Tag Archives: SLB
The week ahead April 1st 2013*
Posted on 31. Mar, 2013 by Harvey Sax.
There will be much talk about how the market (S&P 500)closed at an all time high on last Friday. That’s yesterday’s news. Let’s take a look at the week ahead.
April 1: The market has had an great run. Let’s hope April Fools Day doesn’t extend to the investing public. This interesting tidbit from my friends at BTIG shows that the first of April has been a winner 75% of the time.
April 1st North Korea bluster. What does it mean? Is there an opportunity here? The U.S is unusually showy in flying aircraft over the Korean peninsula. Short Korean ETFs? This is another black swan type of play. It’s highly unlikely the Korean show of force amounts to anything but the systematic devaluation of the Yen will amount to problems for the Korean export driven economy. Another derivative play is long gold in U.S dollars.
April 1st Chinese PMI A Chinese manufacturing gauge rose to an 11-month high, indicating a recovery in the world’s second-largest economy is sustaining momentum. The Purchasing Managers’ Index was 50.9 in March, the National Bureau of Statistics andChina Federation of Logistics and Purchasing said today in Beijing. That compares with 50.1 in February and the 51.2 median estimate of 26 analysts surveyed by Bloomberg News. Readings above 50 indicate expansion. The material stocks like Caterpillar have been laggards. The improving economy and China should help this heavy duty earth mover.
April 1st Schlumberger on 3-31 issued an update “In Venezuela, after meetings with PDVSA, the collections have improved to the point that we will recognize all revenue associated with our first-quarter operations. We further expect to finalize a new payment agreement with PDVSA and we anticipate ramping up activity to meet the current and future needs of PDVSA’s development and production plans, thereby continuing our commitment to Venezuela.” SLB does more than 5% of their business in the post Chavez country. Besides SLB has a nice looking stochastic chart.
April 2nd Express Scripts ESRX hosts a conference call with JP Morgan analyst
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April 3rd Conagra and Monsanto report earnings before the opening. This may shed some light on the dismal state of agricultural commodities prices. It’s a touch ironic that both Mon and CAG are making 52 week highs while the Power Shares DB Agriculture Fund DBA is touching 52 week lows.
April 5th Friday Change in non-farm payrolls. This could be significant. The Fed has said they will keep QE stimulus going until unemployment reaches 6.5 percent unemployment and 2.5 percent inflation for one to two years. If unemployment drops sharply, market participants could get nervous not wanting to be the last one standing when the music stops.
*One of the things we talk about in the Investment Survival Workshop is developing the mindset to think ahead. When I first moved out to Park City, Utah from Atlanta, Georgia I was admittedly a bit anxious about the idea of getting up at 5:00AM every day to start researching the stock market. After all, that’s exactly what I was doing back East except it was 7:00AM and I had a full 2 ½ hours before the market opened at 9:30EST. I did this for some time until I came to the realization that if I was trying to figure out what was happening today, I was already way too late. What was going to happen today already happened early this morning in Europe or even earlier in Asia.
Maybe it was just a form of rationalization but if you are trying to figure out what is going to happen today, you are late to the game. You have to develop a mindset of thinking about something other than today. Now that will vary for everyone. I mean if you look at this as a mental exercise, much like physical exercise, are you training for a half marathon, a 5k walk & run fund raiser or just to be more fit for your family and fun? The point being is that when you have a regular exercise routine, you have goals in mind. When you are planning an investment strategy, it’s no different. What’s your time period? Are you a long-term investor or someone who is just trading week to week or even a day trader? As part of a routine, find time to anticipate what’s going to happen for some period in the future.
Everyone’s time frame will be different. For me, my crystal ball is short term in nature. With that in mind, here are a few of my ideas for the following week, beginning March 5th.
Not necessarily in alphabetical order:
Most technicals look poor
Posted on 14. May, 2012 by Harvey Sax.
I find few stocks in our portfolio that look like they are headed higher in the immediate future. Even though oil has had a sharp and steep decline, prices still look like they have room to drop. The test will come soon though as many oil services and some oil stocks like Hess are trading at 2008 nadir levels. At some point soon, these stocks will rise on declining crude prices and signal some kind of trading bottom. This is the only sector of the market that has had significant insider buying of late. Buying is picking up in a smattering of names, though. The overwhelming majority of insider buys are now under water. This usually portends a good time to buy. As a reminder to our readers, the ideal time to buy is usually when things look the bleakest. As Warren Buffet is fond of saying, Keep you head while others are losing theirs. It won’t be easy but buying when everything is rosy is usually a recipe for disaster.
