Rig Counts Continue to Rise!

As long as rig counts continue to rise, crude will stay under pressure

Baker Hughes reports U.S. rig count up 6 to 933 rigs

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Baker Hughes  (BHI) reports that the U.S. rig count is up 6 rigs from last week to 933, with oil rigs up 6 to 747, gas rigs up 1 to 186, and miscellaneous rigs down 1 to 0.

The U.S. Rig Count is up 509 rigs from last year’s count of 424, with oil rigs up 410, gas rigs up 100, and miscellaneous rigs down 1.

The U.S. Offshore Rig Count is unchanged from last week at 22 and up 1 rig year over year.

The Canadian Rig Count is up 27 rigs from last week to 159, with oil rigs up 17 to 91 and gas rigs up 10 to 68.

The Canadian Rig Count is up 90 rigs from last year’s count of 69, with oil rigs up 63, gas rigs up 28, and miscellaneous rigs down 1 to 0.

STOCKS TO WATCH

The one group that should be benefit from the rig count rise would be Sand and Basic Materials. Stocks such as SLCA, SND, EMES, and HCLP should benefit from the rise, however these stocks are also near their 52-weeks low. These stocks should gradually bottom out at these levels. Other service companies such as SLB, HAL, BHI, TDW, and OII.

WTI crude prices are up 0.6% at $44.72, rebounding after declining by 4.3% over the two previous sessions. This puts in a little space from yesterday’s six-week low at $44.22.

#WTI = West Texas Intermediate

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Kenon Jumps on $942M Cash Infusion

Kenon ($KEN) unit in pact with Wuhu Chery

Qoros Automobile, a unit of Kenon, to receive $942 million in cash investment

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Qoros Automobile, which is 50%-owned by Quantum, a wholly-owned subsidiary of Kenon Holdings, announces that Qoros, Quantum, Wuhu Chery Automobile Investment Company Limited, which owns the other 50% of Qoros, and a new China-based investor, have entered into an investment agreement that provides for the new investor investing approximately RMB6.5B, approximately $942M, in Qoros for a controlling interest in Qoros.

The new investor’s investment is subject to a number of conditions which must be satisfied by a certain date, some of which are beyond the parties’ control and which the parties may be unable to satisfy. These conditions include regulatory approvals and completion of regulatory processes, consents from lenders and further documentation, including entry into additional agreements.

Kenon also announces that Qoros, Quantum and Wuhu Chery’s investment agreement with Yibin Municipal Government, through its investment platform company, which was announced on April 6,, will not take effect, and that Yibin will not make an equity investment in Qoros.

Kenon Holdings Ltd. (KEN) is a Singapore based holding company. It owns, develops, and operates power generation and distribution facilities primarily in Latin America, the Caribbean, and Israel. It also designs, manufactures, distributes, and services passenger vehicles through a network of independent authorized retail dealers in the People’s Republic of China.

Qoros Automotive Co. Ltd. designs, engineers, manufactures, and markets cars. It offers SUV, sedan, and other cars. The company also provides financing and insurance options, as well as test drive services. It offers its products through dealers. Qoros Automotive Co. Ltd. operates as a joint venture between Chery Automobile Co., Ltd. and Israel Corporation Ltd.

KEN last traded at $14.00 up 8.8%. Shares have a 52-week range of $8.81 to $16.00.

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Amazon’s Move on Whole Foods Creates Opportunities

Shares of virtually every major retailer that sells food is lower

Shares of Impinj (PI) surged after Amazon’s announcement

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Shares of virtually every major retailer that sells food – including Wal-Mart (WMT), Target (TGT), Costco (COST), Kroger (KR), Sprouts Farmers Market (SFM), Dollar General (DG) and Dollar Tree (DLTR) – are down after Amazon (AMZN) announced it will acquire Whole Foods Market (WFM).

BACKGROUND

Amazon and Whole Foods announced a definitive merger agreement under which Amazon will buy the natural and organic grocery chain for $42 per share in a transaction valued at approximately $13.7B, including debt. Whole Foods Market will continue to operate stores under the Whole Foods Market brand and “source from trusted vendors and partners around the world,” the company stated. John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market’s headquarters will stay in Austin, Texas. The parties expect to close the transaction during the second half of 2017.

JANA PUSH FOR SALE

The news comes after activist investor JANA Partners took an 8.3% stake in the grocery chain in April urging it to address chronic underperformance for shareholders, change the board and senior management, optimize real estate and capital allocation strategies and pursue opportunities to improve performance. Whole Foods restructured its board in May, appointing five new independent directors, which pleased JANA, but the investor remained skeptical of the company’s operational plan and had concerns about a lack of grocery experience on the board.

Speaking in an interview with Texas Monthly just this week, Whole Foods CEO John Mackey said: “Yes, we need to evolve. We need to get better, and we’re doing that. But these guys [JANA] just want to sell us, because they think they can make forty or fifty percent in a short period of time. They’re greedy bastards, and they’re putting a bunch of propaganda out there, trying to destroy my reputation and the reputation of Whole Foods, because it’s in their self-interest to do so.”

