Tag Archives: oil
Notes from Enercom 2012
Posted on 14. Aug, 2012 by Harvey Sax.
First of all men’s suits are back in force. Everyone is wearing a suit. My big takeway besides men’s haberdashery is that every single company presenting (and there are a lot of them- just about every oil and gas company you never heard of plus a few majors like APA, APC, Petrobras, etc.) is talking about how they have aggressively switched away from drilling for natural gas to oily liquids. Everyone is bragging about how fast they are making the transition. Considering it is currently against the law to export raw crude from the U.S, there will undoubtedly be a glut of U.S. crude in the near future. The U.S is currently a net exporter of refined oil and with the difficulty and economics of building a new refinery, it’s doubtful they will be able to export themselves out of this potential oversupply. Trade idea long Brent, short WTI. Or just short WTI
You have to be impressed with the ability of this country to find oil, build infrastructure to ship it out via rail, pipeline, or truck. I’m more bullish on the drillers and infrastructure plays than I was before coming here and less bullish on the heavily skewed domestic oil companies. There is no doubt we will be importing less and less crude oil. Whether that is a significant enough of a number to curb the price of crude remains to be seen since it’s an international market and developing nations like India and China will have more cars on the road for sure in the future.
Most interesting note was the CSLA analyst who is very bullish on natural gas. Since I’m a contrarian by nature, I found his presentation very interesting although partially unintelligible as he mumbled through half of it. I think his projection for natural gas was a slide into this shoulder season and then assuming a normal winter, sharp rise to the $3-4 range in 2013 and $4-6 in 2014. He went through a few slides showing how inventory was getting drawn down. Just anecdotally listening to these companies all race to leave natural gas makes me far more bullish than anything an analyst could say. He metioned no company names but afterwards I chatted with him and asked him what his favorite names leveraged to natural gas were and he said, Range Resources and Cimarex. I missed the Range presentation but I think you can go to the Enercom web site and get it. The Cimarex presentation was the most impressive one yet not because of their powerpoint but because the new CEO gave a very heartfelt and well-spoken eulogy for the recently passed away founder, Nick Morelli.
Last but certainly not least is the idea that what’s bad for oil prices is very good for airline profits. Coincidentally while at the conference, UAL management bought a slug of their company’s stock following up on the heals of Delta Airlines’s CFO purchase of 50,000 shares last week. It’s probably just coincidence but if oil does go down in value, the airlines would likely rally. We like to buy stocks insiders are buying anyway. It’s just ironic that while at Enercom, the two stocks I bought were DAL and UAL.
Israelis Killed in Bulgaria Blast as Netanyahu Blames Iran – Bloomberg
Posted on 18. Jul, 2012 by Harvey Sax.
Israelis Killed In Bulgaria Blast As Netanyahu Blames IranBy Elizabeth Konstantinova and Calev Ben-David – Jul 18, 2012 1:43 PM MTFacebook ShareLinkedInGoogle +15 COMMENTSPrintQUEUEQSix people were killed and more than 30 injured in an blast on a bus carrying Israeli tourists in Bulgaria. Israeli Prime Minister Benjamin Netanyahu blamed Iran for the attack.Five people were killed in the explosion at the airport in Burgas, on the Black Sea coast, and one person died in hospital, the Foreign Ministry in Sofia said on its website today. Bulgarian authorities are working on the assumption that the attack was an act of terrorism, the ministry said.
via Israelis Killed in Bulgaria Blast as Netanyahu Blames Iran – Bloomberg.
Population growth will drive commodity demand
Posted on 16. Jul, 2012 by Harvey Sax.
BOUT DOT EARTH
By 2050 or so, the human population is expected to reach nine billion, essentially adding two Chinas to the number of people alive today. Those billions will be seeking food, water and other resources on a planet where, scientists say, humans are already shaping climate and the web of life. In Dot Earth, which recently moved from the news side of The Times to the Opinion section, Andrew C. Revkin examines efforts to balance human affairs with the planet’s limits. Conceived in part with support from a John Simon Guggenheim Fellowship, Dot Earth tracks relevant developments from suburbia to Siberia. The blog is an interactive exploration of trends and ideas with readers and experts.
Commodity anguish may be over according to Goldman
Posted on 12. Jul, 2012 by Harvey Sax.
Knowing how everything is manipulated, this means Goldman has covered their short on energy and now wants to take money from you the on the other side of the trade. It sure acts like oil has stopped going down for now.
Chevron ex-CEO sees U.S. oil imports for next 20 years – Yahoo! Finance
Posted on 13. Jun, 2012 by Harvey Sax.
PALO ALTO, California #Reuters# – David O’Reilly, the former head of Chevron Corp #CVX#, believes the United States will be importing oil for at least the next two decades despite a recent surge in domestic production from newly developed shale basins.
