Oil, wow, WTF happened to all of the oil bugs on this site?

[HJ]

I know there are plenty of Canadian constituencies on this board, but what do you guys think about this?

 

http://www.bloomberg.com/news/articles/2016-05-25/blackstone-gives-pricey-canadian-energy-and-property-thumbs-down

[Cardboard]

Sounds to me like someone who is talking generally or who has not done his homework.

 

Currently, there is a huge gap in valuation between the "strong" and the "weak". So if you go shopping for assets where companies have bankers holding a gun to their head, you can likely buy them for PDP NPV to 1P or from $20,000 to $30,000 per boe/d. You can then cherry pick among them for best netbacks or other characteristics. A company like Blackstone would then also proceed to additional cost cutting to reduce operating cost and G&A.

 

However, if they are looking for just one large transaction that does it all then other than Penn West (that would still have to be cleaned up), the field of cheap and obvious assets is pretty limited.

 

By the way, where were they in February when everything was on sale even the Street favourites of today?

 

Cardboard

[LesPaul]

http://www.canadianlawyermag.com/legalfeeds/3273/environment-future-of-companies-take-back-seat-to-creditors-in-oil-well-case.html

 

Thought this was interesting; although the implications of the case may need some time to play out.

 

[Palantir]

Looks like Saudi Arabia's plan is working well. Oil is rising, marginal players are going out of business, and they've actually raised production.

[Uccmal]

Interesting, or not so interesting week.  The big Opec meeting amounted to a yawn. 

 

The price of oil barely moved. 

 

Natural gas in up 30% from its lows for the year, for some reason. 

[CorpRaider]

The oil bugs all stepped out for a drink after yesterday's action.

[Cardboard]

Continued oil data manipulation to keep gasoline prices down does not seem to have stopped.

 

The EIA reported today inventories down only 2.2 million barrels last week while API reported 6.7 million barrels last night.

 

At the same time and in the same report, they show U.S. Lower 48 States production down 38,000 barrels/day in the last week and Alaska down 156,000 barrels/day.

 

What prevented the larger inventory drop was 808,000 barrels/day increase from last week from imports.

And we see such reports:

 

http://finance.yahoo.com/news/venezuelan-crude-exports-u-fall-151940275.html

 

And where is the drop in inventory in the last month due to a large portion of the oil sands shutdown due to the Fort McMurray fire?

 

Something smells here. There will be a price to pay down the road and it will be ugly.

 

Cardboard

[jmp8822]

Continued oil data manipulation to keep gasoline prices down does not seem to have stopped.

 

The EIA reported today inventories down only 2.2 million barrels last week while API reported 6.7 million barrels last night.

 

At the same time and in the same report, they show U.S. Lower 48 States production down 38,000 barrels/day in the last week and Alaska down 156,000 barrels/day.

 

What prevented the larger inventory drop was 808,000 barrels/day increase from last week from imports.

And we see such reports:

 

http://finance.yahoo.com/news/venezuelan-crude-exports-u-fall-151940275.html

 

And where is the drop in inventory in the last month due to a large portion of the oil sands shutdown due to the Fort McMurray fire?

 

Something smells here. There will be a price to pay down the road and it will be ugly.

 

Cardboard

 

Thanks for your continued commentary in this thread.

[opihiman2]

We find the angst somewhat amusing.

 

Oil prices are cyclical. And because they ARE cyclical we know, with certainty, that tomorrows price will not be the same as todays. To invest is to simply be comfortable with the idea of arbitraging uncertainty over time. Today’s dog (Gold @ $350) is just tomorrows star (Gold @ $3500).

 

All those OPEC nations need higher prices to fund their various social programs and wars. We have great confidence in the self-interest, and ability, of those regimes to remain in power.

 

We also have great confidence in the laws of supply and demand, and reservoir engineering. Everywhere in the world, the CAPEX cost of maintaining production goes up as reservoirs progressively move through their various stages of production. Even in Saudi Arabia, and Iran.

 

Petro dollar recycling was a wonderful invention; most recognize that petro yuan recycling would be a similar invention. Traditionally you exchange weapons for oil, & let the resultant tension add to the commodity price - in a virtuous circle.

 

If all you did was simply trim (if even necessary) & hold, it is pretty hard to see how you would not do well. Nothing to do with being bullish or bearish.

 

Corruption and self-interest work far better!

 

SD

 

+1! 

 

I was a bear when Jeff Rubin was predicting and writing about $200/barrel oil.  People told me I was wrong then. 

 

Today, I'm watching people pour out of oil, and it has done nothing except to get me titillated and excited.  If you think oil will be permanently at $40 or less per barrel, you are out of your mind.  Cheers!

 

Heading back to $40 per bbl!  I was definitely an oil bull when prices were below $30 / bbl a few years ago.  Too bad there's no good way for me to trade that other than buying actual oil future contracts, and I really don't know much about commodities trading to get into that.  I looked at USO, USL, and OIL, and they all pretty much suck in tracking the actual commodity.  Anyone know of a good way to get into the actual commodity without having to keep buying long dated futures contracts?