Superior Energy Services, is it all a sector story? Score Zero
Posted on 22. Apr, 2012 by Harvey Sax.
This is a checklist I use to quickly come to a conclusion on a stock. I score a stock, each line getting a 1, 0, or -1. A stock that scored 1 on each line would be a perfect 10. Buy it!
Some of these items are quite subjective. For example how would I score Cash Flow? If a company’s cash flow is much lower than it’s reported earnings, that raises a flag and I would score it a -1. If there are more insiders buying than selling, I would score it a 1. If there are no apparent catalysts in the near future I would score it a 0 but on the other hand if there is a pending secondary that will put more stock out on the market, I would score it -1.
- CHART- know how to read charts. I firmly believe I can improve the price of buying or selling from an understanding of chart action. Although SPN is below 50 & 200 day moving averages, the RSI is diverging. +1
- ANALYSTS- read analyst reports but come to your own conclusions. 6 strong buys, 7 buys, 1 hold. +1
- INSIDERS- if the people that know the company the best are not buying it, why should you? This is more complicated than usual. The CEO Dunlap bouth 10,000 at $30.43 and the Dir Kennear buought 10,000 at $29.69. That’s clouded by V.P. Moore’s enormous exercise and sale of 443,196 shares on 2-29-12. A review of the Form 4. To understand that, note that on February 7th, Superior complete the acquisition of Complete Production Services. Mr. Moore. From March 2007 until the merger between Complete Production Services, Inc. and Superior, Mr. Moore was President and Chief Operating Officer of Complete, and was with Complete and its predecessor companies since April 2004. 0
- MANAGEMENT DISCUSSION 10Q AND 10K- this is the only truthful thing you will read about a company. It’s composed by management, the auditors, and the firm’s lawyers. If all three of them can agree on the verbiage, it’s passed a big hurdle. Read it carefully. Pay particular attention to the Risks, Litigation, and Related Transaction sections. These are the things you will wish you had taken the time to read if something goes bad with your investment. Superior recently acquired Complete Productions (CPX) which put them in all of the unconventional North American hydrocarbon plays. Advances in horizontal drilling and completion technologies and techniques have made the development of many unconventional resources such as oil and natural gas shale formations economically attractive. The North American horizontal rig count has risen from 335 at the beginning of 2007 to 947 at the end of December 2010, according to Baker Hughes. The bad news is that there will be short term oversupply and dislocation resulting in margin pressures. The risk is best summed up from CPX’s 10k 0
- RELATIVE PERFORMANCE- If the stock has a superior relative performance to the market in the short term + 1 – SPN has been underperforming -1
- SECTOR OUTLOOK- buying a good stock in a bad sector can be a humbling experience -1
- CASH FLOW- cash flow is more accurate than earnings. Earnings can be more easily manipulated. +1
- PEG RATIO- it’s good to find a company growing faster than it’s multiple. +1
- VALUATION- contrary to popular opinion, it does matter what you pay for a company. Check its discounted cash flow value. Buy it for less than what it’s worth, a 1, less a -1, about the same 0. -1
- 10.CATALYST- what’s going to change the status quo?Superior Energy Services (SPN: 24.75, -0.44, -1.75%) has agreed to acquire Complete Production Services (CPX: 36.10, -0.10, -0.28%) for about $2.7 billion in a cash-and-stock merger that will help expand its presence in the oilfield-services industry
The combined company will have enhanced positions in large sectors for key products and services, such as hydraulic fracturing and well servicing, that are widely used during drilling, completion and production processes, Dunlap said.Superior hopes the addition of Complete, which provides specialized completion and production services and products to develop hydrocarbon reserves for oil and gas companies in North America and southeast Asia, will help expedite its global expansion. The timing of this transaction could be dreadful though as N.A. frac drilling is becoming crowed and margins coming down according to SLB recent conference call. None the less, the future in the long term is in these unconventional oil and gas plays and the potential for global expansion of shale plays seems bright if untested. -1
Trading the markets is a humbling experience. I hope this handy checklist makes it less so.
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..
