

In other words, both buyers and sellers are ready for a wave of consolidation — and it’s about time:

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Just $58 billion worth of M&A deals were completed by US oil and gas companies last year, according to energy technology firm Enverus. That marked a 13% decline from 2021, a nearly 20% decline from pre-pandemic norms, as well as the lowest volume of activity since 2005.

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After a wildly volatile past couple of years, oil prices are finally stabilizing to around $80 per barrel — making it much easier for buyers and sellers to see eye to eye when settling on a final sale price.

“There’s a good match with the needs of buyers and the needs of sellers right now,” Enverus analyst Andrew Dittmar told the FT. “You just need a little co-operation on price to get the deals done.”

Gassed Up: The gas industry, meanwhile, isn’t in the mood. Natural gas prices are way depressed compared to 2022 levels. Meanwhile, an all-important verdict from the FTC’s review of THQ Appalachia’s $5 billion buyout of EQT is still in the making. In the meantime, major gas firms have no choice when it comes to dealmaking but to… hit the brakes.

– Brian Boyle

Outdoors

Vail’s Skiing Dominance Makes it King of the Mountain

(Photo Source: Glade Optics/Unsplash)

With climate change shortening seasons, Colorado’s Vail Resorts is playing the rich, smarmy Chad in a cliché 1980s ski movie.

The famed resort is buying up all the mountains and better positioning itself to handle whatever Mother Nature may (or in this case) may not throw its way.

The Weather Outside is Mild

There’s no question Earth is getting warmer. The National Oceanic and Atmospheric Administration says the planet has risen 2 degrees Fahrenheit since the 1880s. That may not sound like a lot, but to a ski resort, not enough of the white stuff can put you in the red fast. According to a report in the Geophysical Research Letter, the snowfall in western states like Colorado and Utah has seen an average drop of 41% since the early 1980s, stealing roughly 34 days of the natural ski season. Most resorts typically run from mid-November to late-April these days.

Vail is getting ahead of the warming weather by amassing an empire of roughly 40 other resorts across tall mountains in the US, Canada, Australia, and Switzerland, strategically located to thrive in the new, warmer paradigm:

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In 2019, Vail purchased Peak Resorts, operator of 17 ski centers in the Northeast and Midwest, for $264 million. That same year, it bought two Australian resorts for $124 million. And just last year, Vail acquired a 55% stake in Switzerland’s Andermatt-Sedrun for $162 million.

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In New Hampshire, the median peak at a Vail resort is 2,547 feet – a high elevation to facilitate natural and artificial snow – but at smaller competing resorts, it’s only 1,685 feet, according to a Financial Times analysis. At a place like Vermont’s Stowe Mountain, which Vail owns, 83% of the terrain is covered by artificial snow. ESPN estimates that a year of snowmaking at a resort can cost anywhere between $500,000 and $3.5 million.

Vail’s success comes at a price. While its business is booming — last fiscal year saw $2.5 billion in revenue, a 32% bump over the previous year — skiers often complain about long wait lines and lift tickets that cost more than $250 for just one day. Plus, the ski fervor has attracted more wealthy buyers to places like Vail, Breckenridge, and Park City, Utah, driving up home and rental prices.

Beat the Crowds: All of this frustration has somewhat helped smaller operations. While Vail Resorts has the Epic Pass, more than 100 independent resorts partnered to offer a cheaper alternative called the Indy Pass. In September, Indy Pass President Doug Fish said unit sales for the 2022/23 ski season were 52% over last year. Truist analyst Patrick Scholes told the Financial Times, “You saw a shift in skier consumer preference this year to thinking outside the box to say, ‘hey, I would rather ski than wait.’”

–Griffin Kelly

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Insurance

UnitedHealth is the Latest Industry Player to Embrace Wearables

For most people, health insurance is something they’d rather not think about. For better or worse, UnitedHealth wants to always be on your mind — and your wrist.

The health insurance giant is revamping its UnitedHealthcare Rewards program to offer financial incentives for customers who engage in healthy behaviors — as tracked by wearable devices like a Fitbit, an Apple Watch, or a Garmin.

An Apple Watch a Day…

The Affordable Care Act has precluded health insurance providers from charging extra or denying coverage to patients with pre-existing conditions for over a decade now. That’s forced insurers to get creative as they face the steadily increasing cost of care in the US; total healthcare spending hit nearly $13,000 per person in 2021 or $4.3 trillion overall, roughly the equivalent of one-fifth the national GDP, according to the Centers for Medicare & Medicaid Services.

One solution they’ve stumbled onto: If health problems can’t be penalized, why not incentivize healthy habits? It’s a strategy Vitality Health, a subsidiary of global insurance provider Discovery, has created an entire business out of. Not that it doesn’t trust you or anything, but Vitality uses wearables and the internet of things to track everything from blood pressure to cholesterol levels, creating a points reward system. Now, UnitedHealth, which has 26 million US clients, is aiming to launch a similar program:

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Rewards will be granted via cash gift cards or health savings account funds and can be earned by taking a minimum of 5,000 steps and completing 15 minutes of exercise per day. Members can earn up to $1,000 annually.

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The program will first be available to UnitedHealth’s 3 million patients on fully-insured plans, before being rolled out to self-insured plan members sometime next year.

“The goal of the program is really to motivate our members to take charge of their health and stay engaged in these activities and ultimately improve their quality of life,” Samantha Baker, chief consumer officer of UH’s commercial business, told Axios.

Foul Play: There’s a blurry line between incentivizing good behavior and disincentivizing bad behavior, critics claim. And, as it stands, companies could likely do both if they pleased. “Insurance companies are now using [health] data for rewards programs, but there are no regulations stopping them from doing the opposite,” the American Medical Association warns. While most people would love to have a doctor in the family, having a Big Brother as your health insurer isn’t exactly the same.

– Brian Boyle

Extra Upside

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No, not aliens: A UFO shot down over Canada is another suspected Chinese spy balloon.

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I know your face: NYC food stores deploy facial recognition to catch serial thieves.

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Just For Fun

Is that a forward backflip?

Life hacks.

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