james22 Posted November 28, 2015 Share Posted November 28, 2015 Gutsy move by this fund manager..... Thanks for this, sculpin. Interesting. Link to comment Share on other sites More sharing options...
james22 Posted November 28, 2015 Share Posted November 28, 2015 Well, good luck on his call but doing this with 100% of a portfolio is probably insane even if he turns out to be right. It's one thing if it's your own money, but managing on behalf of others is a different story. At least he's upfront about it so people who are uncomfortable can get out if they want. Our portfolio manager Cale Smith has nearly all of his family’s life savings invested in the Tarpon Folio. https://www.islainvest.com/portfolios/ Link to comment Share on other sites More sharing options...
kevin4u2 Posted November 28, 2015 Share Posted November 28, 2015 Gutsy move by this fund manager..... "I refuse to let other people do our thinking for us. Also, the decline curve never sleeps." Investor Letter on Oil The popular consensus is that the oil market is grossly oversupplied, due to Saudi Arabia’s determination to retain market share at the expense of U.S. “tight oil” producers – a relatively new breed of oil companies drilling in shale, sandstone, and carbonate rock. In this consensus view, the market will remain oversupplied until significant amounts of current production are reduced – a potentially long, painful process. My view is different. I believe there are fundamental industry trends being ignored that, unless oil prices rise fairly soon, mean the oil market is at risk of sleepwalking into a supply shortage in 2016. In the meantime, the price of oil is unsustainably low and should self-correct fairly soon. This collapse in oil prices has created egregious mispricings in securities across the capital structures of numerous energy companies. The common stock prices of U.S. exploration and production companies in particular appear the most untethered from conservative appraisals of true value. A number of these firms represent exploitable, once-in-a-decade opportunities for patient investors to compound capital at high rates of return with significantly less risk than extreme levels of volatility might otherwise imply. I believe a significant and sustained rise in oil prices is inevitable much sooner than consensus. Massive cutbacks to drilling programs plus natural decline rates across the world’s oilfields may render the industry temporarily unable to increase production enough to control the pace of an increase in oil prices as demand begins to exceed supply. Oh, and also: Is it just me, or does the Middle East right now look like a Tom Clancy novel that ends in massive sectarian war? Because, um, nobody has told the oil market. The shares of the companies we now own in Tarpon have been extremely volatile. But that same volatility appears to have driven out the vast majority of institutional investors, who because of clients far less patient than you all, are doing their best to avoid the sector entirely. This has temporarily left us with a large, exploitable advantage over some of the biggest investors in the world. I believe the odds we have on our side right now are the most favorable we have seen in any area of the stock market since late 2008. As a result, Tarpon is now entirely focused on this opportunity. I have deliberately chosen to concentrate our efforts and capital here. We are, effectively, all-in on U.S. energy companies, and this is somewhat of an unexpected and dramatic shift in our holdings. I’m hoping the rest of this letter will help explain why. Well, good luck on his call but doing this with 100% of a portfolio is probably insane even if he turns out to be right. It's one thing if it's your own money, but managing on behalf of others is a different story. At least he's upfront about it so people who are uncomfortable can get out if they want. Huge gutsy move by this guy. Here are some facts that don't support his view of the world, particularly the supply situation. The world neither knows nor cares what we think or what we think "should" happen. 1) Iraq, the fastest-growing producer within the 12-nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November, ship-tracking and charters compiled by Bloomberg show. Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq since June 2012, according to Energy Information Administration figures. (see Iraq crude import graph below) http://www.bloomberg.com/news/articles/2015-11-11/opec-challenges-shale-afresh-as-iraq-crude-floods-gulf-of-mexico 2) This will hit the market at a time when US storage is bulging and US production is no longer declining. Going long here, when a flood of supply is hitting the market is a gutsy move. (see graph below) 3) Supply is now cheap and plentiful. North Dakota has 1000 wells drilled but not frac'd ready to be turned on. New record. This will keep a hard ceiling on oil prices going forward. https://bakken.com/news/id/248095/north-dakota-oil-well-backlog-eclipses-1000-for-first-time/ Link to comment Share on other sites More sharing options...