J.P. Morgan-” Trading at practically unthinkable valuation levels, Halliburton has by far the most upside..”
Posted on 02. Apr, 2012 by Harvey Sax.
I’ve been losing money on Halliburton for the last month but probably not as much as J.P. Morgan clients. If you would like to view this report in its entirety , you should call your J.P. Morgan broker. I’d post it but Merrill Lynch makes me take down everything I post of theirs even though its generally completely wrong. J.P is generally less vigilant and better, too.
1Q12 Preview – Must Be Close to Capitulation
With the mood on the Street about as bad as it can get, earnings season may be just the cure to get all the negative sentiment behind us and get a rally going in oilfield services. This has been a very difficult group to trade the past 6 months, with investor frustration reaching boiling point as seemingly just about everything is going against the sector: macro, market, and company specific issues are all concerns. But with expectations so low right now, it won’t take much to spark a rally, but likely one that will be more stock specific. Not only is there little uniformity across the global service markets, but each company is positioned differently (as Baker Hughes is reminding us). It isn’t all doom and gloom, in fact we see a number of signs that could point towards a 2H rally. With more than 40% upside to fair valuation levels, we think large cap services has to be favored, followed by offshore drillers. Trading at practically unthinkable valuation levels, Halliburton has by far the most upside on our numbers, but Schlumberger is the safer pick heading into earnings season in our view. On the other hand, we think Cameron and Rowan will come up short as we’re below consensus on earnings.
Energy Shares Suffer ‘Gas’ Pangs – WSJ.com
Posted on 13. Mar, 2012 by Harvey Sax.
I thought this article was interesting. The drilling companies represent outstanding value and we are long HAL, BAS, SPN. Good American know how at bargain basement prices.
Energy Shares Suffer ‘Gas’ Pangs
Sector is S&P 500′s Cheapest Relative to P/E Ratio as Many Believe Natural-Gas Prices to Stay Low
By ALEXANDRA SCAGGS
Despite rising oil prices, U.S. energy stocks are scraping the bottom of the barrel.
The world price of crude has climbed 18% this year as rising political tension with Iran has stoked fears of a supply disruption. That is boosting profits at energy companies. Yet investors remain skeptical over the sector’s valuations amid fears over its long-term prospects.
Drill baby drill will be the U.S. national anthem
Posted on 22. Feb, 2012 by Harvey Sax.
If oil is cut off from Iran, it could also impede supply in Iraq as Iran will use it’s influence to cause chaos wherever they can. There is significant potential for an Israeli strike against Iran before the U.S. Presidential elections. Israel would want to use its leverage before the outcome of the election is certain. One thing looks clear to me. If there is a major disruption of oil from the MidEast, “Drill Baby Drill” will be the U.S national anthem.
Buy OIH, the ETF. Buy HAL, SLB, BAS,WFT probably just about any driller for oil will work well.
Iran, Nuclear Policy, and America: An Investment Opportunity In Disaster?
Posted on 24. Jan, 2012 by Wilensky.
We have a delicate balancing act at hand between the threat of an emerging nuclear power, our rapacious thirst for oil, and responsible diplomatic policy. The consternation in the air is palpable, bringing to mind Buffet’s famous words “Be fearful when others are greedy and greedy when others are fearful”. So how does one put such words of wisdom into an actionable trade idea? Since going long nuclear fallout seems short sighted, let’s look at how to take advantage of a potential event driven jump in the price of oil once we fully grasp the situation at hand.
At the mentioning of the country results in a harsh, metallic taste of uncertainty and fear in the back of your mouth when you consider the effects on your portfolio. Developing a perspective on the state of affairs is difficult, especially solely from sorting through headline after headline; from the motorcycle delivered assassination of nuclear scientist Mostafa Ahmadi Roshan on Wednesday near Iran’s main enrichment facility to Europe’s proposed boycott of Iranian crude, to the menacing threat of a barricade in the Strait of Hormuz.
Lets break things down and set the scene so we can take a more accurate look. We have two main catalysts; the increasing threat that Iran poses to the rest of the world and of course, oil. It was most recently reported that Iran’s nuclear program had passed the low enrichment rate of 3-5% and begun to reach the threshold of weapons grade uranium, breeching the 20% level which is sufficient enough for a crude yet effective nuclear weapon. The assassination of Roshan yesterday only supports this theory, suggesting the program had progressed far enough to merit a public killing regardless of the political fallout. While the nuclear threat from Iran doesn’t seem all that immediate (at least until they find another sucker to be Director), former CIA chief Michael Hayden still feels the country ” ..is the single greatest destabilizing element right now with regards to global security”.