STOCK TO WATCH

Shares of Impinj (PI) surged after Amazon’s announcement due to a small connection between the RFID technology maker and Amazon. Impinj manufactures non-volatile-memory chips and radio frequency chips that are used in “tags” that can be attached to objects, and it also makes wireless scanning devices to read those tags at a distances, including for inventory management for groceries. Amazon is a member of Impinj’s industry group to promote RFID tech, though it is not yet clear if Amazon will utilize the startup’s technology

PRICE ACTION

In Friday’s trading, Wal-Mart fell over 6%, Target dropped more than 10%, Costco declined 7% and Kroger, which also cut its fiscal year profit outlook along with its earnings report last night, plunged 14%. Meanwhile, Whole Foods shares are up 27% to $41.94 and Amazon has risen 3% to $993.14 per share.

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Amazon to acquire Whole Foods for $42 per share

Amazon will acquire Whole Foods Market for $13.7 billion in cash

John Mackey will remain as CEO of Whole Foods Market

Amazon to buy Whole Foods

Amazon (AMZN) and Whole Foods Market (WFM) announced that they have entered into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7B, including Whole Foods Market’s net debt.

Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world.

John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market’s headquarters will stay in Austin, Texas.

Completion of the transaction is subject to approval by Whole Foods Market’s shareholders, regulatory approvals and other customary closing conditions.

The parties expect to close the transaction during the second half of 2017.

Amazon (AMZN) said Whole Foods (WFM) “will be obligated to pay a fee equal to $400M if the Merger Agreement is terminated (i) by the company because the Whole Foods Market board of directors has changed its recommendation of the Merger prior to the Whole Foods Market shareholder approval having been obtained, or (ii) by Whole Foods Market if, prior to the time the Whole Foods Market shareholder approval is obtained, Whole Foods Market enters into an Alternative Acquisition Agreement that provides for a Superior Proposal.

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Weight Watchers Higher on Insider Buy

Weight Watchers said in a regulatory filing that its general counsel purchased 7,110 shares in the company

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Weight Watchers (WTW) shares are getting a boost following a filing by the company’s general counsel showing he purchased shares in the weight loss company.

SHARE PURCHASE

Weight Watchers said in a regulatory filing on Thursday afternoon that general counsel Michael Colosi purchased 7,110 shares in the company.

RECENT COMPANY NEWS

In May, the Oprah Winfrey-backed diet company posted a surprise profit for the first quarter and reported revenue that also beat analysts’ expectations.

The company also said it ended the quarter with 3.6M subscribers, up 16% from a year ago. The gains prompted the company to raise its earnings per share view for fiscal year 2017.

Weight Watchers has been on a turnaround track since Winfrey took a stake in the company and agreed to become a company spokesperson in October 2015.

In addition to “the Oprah Effect,” CFO Nick Hotchkin said the company is retaining customers through technology investments and an improved weight loss program.

New CEO

Weight Watchers announced in late April that Mindy Grossman, CEO of HSN, Inc (HSNI), would join the company as president and CEO in July. The company had been seeking a replacement for Jim Chambers, who resigned in September 2016.

Weight Watchers recently announced results from a two-year study published in The Lancet which found that adults with obesity referred to Weight Watchers for one year lost significantly more weight and were able to keep it off for longer “compared to those who either received brief advice and self-help materials, or were referred to a 12-week Weight Watchers program.” Those on both the 12- and 52-week Weight Watchers program also had greater blood sugar control and greater reductions in body fat than those on the brief intervention program.

PRICE ACTION:

Weight Watchers closed on Thursday up 6.3% at $28.80, just off the 52-week high of $28.95 hit during the session.

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Trump plans executive order on drug prices

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The Trump administration is preparing an executive order regarding U.S. drug costs, which may express support for value-based agreements via which drug companies and health insurers make arrangements to pay for products depending on how well they work, Bloomberg reported yesterday afternoon, citing people familiar with the matter.

A first executive order on drug prices may come out soon, followed by a second, more extensive one later, sources told the news service.

Top health and budget officials in the administration will meet today to discuss the issue, according to the people, who asked not to be identified because the session is private. Trump sought recommendations from the nation’s health agencies on reducing medication costs, Health and Human Services Secretary Tom Price told senators last week.

Unlike other advanced economies, the U.S. doesn’t directly regulate medicine prices. The pricing system is opaque, with list prices set by drugmakers and rebates negotiated in private with intermediaries like PBMs.

The industry wants the government to modify the law so that companies can reach more value-based payment agreements, whereby reimbursements are based on a drug’s results. Swiss pharma giant Novartis AG has such a “pay-for-performance” plan in place for heart failure treatment #Entresto, in which insurers pay more if the drug keeps patients out of the hospital and lowers associated costs.

Another idea discussed by the industry would allow insurers to pay by increments for very expensive drugs that essentially cure diseases.

The president has threatened on several occasions to force drugmakers to bid for government business as a way to reduce prices. He’s also talked about letting consumers import drugs from other countries with lower prices. Neither of those policies, which would likely require a change in law to be implemented in a meaningful way, are in drafts of the orders, according to one person familiar with the effort.

Publicly traded large-cap drugmakers include AstraZeneca (AZN), Bristol-Myers (BMY), Eli Lilly (LLY), GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), Merck (MRK), Novartis (NVS), Pfizer (PFE), Roche (RHHBY) and Sanofi (SNY).

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