bmichaud Posted November 28, 2015 Author Share Posted November 28, 2015 Who cares about facts? Are those 'facts' priced into crude at this level? (IDK.) Link to comment Share on other sites More sharing options...
goldfinger Posted November 28, 2015 Share Posted November 28, 2015 Gutsy move by this fund manager..... "I refuse to let other people do our thinking for us. Also, the decline curve never sleeps." Investor Letter on Oil The popular consensus is that the oil market is grossly oversupplied, due to Saudi Arabia’s determination to retain market share at the expense of U.S. “tight oil” producers – a relatively new breed of oil companies drilling in shale, sandstone, and carbonate rock. In this consensus view, the market will remain oversupplied until significant amounts of current production are reduced – a potentially long, painful process. My view is different. I believe there are fundamental industry trends being ignored that, unless oil prices rise fairly soon, mean the oil market is at risk of sleepwalking into a supply shortage in 2016. In the meantime, the price of oil is unsustainably low and should self-correct fairly soon. This collapse in oil prices has created egregious mispricings in securities across the capital structures of numerous energy companies. The common stock prices of U.S. exploration and production companies in particular appear the most untethered from conservative appraisals of true value. A number of these firms represent exploitable, once-in-a-decade opportunities for patient investors to compound capital at high rates of return with significantly less risk than extreme levels of volatility might otherwise imply. I believe a significant and sustained rise in oil prices is inevitable much sooner than consensus. Massive cutbacks to drilling programs plus natural decline rates across the world’s oilfields may render the industry temporarily unable to increase production enough to control the pace of an increase in oil prices as demand begins to exceed supply. Oh, and also: Is it just me, or does the Middle East right now look like a Tom Clancy novel that ends in massive sectarian war? Because, um, nobody has told the oil market. The shares of the companies we now own in Tarpon have been extremely volatile. But that same volatility appears to have driven out the vast majority of institutional investors, who because of clients far less patient than you all, are doing their best to avoid the sector entirely. This has temporarily left us with a large, exploitable advantage over some of the biggest investors in the world. I believe the odds we have on our side right now are the most favorable we have seen in any area of the stock market since late 2008. As a result, Tarpon is now entirely focused on this opportunity. I have deliberately chosen to concentrate our efforts and capital here. We are, effectively, all-in on U.S. energy companies, and this is somewhat of an unexpected and dramatic shift in our holdings. I’m hoping the rest of this letter will help explain why. Well, good luck on his call but doing this with 100% of a portfolio is probably insane even if he turns out to be right. It's one thing if it's your own money, but managing on behalf of others is a different story. At least he's upfront about it so people who are uncomfortable can get out if they want. Huge gutsy move by this guy. Here are some facts that don't support his view of the world, particularly the supply situation. The world neither knows nor cares what we think or what we think "should" happen. 1) Iraq, the fastest-growing producer within the 12-nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November, ship-tracking and charters compiled by Bloomberg show. Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq since June 2012, according to Energy Information Administration figures. (see Iraq crude import graph below) http://www.bloomberg.com/news/articles/2015-11-11/opec-challenges-shale-afresh-as-iraq-crude-floods-gulf-of-mexico 2) This will hit the market at a time when US storage is bulging and US production is no longer declining. Going long here, when a flood of supply is hitting the market is a gutsy move. (see graph below) 3) Supply is now cheap and plentiful. North Dakota has 1000 wells drilled but not frac'd ready to be turned on. New record. This will keep a hard ceiling on oil prices going forward. https://bakken.com/news/id/248095/north-dakota-oil-well-backlog-eclipses-1000-for-first-time/ It is from 2016 forward that things are going to get interesting though: - Libya is actually the next potential supply increase surprise. - Iraq is going to find it hard to increase production substantially at such low prices and with the (geo)political situation there. Iraq's gov cannot pay its people anymore... - consumption has been surprising on the upside almost everywhere in the world (China included) and this trend seems to be continuing as low oil prices persist. - data from most specialized organized (IEA, IEA, OPEC etc...) is showing supply balance by 2H2016. - the Saudi language has changed in the last few weeks as they seem to fear price spikes in 2/3 years as the world is losing its ability to respond to demand increase with the current cancellations. - shale productivity stalled 6 to 9 months ago. The cost of new barrel is around 60$ in the average there - probably putting a ceiling in that viscinity unless demand grows too fast... I am responding with phone and this is making it harder to add the supportive data... Link to comment Share on other sites More sharing options...