 

By the way, Bethany Mclean came out with an awesome book on the U.S. shale revolution being largely driven by ZIRP and Fed policies of the past 15 years.  I remember back on CBOF, people were looking at O&G shale / fracking companies, and I thought it was absurd that no one on here thought about the biggest glaring issue: if these companies can't make money at $100 usd / bbl, how the hell are they going to make money when oil prices revert back to mean, which is exactly what happened, and exactly where we're at today.  I highly recommend her new book.  I pretty much agreed with everything she said, and I believe if interest rates normalize above 5%, U.S. shale oil production will decline big time.

[BG2008]

We find the angst somewhat amusing.

 

Oil prices are cyclical. And because they ARE cyclical we know, with certainty, that tomorrows price will not be the same as todays. To invest is to simply be comfortable with the idea of arbitraging uncertainty over time. Today’s dog (Gold @ $350) is just tomorrows star (Gold @ $3500).

 

All those OPEC nations need higher prices to fund their various social programs and wars. We have great confidence in the self-interest, and ability, of those regimes to remain in power.

 

We also have great confidence in the laws of supply and demand, and reservoir engineering. Everywhere in the world, the CAPEX cost of maintaining production goes up as reservoirs progressively move through their various stages of production. Even in Saudi Arabia, and Iran.

 

Petro dollar recycling was a wonderful invention; most recognize that petro yuan recycling would be a similar invention. Traditionally you exchange weapons for oil, & let the resultant tension add to the commodity price - in a virtuous circle.

 

If all you did was simply trim (if even necessary) & hold, it is pretty hard to see how you would not do well. Nothing to do with being bullish or bearish.

 

Corruption and self-interest work far better!

 

SD

 

+1! 

 

I was a bear when Jeff Rubin was predicting and writing about $200/barrel oil.  People told me I was wrong then. 

 

Today, I'm watching people pour out of oil, and it has done nothing except to get me titillated and excited.  If you think oil will be permanently at $40 or less per barrel, you are out of your mind.  Cheers!

 

Heading back to $40 per bbl!  I was definitely an oil bull when prices were below $30 / bbl a few years ago.  Too bad there's no good way for me to trade that other than buying actual oil future contracts, and I really don't know much about commodities trading to get into that.  I looked at USO, USL, and OIL, and they all pretty much suck in tracking the actual commodity.  Anyone know of a good way to get into the actual commodity without having to keep buying long dated futures contracts?

 

By the way, Bethany Mclean came out with an awesome book on the U.S. shale revolution being largely driven by ZIRP and Fed policies of the past 15 years.  I remember back on CBOF, people were looking at O&G shale / fracking companies, and I thought it was absurd that no one on here thought about the biggest glaring issue: if these companies can't make money at $100 usd / bbl, how the hell are they going to make money when oil prices revert back to mean, which is exactly what happened, and exactly where we're at today.  I highly recommend her new book.  I pretty much agreed with everything she said, and I believe if interest rates normalize above 5%, U.S. shale oil production will decline big time.

 

From VIC's discussion of the E&P business

 

E&P Companies Are Like Street Walkers (From a generalist perspective)

They promise a good time (Look at those IRRs)

 

You rent them (Have to trade in and out)

 

You don't marry them (Can't really hold for long term)

 

I won't touch them with a ten foot pole (Personal choice)

 

You can't bring them home to your parents (Can't really tell your LPs that you own them, hard to justify unless that's your strategy)

 

When the cops pull you guys over, it's a very awkward situation (If the stock price is down, you can't really back up the truck and buy more)

 

They have very short careers (The assets depreciate and the street walker ages quickly)

 

Totally supply and demand driven equal zero pricing power (Commodity price)

 

They like to party and blow their money (Similarity is uncanny)

 

Hard to find an honest woman in the house of pleasure (Not a fertile hunting ground for me) 

 

Surprises tend to be negative, they give gifts that keeps giving and gifts that can be cured with antibiotics (Have you been negatively surprised while investing in E&Ps??)

 

Lots of liars, I'm doing this to pay for college (Right!!)

 

Your ability to identify Julia Roberts won't improve over time (My ability to identify the right E&P has not improved in 10 years, luckily I have never owned a E&P company)

 

Depletion is real for both youth and O&G

[BG2008]

Midstream Is Kind of Like A PIMP

 

You get a fixed fee whether the girls make money or not "Is Wayne Brady Gunna have to choke a bitch?" (Take or pay contracts)

 

You stay in the warmth while the girls stay out in the cold (Cashflow much more stable than E&P)

 

You offer a service that is highly desirable, protection from Ted Bundy (Moves the  O&G out of the basin into the market)

 

The relationship feels like it should not be sustainable, but it is sustainable, because sex work is the oldest profession and there will always be demand for the product (I just realized this while I type this out)

 

In theory, the gals should not enter this profession and enter into an agreement with you.  You have almost complete control over the gals.  But there are lots of broken homes and gals who don't have other skillsets.  Hence, new gals keep entering this terrible business.   

