muscleman Posted December 9, 2014 Share Posted December 9, 2014 Any thoughts? 1. Oil production companies: I am worries if the oil price can stay longer than those companies stay solvent. Look at today's nat gas producers! 2. Oil service companies: These companies will have much less business when OPEC decides to cut production. I expect US shale oil companies to cut production first and then OPEC will cut production. Therefore the oil service companies may experience a longer period of distress than oil production companies. 3. Oil consumers: Chemical companies and airlines and auto industry. It is probably already too late. Link to comment Share on other sites More sharing options...
shhughes1116 Posted December 9, 2014 Share Posted December 9, 2014 Look at midstream and compression. While growth in production will slow, midstream and compression plays are more dependent on volume than price, and I would expect volume to increase as the price decreases. Can't move liquid and gas through a pipe without compression. One caveat...although I like midstream, I would avoid the smaller plays that depend on collection/gathering systems for a substantial Amount of their cash flow. I can only speak from my personal research, but it seems that mAny of the pipelines are built to address existing volume, while many of the collection/gathering systems are built based on projections for new well completions and projected oil/gas volumes. Thus they may be more impacted by the slowdown in drilling new wells. Link to comment Share on other sites More sharing options...
alertmeipp Posted December 9, 2014 Share Posted December 9, 2014 a few months does not make a trend. Link to comment Share on other sites More sharing options...
Guest longinvestor Posted December 9, 2014 Share Posted December 9, 2014 Build a 10,000 gallon underground storage tank in the backyard! Link to comment Share on other sites More sharing options...
Pauly Posted December 9, 2014 Share Posted December 9, 2014 Any thoughts/opinions on PSX? Their midstream, refining, and chemicals segments could all benefit from lower oil, could they not? Link to comment Share on other sites More sharing options...
Laxputs Posted December 9, 2014 Share Posted December 9, 2014 I would suggest looking at companies that have earnings from recurring revenue/maintenance contracts, as well as directly from O&G sector. And of course companies with little debt and strong cash flows. There are companies where the baby is being thrown out with the bath water. I'd suggest looking at Enterprise Group, Macro Enterprises, and Emeco. Link to comment Share on other sites More sharing options...
ni-co Posted December 9, 2014 Share Posted December 9, 2014 My way of "playing" it is preparing for an economic slowdown. I raised my net cash position by shorting the Russell 2000 and even thought about buying treasuries (in the end I didn't consider it a good enough risk/reward bet, so I haven't done it). Link to comment Share on other sites More sharing options...
rkbabang Posted December 9, 2014 Share Posted December 9, 2014 Road Trip! Link to comment Share on other sites More sharing options...
blainehodder Posted December 9, 2014 Share Posted December 9, 2014 History would suggest that getting creative is unnecessary, and that buying XOM has always worked. Link to comment Share on other sites More sharing options...
jawn619 Posted December 9, 2014 Share Posted December 9, 2014 History would suggest that getting creative is unnecessary, and that buying XOM has always worked. PROFOUND Link to comment Share on other sites More sharing options...
AzCactus Posted December 9, 2014 Share Posted December 9, 2014 Wait for things to get even cheaper. Link to comment Share on other sites More sharing options...
boilermaker75 Posted December 9, 2014 Share Posted December 9, 2014 History would suggest that getting creative is unnecessary, and that buying XOM has always worked. If it works, keep doing it. I have been writing the 89-, 90-, and 91-strike weekly puts. The premiums are nice and if I get put to I have a great entry price. Link to comment Share on other sites More sharing options...
Uccmal Posted December 10, 2014 Share Posted December 10, 2014 History would suggest that getting creative is unnecessary, and that buying XOM has always worked. If it works, keep doing it. I have been writing the 89-, 90-, and 91-strike weekly puts. The premiums are nice and if I get put to I have a great entry price. Boilermaker, Can you elaborate. I was just looking at the list for the 90s for dec. 20. Its $1.00. Is this what you mean - really short term. I guess it works okay until you get put to a few times and end up eating up your margin on XOM stock. Tx. Link to comment Share on other sites More sharing options...
Uccmal Posted December 10, 2014 Share Posted December 10, 2014 Build a 10,000 gallon underground storage tank in the backyard! Permit costs will kill you. Just buy a gas station and dont sell anything until the price goes back up. Were you kidding... :-). Link to comment Share on other sites More sharing options...
boilermaker75 Posted December 10, 2014 Share Posted December 10, 2014 History would suggest that getting creative is unnecessary, and that buying XOM has always worked. If it works, keep doing it. I have been writing the 89-, 90-, and 91-strike weekly puts. The premiums are nice and if I get put to I have a great entry price. Boilermaker, Can you elaborate. I was just looking at the list for the 90s for dec. 20. Its $1.00. Is this what you mean - really short term. I guess it works okay until you get put to a few times and end up eating up your margin on XOM stock. Tx. Yes that is what I mean. I don't mind being put to, I would like to own some XOM acquired at $89. So I am only writing the amount of contracts equivalent to the position I want to have in XOM. Like putting in a limit order, where I make some cash while waiting to execute. Link to comment Share on other sites More sharing options...