goldfinger Posted November 28, 2015 Share Posted November 28, 2015 When one looks at companies like penn west and factors in non core production sales, core production optimizations and exchange rate, one will find out that it will be very profitable at 50/55$ per barrel. Probably as much as if oil was at 70+$/barrel in the recent past. So prices capped by shale will be fine. Link to comment Share on other sites More sharing options...
goldfinger Posted November 28, 2015 Share Posted November 28, 2015 Gutsy move by this fund manager..... "I refuse to let other people do our thinking for us. Also, the decline curve never sleeps." Investor Letter on Oil The popular consensus is that the oil market is grossly oversupplied, due to Saudi Arabia’s determination to retain market share at the expense of U.S. “tight oil” producers – a relatively new breed of oil companies drilling in shale, sandstone, and carbonate rock. In this consensus view, the market will remain oversupplied until significant amounts of current production are reduced – a potentially long, painful process. My view is different. I believe there are fundamental industry trends being ignored that, unless oil prices rise fairly soon, mean the oil market is at risk of sleepwalking into a supply shortage in 2016. In the meantime, the price of oil is unsustainably low and should self-correct fairly soon. This collapse in oil prices has created egregious mispricings in securities across the capital structures of numerous energy companies. The common stock prices of U.S. exploration and production companies in particular appear the most untethered from conservative appraisals of true value. A number of these firms represent exploitable, once-in-a-decade opportunities for patient investors to compound capital at high rates of return with significantly less risk than extreme levels of volatility might otherwise imply. I believe a significant and sustained rise in oil prices is inevitable much sooner than consensus. Massive cutbacks to drilling programs plus natural decline rates across the world’s oilfields may render the industry temporarily unable to increase production enough to control the pace of an increase in oil prices as demand begins to exceed supply. Oh, and also: Is it just me, or does the Middle East right now look like a Tom Clancy novel that ends in massive sectarian war? Because, um, nobody has told the oil market. The shares of the companies we now own in Tarpon have been extremely volatile. But that same volatility appears to have driven out the vast majority of institutional investors, who because of clients far less patient than you all, are doing their best to avoid the sector entirely. This has temporarily left us with a large, exploitable advantage over some of the biggest investors in the world. I believe the odds we have on our side right now are the most favorable we have seen in any area of the stock market since late 2008. As a result, Tarpon is now entirely focused on this opportunity. I have deliberately chosen to concentrate our efforts and capital here. We are, effectively, all-in on U.S. energy companies, and this is somewhat of an unexpected and dramatic shift in our holdings. I’m hoping the rest of this letter will help explain why. Well, good luck on his call but doing this with 100% of a portfolio is probably insane even if he turns out to be right. It's one thing if it's your own money, but managing on behalf of others is a different story. At least he's upfront about it so people who are uncomfortable can get out if they want. Huge gutsy move by this guy. Here are some facts that don't support his view of the world, particularly the supply situation. The world neither knows nor cares what we think or what we think "should" happen. 1) Iraq, the fastest-growing producer within the 12-nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November, ship-tracking and charters compiled by Bloomberg show. Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq since June 2012, according to Energy Information Administration figures. (see Iraq crude import graph below) http://www.bloomberg.com/news/articles/2015-11-11/opec-challenges-shale-afresh-as-iraq-crude-floods-gulf-of-mexico 2) This will hit the market at a time when US storage is bulging and US production is no longer declining. Going long here, when a flood of supply is hitting the market is a gutsy move. (see graph below) 3) Supply is now cheap and plentiful. North Dakota has 1000 wells drilled but not frac'd ready to be turned on. New record. This will keep a hard ceiling on oil prices going forward. https://bakken.com/news/id/248095/north-dakota-oil-well-backlog-eclipses-1000-for-first-time/ It is from 2016 forward that things are going to get interesting though: - Libya is actually the next potential supply increase surprise. - Iraq is going to find it hard to increase production substantially at such low prices and with the (geo)political situation there. Iraq's gov cannot pay its people anymore... - consumption has been surprising on the upside almost everywhere in the world (China included) and this trend seems to be continuing as low oil prices persist. - data from most specialized organized (IEA, IEA, OPEC etc...) is showing supply balance by 2H2016. - the Saudi language has changed in the last few weeks as they seem to fear price spikes in 2/3 years as the world is losing its ability to respond to demand increase with the current cancellations. - shale productivity stalled 6 to 9 months ago. The cost of new barrel is around 60$ in the average there - probably putting a ceiling in that viscinity unless demand grows too fast... I am responding with phone and this is making it harder to add the supportive data... Recent world inventory numbers by several orgs are: OPEC IEA STEO May 2905 2905 2839 June 2905 2905 2866 July 2923 2914 2880 August 2943 2975 2920 September 2942 2989 2935 If one takes out the propane build (~= 40M barrels), the build in between May and September seems to be around 15M barrels. It doesn't support the 1M to 1.5M barrels per day of advertised oversupply (which was >2.3M barrels in the middle of 2015...). So that the supply/demand equation is already tightening beyond current expectations/projections... The world might actually be undersupplied as early as 1H 2016 if we follow these data (reckless to bank on that but this shows there is a lot of sentiment in the pricing of oil right now too...). The most balanced view though is 2H 2016. Other than that Iraq has now become a supply risk as their outburst of production is already factored in the recent data/pricing. Beyond their inability to pay people and cope with maintenance costs why is it that everyone ignores the rapidly changing (for the worst) geopolitical situation? Link to comment Share on other sites More sharing options...
goldfinger Posted November 28, 2015 Share Posted November 28, 2015 Gutsy move by this fund manager..... "I refuse to let other people do our thinking for us. Also, the decline curve never sleeps." Investor Letter on Oil The popular consensus is that the oil market is grossly oversupplied, due to Saudi Arabia’s determination to retain market share at the expense of U.S. “tight oil” producers – a relatively new breed of oil companies drilling in shale, sandstone, and carbonate rock. In this consensus view, the market will remain oversupplied until significant amounts of current production are reduced – a potentially long, painful process. My view is different. I believe there are fundamental industry trends being ignored that, unless oil prices rise fairly soon, mean the oil market is at risk of sleepwalking into a supply shortage in 2016. In the meantime, the price of oil is unsustainably low and should self-correct fairly soon. This collapse in oil prices has created egregious mispricings in securities across the capital structures of numerous energy companies. The common stock prices of U.S. exploration and production companies in particular appear the most untethered from conservative appraisals of true value. A number of these firms represent exploitable, once-in-a-decade opportunities for patient investors to compound capital at high rates of return with significantly less risk than extreme levels of volatility might otherwise imply. I believe a significant and sustained rise in oil prices is inevitable much sooner than consensus. Massive cutbacks to drilling programs plus natural decline rates across the world’s oilfields may render the industry temporarily unable to increase production enough to control the pace of an increase in oil prices as demand begins to exceed supply. Oh, and also: Is it just me, or does the Middle East right now look like a Tom Clancy novel that ends in massive sectarian war? Because, um, nobody has told the oil market. The shares of the companies we now own in Tarpon have been extremely volatile. But that same volatility appears to have driven out the vast majority of institutional investors, who because of clients far less patient than you all, are doing their best to avoid the sector entirely. This has temporarily left