[BG2008]

Wall Street Is the John

 

Johns create the demand (Wall Street keeps giving money to the drillers)

[Uccmal]

Opihiman, the discussion has been ongoing for years over here:

 

http://www.cornerofberkshireandfairfax.ca/forum/strategies/future-strategy-to-survive-discovering-1-out-of-every-20-bbls-of-oil-we-now-use/

 

[John Hjorth]

Wall Street Is the John

 

Johns create the demand (Wall Street keeps giving money to the drillers)

 

Please keep me out of this. [sorry, I couldn't help it.] [<- What smiley is appropriate here?]

[rkbabang]

Wall Street Is the John

 

Johns create the demand (Wall Street keeps giving money to the drillers)

 

Please keep me out of this. [sorry, I couldn't help it.] [<- What smiley is appropriate here?]

 

Just keep creating the demand and we'll leave you alone.

 

[Spekulatius]

Midstream Is Kind of Like A PIMP

 

You get a fixed fee whether the girls make money or not "Is Wayne Brady Gunna have to choke a bitch?" (Take or pay contracts)

 

You stay in the warmth while the girls stay out in the cold (Cashflow much more stable than E&P)

 

You offer a service that is highly desirable, protection from Ted Bundy (Moves the  O&G out of the basin into the market)

 

The relationship feels like it should not be sustainable, but it is sustainable, because sex work is the oldest profession and there will always be demand for the product (I just realized this while I type this out)

 

In theory, the gals should not enter this profession and enter into an agreement with you.  You have almost complete control over the gals.  But there are lots of broken homes and gals who don't have other skillsets.  Hence, new gals keep entering this terrible business. 

 

I am bullish on midstreams. It’s very similar to real estate and assets can be moaty. Locations and connections count and there is the FERC to regulate supply. They generate nice cash returns for decades and some pipes run for 50+ years, even though they are fully depreciated. in some cases they can be repurposed. Vulnerability is the same - overinvestment, cash return lag Capex expense during buildout phase and credit markets need to stay accessable for them to work.

 

The E&P is like the airline industry 30 years ago and shale is the worst thing that ever happened to the industry.

[JRM]

The interstate pipeline companies that operate in the U.S will likely face some higher O&M costs due to new regulations expected by the dn of Q1 2019 for transmission pipelines.  Not a reason to avoid the space, just something I don't see anyone talking about. 

 

With that said I'm extremely bullish on natural gas pipelines.  I have a hard time seeing a decline in usage in the next 50 years or so.

[rb]

Wouldn'y they ask for higher tolls to compensate for those?

[opihiman2]

Opihiman, the discussion has been ongoing for years over here:

 

http://www.cornerofberkshireandfairfax.ca/forum/strategies/future-strategy-to-survive-discovering-1-out-of-every-20-bbls-of-oil-we-now-use/

 

Ah, much thanks.!  I haven't really spent time on that part of the forum.  I'll peruse the thread.

[KJP]

Midstream Is Kind of Like A PIMP

 

You get a fixed fee whether the girls make money or not "Is Wayne Brady Gunna have to choke a bitch?" (Take or pay contracts)

 

You stay in the warmth while the girls stay out in the cold (Cashflow much more stable than E&P)

 

You offer a service that is highly desirable, protection from Ted Bundy (Moves the  O&G out of the basin into the market)

 

The relationship feels like it should not be sustainable, but it is sustainable, because sex work is the oldest profession and there will always be demand for the product (I just realized this while I type this out)

 

In theory, the gals should not enter this profession and enter into an agreement with you.  You have almost complete control over the gals.  But there are lots of broken homes and gals who don't have other skillsets.  Hence, new gals keep entering this terrible business. 

 

Mineral interest owners like Black Stone Minerals are similar.  They get their royalties regardless of whether the E&Ps make money or not, and directly benefit from higher volumes.  But their profits are more exposed to hydrocarbon prices than the typical midstream company.

[opihiman2]

Wooo hooo!!!  WTI near $40 a bbl!  Who wants to bet we see near $30 by next year? 

[Cardboard]

Just make your bet and short it. Too much of a wussy?

 

Cardboard

[opihiman2]

I'm looking to go long!  But, whatever, keep crying over the Fed hikes. 

[Cardboard]

You said you were looking to go long treasuries with your 100% cash. Now long oil???

 

You sound like a troll to me.

 

Cardboard

[opihiman2]

You said you were looking to go long treasuries with your 100% cash. Now long oil???

 

You sound like a troll to me.

 

Cardboard

 

Yeah, read the past page, dick head.