While O’Reilly was upbeat about the potential for supplying enough natural gas and coal for U.S. electricity, he said the country should worry about its transportation system given its reliance on oil – barring a technological breakthrough.
via Chevron ex-CEO sees U.S. oil imports for next 20 years – Yahoo! Finance.
U.S. is not a net oil exporter and won’t be for a long time if ever
Posted on 01. Jun, 2012 by Harvey Sax.
As of 2011, approximately 89 million barrels of oil and liquid fuels were consumed per day worldwide. That works out to nearly 32 billion barrels a year.
Where is the bulk of oil demand growth going to come from?
In the next five years, almost half of global oil demand growth will come from China according to the IEA, and this trend is set to continue to 2035 as oil demand from the transportation sector is growing strongly in countries such as China and India. In contrast, oil demand among OECD countries is expected to decline over the next two decades, driven mostly by government policies on fuel efficiency and the fact that rates of vehicle ownership are already high.
via IEA – Oil.
Why Do You Hate The Oil Sector? And Yes, I Do Mean You..
Posted on 20. Apr, 2012 by Wilensky.
Watching SLB trade lower and lower is what I’m talking about. Watching HES and HAL trade into the red is what I’m talking about. Watching BAS get crushed is what I’m talking about. The market hates oil and oil service stocks. Period. Prices are high, these companies are making profits hand over fist, but demand for these companies simply isn’t there. Despite SLB’s conference call, fracking still offers a major opportunity for these companies. China is trying to sever their lifeline to coal, and shale drilling is the surgeon. Sure natural gas is a big black eye, but this world runs on OIL. How can the market be so blind? Or maybe how can the market’s memory be so short… Did we forget about the Middle East? One headline and oil is at $150 in a heartbeat. It’s just a matter of time..
Bull Markets Are Everywhere. Here’s One In Sand
Posted on 05. Apr, 2012 by Wilensky.
US Silica went public at the beginning of February. And the first direct play on sand has been on a tear ever since. Up around 24%, SLCAs appreciation has been due to the rising demand for sand in the fracking process of extracting oil. The fact that some of the larger resource companies have simply bought their own sand manufacturers bodes well for the company, in conjunction with a steadily rising demand for the product.
Along with Heckmann Corp. (HEK), US Silica could be a nice indirect play on the US becoming a oil producing powerhouse. It’s worth taking a look at.
Climateer Investing: What the Frack? U.S. Silica Up 24% since Feb. 1 IPO (SLCA).
Why Are Oil Markets So Short Sighted?
Posted on 04. Apr, 2012 by Wilensky.
Other than the occasional headline, the Iran embargo is a distant memory. And oil markets seemed to forget that an increasing oil reserve is a direct result of preparing for such an embargo. Just because reserve levels happened to beat expectations (it’s not like analysts regularly and accurately deal with embargo situations anyways), is it reason for a 2% or more correction in USO? I doubt it.
CHART OF THE DAY: How To Protect Your Money In A War With Iran, And An Oil Spike
Posted on 07. Mar, 2012 by Harvey Sax.
CHART OF THE DAY: How To Protect Your Money In A War With Iran, And An Oil Spike by Joe Weisenthal
One of the big fears for the market is obviously an oil spike, possibly caused by a war with Iran.Such an event would probably be bad for stocks if oil surged but given the market and economic momentum, people arent inclined to just bet against the market on the chance of this geopolitical event.So heres an idea from Barclays Sreekala Kochugovindan.
via CHART OF THE DAY: How To Protect Your Money In A War With Iran, And An Oil Spike.
Supposed Pipeline Explosion Drives Oil Above $110 A Barrel, Reported False After Market Close
Posted on 01. Mar, 2012 by Wilensky.
If a falsified report that a Saudi pipeline can drive oil over $110 a barrel, just imagine the repercussions of a full Iran-Israel conflict. According to the report that was later confirmed “completely false” after US markets had just closed, a natural gas pipeline in the city of Awamiyah exploded resulting in numerous injuries and deaths. Thats right, natural gas drove up the price of crude simply on rumor. That should give you an idea of how volatile the Iran situation is on the markets, despite stepping out of the headlines momentarily. Considering we have close to two years supply of the commodity sitting in strategic reserves, it seems high oil prices are here to stay in the immediate term.. Or at least until election time.
US Stocks: Stocks End Off Highs on Saudi Pipeline Reports – US Business News – CNBC.
Managing Your MLP Holdings
Posted on 27. Feb, 2012 by Investing Daily.
Today, MLPs are still in the sweet spot: Not only does the nation face a critical shortage of midstream infrastructure to support growing output from prolific shale oil and gas plays, but most MLPs also have easy access to relatively inexpensive debt and capital.