us with a large, exploitable advantage over some of the biggest investors in the world. I believe the odds we have on our side right now are the most favorable we have seen in any area of the stock market since late 2008. As a result, Tarpon is now entirely focused on this opportunity. I have deliberately chosen to concentrate our efforts and capital here. We are, effectively, all-in on U.S. energy companies, and this is somewhat of an unexpected and dramatic shift in our holdings. I’m hoping the rest of this letter will help explain why. Well, good luck on his call but doing this with 100% of a portfolio is probably insane even if he turns out to be right. It's one thing if it's your own money, but managing on behalf of others is a different story. At least he's upfront about it so people who are uncomfortable can get out if they want. Huge gutsy move by this guy. Here are some facts that don't support his view of the world, particularly the supply situation. The world neither knows nor cares what we think or what we think "should" happen. 1) Iraq, the fastest-growing producer within the 12-nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November, ship-tracking and charters compiled by Bloomberg show. Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq since June 2012, according to Energy Information Administration figures. (see Iraq crude import graph below) http://www.bloomberg.com/news/articles/2015-11-11/opec-challenges-shale-afresh-as-iraq-crude-floods-gulf-of-mexico 2) This will hit the market at a time when US storage is bulging and US production is no longer declining. Going long here, when a flood of supply is hitting the market is a gutsy move. (see graph below) 3) Supply is now cheap and plentiful. North Dakota has 1000 wells drilled but not frac'd ready to be turned on. New record. This will keep a hard ceiling on oil prices going forward. https://bakken.com/news/id/248095/north-dakota-oil-well-backlog-eclipses-1000-for-first-time/ It is from 2016 forward that things are going to get interesting though: - Libya is actually the next potential supply increase surprise. - Iraq is going to find it hard to increase production substantially at such low prices and with the (geo)political situation there. Iraq's gov cannot pay its people anymore... - consumption has been surprising on the upside almost everywhere in the world (China included) and this trend seems to be continuing as low oil prices persist. - data from most specialized organized (IEA, IEA, OPEC etc...) is showing supply balance by 2H2016. - the Saudi language has changed in the last few weeks as they seem to fear price spikes in 2/3 years as the world is losing its ability to respond to demand increase with the current cancellations. - shale productivity stalled 6 to 9 months ago. The cost of new barrel is around 60$ in the average there - probably putting a ceiling in that viscinity unless demand grows too fast... I am responding with phone and this is making it harder to add the supportive data... Recent world inventory numbers by several orgs are: OPEC IEA STEO May 2905 2905 2839 June 2905 2905 2866 July 2923 2914 2880 August 2943 2975 2920 September 2942 2989 2935 If one takes out the propane build (~= 40M barrels), the build in between May and September seems to be around 15M barrels. It doesn't support the 1M to 1.5M barrels per day of advertised oversupply (which was >2.3M barrels in the middle of 2015...). So that the supply/demand equation is already tightening beyond current expectations/projections... The world might actually be undersupplied as early as 1H 2016 if we follow these data (reckless to bank on that but this shows there is a lot of sentiment in the pricing of oil right now too...). The most balanced view though is 2H 2016. Other than that Iraq has now become a supply risk as their outburst of production is already factored in the recent data/pricing. Beyond their inability to pay people and cope with maintenance costs why is it that everyone ignores the rapidly changing (for the worst) geopolitical situation? Also the fact that Saudis and Russians are getting together to work on oil/gas cooperation as here: http://www.reuters.com/article/2015/11/26/russia-saudi-oil-idUSL8N13L3GO20151126 is a strong signal that they are getting ready to act to ensure more stability in the price of oil - 55/60$ being the pricing where NA cannot ramp up massively yet... Are we about to see some key decisions made in the next OPEC meeting or in June next year? Link to comment Share on other sites More sharing options...