jay21 Posted December 10, 2014 Share Posted December 10, 2014 Look at midstream and compression. While growth in production will slow, midstream and compression plays are more dependent on volume than price, and I would expect volume to increase as the price decreases. Can't move liquid and gas through a pipe without compression. One caveat...although I like midstream, I would avoid the smaller plays that depend on collection/gathering systems for a substantial Amount of their cash flow. I can only speak from my personal research, but it seems that mAny of the pipelines are built to address existing volume, while many of the collection/gathering systems are built based on projections for new well completions and projected oil/gas volumes. Thus they may be more impacted by the slowdown in drilling new wells. How will potential bankruptcies and lack of future drilling affect midstream? I know nothing but I thought I heard that midstream enters into long term contracts. What if the counterparty defaults? I am intrigued but not interested so I am waiting. It looks like the bad companies sold off and I will wait until they go bankrupt or quality sells off before I start to get very interested. Link to comment Share on other sites More sharing options...
CorpRaider Posted December 10, 2014 Share Posted December 10, 2014 Potential risk is there hypothetically although debtor in possession or trustee is going to compromise the contract to get the carbon transported to market for cash only as last resort, at least that is the theory. Link to comment Share on other sites More sharing options...
valueinvesting101 Posted December 10, 2014 Share Posted December 10, 2014 Hopefully Berkshire can pick some good pipeline assets then ;) Link to comment Share on other sites More sharing options...
saltybit Posted December 10, 2014 Share Posted December 10, 2014 Who is holding a large part of the debt of these oil companies? What happens if these oil companies default? Will there be cascading effects that don't just touch the energy industry? Link to comment Share on other sites More sharing options...
moustachio Posted December 10, 2014 Share Posted December 10, 2014 http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/wres-warren-resources/ Link to comment Share on other sites More sharing options...
james22 Posted December 10, 2014 Share Posted December 10, 2014 Intelligent or not, I'm limping into Vanguard's Energy Fund (VGELX). Link to comment Share on other sites More sharing options...
shhughes1116 Posted December 10, 2014 Share Posted December 10, 2014 Look at midstream and compression. While growth in production will slow, midstream and compression plays are more dependent on volume than price, and I would expect volume to increase as the price decreases. Can't move liquid and gas through a pipe without compression. One caveat...although I like midstream, I would avoid the smaller plays that depend on collection/gathering systems for a substantial Amount of their cash flow. I can only speak from my personal research, but it seems that mAny of the pipelines are built to address existing volume, while many of the collection/gathering systems are built based on projections for new well completions and projected oil/gas volumes. Thus they may be more impacted by the slowdown in drilling new wells. How will potential bankruptcies and lack of future drilling affect midstream? I know nothing but I thought I heard that midstream enters into long term contracts. What if the counterparty defaults? I am intrigued but not interested so I am waiting. It looks like the bad companies sold off and I will wait until they go bankrupt or quality sells off before I start to get very interested. As I stated in my original post, I think the slow down in drilling activity will negatively impact midstream companies that focus on building out collection/gathering systems. That is simply my assessment based on how they seem to plan and build out those systems, relative to the larger interstate pipelines. With respect to counterparty risk, that is certainly a concern with any company engaging in long-term contracts. However, my belief is that if/when some of the marginal companies default (and I think there will be a few that do) their trustees will continue to honor the contracted terms in order to get their hydrocarbon product to the market. How else would they maximize cash flow from the distressed asset if they can't get their hydrocarbons to the market? I think the great recession is instructive in this case. Not only did demand drop off, but the credit markets froze up as well. Yet many of the stronger midstream companies maintained their distribution or even increased it, with few counterparty issues. I think it is also useful to point out that the marginal companies most likely to default, for the most part, are smaller operators that make up a small portion of contracted volumes on the bigger pipelines. I don't have any numerical data to substantiate this claim...this is just something I have gleaned from reading a number of 10k's. In my case, I have focused on midstream operators where demand seems to be driving the construction and/or expansion of pipelines. Williams Company is a good example with their transco pipeline. Upstream companies seem to be falling all over themselves to get space on this pipeline because it serves some of the biggest natural gas markets in the country. EPD is another good example, especially given their distribution coverage of almost 1.5:1 and their assets in the Gulf Coast Region. and SHLX is another good example...although the valuation is a bit rich right now, shell has some premier midstream sssets that will likely be dropped down to SHLX....their stake in the colonial pipeline is a great example. Link to comment Share on other sites More sharing options...
CorpRaider Posted December 10, 2014 Share Posted December 10, 2014 Here sits mighty XOM at my target price. Yet here sits my bat on my shoulder. ;D Link to comment Share on other sites More sharing options...
scorpioncapital Posted December 10, 2014 Share Posted December 10, 2014 I think skipping the equities and looking at the debt is a first step. E.g. 2018 Exoc debt is currently yielding a whopping 20%. They are hedged for 1 year. True, low prices will require some deft management but if the debt is paid, then 20% is an amazing yield to maturity. Others, EROC - 11% yield for 5 years and fully hedged at $90 oil price until about 2018. Link to comment Share on other sites More sharing options...
boilermaker75 Posted December 10, 2014 Share Posted December 10, 2014 Here sits mighty XOM at my target price. Yet here sits my bat on my shoulder. ;D No guts no glory. My source for that quote is a Drexel Burnham Lambert coffee mug on my desk. Link to comment Share on other sites More sharing options...
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