My favorite MLPs continue to grow their distributable cash flow through acquisitions and organic growth projects, but all my infrastructure-related picks secure commitments from customers before turning the first shovelful of earth for new pipelines, fractionators or gas processing facilities.
In late 2011, some investors fretted that a study linking water contamination to hydraulic fracturing in Pavilion, Wyo. would prompt the government to restrict the practice and derail the shale oil and gas revolution. Fracturing, or stimulation, increases the permeability of the reservoir rock, allowing the formerly trapped hydrocarbons to flow from the reserve rock into the well. This process involves pumping large quantities of water and a small percentage of chemicals into the rock formation at high pressure, which produces a network of cracks. This production technique is critical to unlocking oil and gas isolated in shale and other “tight” reservoir rocks. For more information on hydraulic fracturing, see my Colleague, Elliott Gue’s, Seeking Alpha instablog post, Hydraulic Fracturing: What’s it All About.
In the abovementioned instablog post, Elliot debunked speculation that the Environmental Protection Agency’s “smoking gun” would lead to restrictive regulations on hydraulic fracturing, explaining why the unique situation analyzed in the report had little bearing on activity in commercial-scale shale oil and gas plays.
President Barack Obama likewise put these fears to rest during his 2012 State of the Union address, highlighting the nation’s rising output of natural gas and encouraging its widespread adoption for power generation and transportation. Such an endorsement effectively rules out overly restrictive regulations that would curtail hydraulic fracturing.
Although the government may mandate the disclosure of the chemicals used in fracturing fluid, drilling should continue apace in the Eagle Ford Shale and the nation’s other major unconventional oil and gas plays. Spears & Associates, the preeminent provider of data on pressure pumping, estimates that global spending on this critical service will surge 23 percent in 2012, to $52 billion. Much of this spending will occur in North America.
Frenzied drilling activity in the Bakken Shale in North Dakota, the Eagle Ford Shale in South Texas and other oil-rich plays has enabled the US to grow it annual oil output for the first time in decades. Even more impressive, this increase in overall oil volumes has occurred despite a sharp decline in production offshore Alaska and in the Gulf of Mexico.
Meanwhile, robust drilling in the nation’s shale plays also enabled the US to surpass Russia as the world’s leading producer of natural gas and has dramatically depressed gas prices in the closed North American market. Despite gas prices that continue to hover near record lows, US output has continued to grow. Exploration and production firms have shifted their emphasis from dry-gas fields to plays that also produce large amounts of higher-value natural gas liquids (NGL) that improve wellhead economics.
This upsurge in onshore oil and gas output has occurred in the Bakken Shale and other regions that lack legacy takeaway and processing capacity, while even the Permian Basin in west Texas–an area that’s produced oil since the 1920s–requires additional infrastructure to handle growing volumes. With ready access to capital, MLPs will build much of this midstream capacity.
Despite these strong fundamentals, recent inflows into the Master Limited Partnership space have pushed valuations to frothy levels. We can’t emphasize enough the importance of adhering to our buy targets and taking some profits off the table when a big winner throws off the balance of your portfolio.
Some investors balk at taking some profits in MLP positions that have rallied considerably–after all, no one likes to pay taxes. If you hold your MLP investments in a taxable account, you’ll likely be paying on a cost basis that’s been reduced by accumulated distributions that count as a return of capital.
Investors should grit their teeth and remember that regardless of the tax you pay on your gains, you’ll reap more profit than if you lose some of your paper profits in a correction. Moreover, the 15 percent tax rate on long-term capital gains is the lowest in decades.
If you hold your MLPs in an IRA, taking some money off the table won’t trigger a taxable event. Nonetheless, some investors will rationalize their decision not to take profits by reminding themselves that they’re earning a higher return on their original investment than they could earn by investing new money. But a 10 percent correction in the market could more than wipe out a year’s worth of income from any MLP.
Don’t equate taking profits with bailing out. In these uncertain times, taking what the market gives you will lock in hard-won gains. You can always reinvest the proceeds when stock prices inevitably pull back.
IAEA Gets Nowhere With Iran Nuclear Talks
Posted on 22. Feb, 2012 by Wilensky.
While Iran’s willingness to reopen talks with the International Atomic Energy Agency about their nuclear program was a surprise, it seems that the motion was mostly for show. Several rounds of discussions yielded no access to a military site in Parchin which is suspected to be a weapons development facility. There has been no agreement on further discussing the matter. Light crude is hovering close to $106 a barrel today, so much for Prince Alwaleed’s promise to keep oil under the $100 a barrel mark.
“The International Atomic Energy Agency has reported that it held a “disappointing” meeting with Iran this week over the country’s nuclear programme, with no agreement reached on any of the key issues under discussion. After a two-day meeting in Iran, IAEA officials returned to the UN watchdog’s headquarters in Vienna on Wednesday and indicated that talks with Iranian officials had made no progress.”
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