Fear aside, this brings us to the second catalyst: oil. One fifth of the world’s oil passes through the 34 mile wide channel, accounting for 35% of all waterborne oil traffic.. an ideal conduit for a battered and beaten nation to draw in an unwavering audience.
Now Iran gets pushed around quite a bit, with the most recent abuse in the form of sanctions against all crude oil exported from the nation; starting what Iran has referred to as an “economic war” on the country’s largest export. A ten day long display of naval tactics in the Strait was just the beginning for Iran’s government, stating that “if sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz.” Responding in turn, the US Navy ordered a second Carrier Battle Group into the region, just to keep an eye on things (which must make China feel all warm and fuzzy inside).
So now that we have pieced together a relatively coherent picture of the different catalysts in the scenario that could lead to a spike in oil prices, lets take a look at how to best position for such an event.
1. In an effort to reduce variables in such a complex and politically driven scenario, a simple strategy is highly recommended for the average investor. One of the easiest and cheapest options to develop a position is through buying the corresponding ETF, although since these funds generally invest in near term futures contracts due to the difficulty of holding the physical asset there is potential for some tracking error on the part of the fund.
2. Another option that provides a more direct investment is to own the actual oil companies (SLB, HES, HAL, XOM, etc.) Although also relatively inexpensive in terms of trade costs, this strategy subjects you to the headline risk of the individual companies rather than limiting your exposure directly to the price of oil. This strategy also lacks a guarantee that the correlation between oil company and oil price will appreciate in line with each other.
3. Which brings us to a play more directly linked to the movement in the price of oil and involves less capital than option 1 and option 2: buying options on the futures contracts. Each contract is for 1,000 barrels and a $.01 move in the price per barrel equals a $10 move in contract price. The pricing of these options requires some understanding of both the futures markets and options strategies, so is not appropriate for the average investor.
While some sort of drama ensuing from the Middle East debacle seems imminent, there is no guarantee that events will play out as expected and oil prices will respond in turn. Buying stock in a solid, multi national company with a strong balance sheet and diversified portfolio of assets might be a safer play on the chance that Iran can agree to some sort of terms on their Nuclear development program.
Dueling versions of the State of the Union -who’s got it right CNN or WSJ?
Posted on 23. Jan, 2012 by Harvey Sax.
There are major implications for short-term trading here. Natural gas E&P companies were the biggest gainers today while the drillers like BAS were some of the biggest losers on the idea that natural gas prices are bottoming since Chesapeake Energy announced major curbs on drilling due to collapsing natural gas prices. If Obama sounds sympathetic to nat gas and promotes it in any kind of meaningful way, BAS and others could rocket.
State of the Union to offer a blueprint for the economy By Jessica Yellin, CNN Chief White House Correspondentupdated 5:29 PM EST, Mon January 23, 2012
A source says President Obama will propose tax reform, clean energy incentivesObamas address will focus on manufacturing, energy, education and valuesSources: Obama will discuss “insourcing,” or bringing back jobs from overseasThis will be the presidents third State of the Union addressWashington CNN — President Barack Obama will use Tuesdays State of the Union address to frame the message of his re-election campaign.The annual speech to Congress will lay out in clear terms a theme hes been repeating recently about economic inequality and a government that should ensure “a fair shake” for all.
via State of the Union to offer a blueprint for the economy – CNN.com.
Obama to Spotlight Energy
State of the Union Speech Will Call for Expanding U.S. Oil and Gas Production
By DEBORAH SOLOMON And LAURA MECKLER
President Barack Obama will use his State of the Union speech on Tuesday to call for an increase in domestic energy production, said people familiar with the plans.
Mr. Obama is expected to tout the economic and energy security benefits of increased U.S. oil and gas production, a message unlikely to sit well with some of the President’s environmental supporters but which could blunt industry
Bloomberg NewsU.S. natural gas production is to get new support. Above, a pipeline crew working in North Dakota in October.Mr. Obama’s speech is expected to call for increased oil and gas production and highlight a drop in U.S. oil imports, although some of that decrease stems from reduced demand amid a weak economy.
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