goldfinger Posted November 28, 2015 Share Posted November 28, 2015 Gutsy move by this fund manager..... "I refuse to let other people do our thinking for us. Also, the decline curve never sleeps." Investor Letter on Oil The popular consensus is that the oil market is grossly oversupplied, due to Saudi Arabia’s determination to retain market share at the expense of U.S. “tight oil” producers – a relatively new breed of oil companies drilling in shale, sandstone, and carbonate rock. In this consensus view, the market will remain oversupplied until significant amounts of current production are reduced – a potentially long, painful process. My view is different. I believe there are fundamental industry trends being ignored that, unless oil prices rise fairly soon, mean the oil market is at risk of sleepwalking into a supply shortage in 2016. In the meantime, the price of oil is unsustainably low and should self-correct fairly soon. This collapse in oil prices has created egregious mispricings in securities across the capital structures of numerous energy companies. The common stock prices of U.S. exploration and production companies in particular appear the most untethered from conservative appraisals of true value. A number of these firms represent exploitable, once-in-a-decade opportunities for patient investors to compound capital at high rates of return with significantly less risk than extreme levels of volatility might otherwise imply. I believe a significant and sustained rise in oil prices is inevitable much sooner than consensus. Massive cutbacks to drilling programs plus natural decline rates across the world’s oilfields may render the industry temporarily unable to increase production enough to control the pace of an increase in oil prices as demand begins to exceed supply. Oh, and also: Is it just me, or does the Middle East right now look like a Tom Clancy novel that ends in massive sectarian war? Because, um, nobody has told the oil market. The shares of the companies we now own in Tarpon have been extremely volatile. But that same volatility appears to have driven out the vast majority of institutional investors, who because of clients far less patient than you all, are doing their best to avoid the sector entirely. This has temporarily left us with a large, exploitable advantage over some of the biggest investors in the world. I believe the odds we have on our side right now are the most favorable we have seen in any area of the stock market since late 2008. As a result, Tarpon is now entirely focused on this opportunity. I have deliberately chosen to concentrate our efforts and capital here. We are, effectively, all-in on U.S. energy companies, and this is somewhat of an unexpected and dramatic shift in our holdings. I’m hoping the rest of this letter will help explain why. Well, good luck on his call but doing this with 100% of a portfolio is probably insane even if he turns out to be right. It's one thing if it's your own money, but managing on behalf of others is a different story. At least he's upfront about it so people who are uncomfortable can get out if they want. Huge gutsy move by this guy. Here are some facts that don't support his view of the world, particularly the supply situation. The world neither knows nor cares what we think or what we think "should" happen. 1) Iraq, the fastest-growing producer within the 12-nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November, ship-tracking and charters compiled by Bloomberg show. Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq since June 2012, according to Energy Information Administration figures. (see Iraq crude import graph below) http://www.bloomberg.com/news/articles/2015-11-11/opec-challenges-shale-afresh-as-iraq-crude-floods-gulf-of-mexico 2) This will hit the market at a time when US storage is bulging and US production is no longer declining. Going long here, when a flood of supply is hitting the market is a gutsy move. (see graph below) 3) Supply is now cheap and plentiful. North Dakota has 1000 wells drilled but not frac'd ready to be turned on. New record. This will keep a hard ceiling on oil prices going forward. https://bakken.com/news/id/248095/north-dakota-oil-well-backlog-eclipses-1000-for-first-time/ By the way last numbers show that american production is still (slowly) declining: http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_3.pdf - look at Aug to Sept. With number of shale DUCs going to 0 and shale productivity numbers showing a plateauing since pre-middle 2015 in NA and average production prices of new barrels at 60+ in the average, I do not see how what you describe is a sustainable trend at all. What has slowed down the decline in NA production is GOM projects (long life) which have been coming online all year long. This is not going to be repeated in 2016 as new projects have all been cancelled due to low prices. We have not yet repealed the "the cure for low prices is low prices" law... Link to comment Share on other sites More sharing options...
rohitc99 Posted November 28, 2015 Share Posted November 28, 2015 maybe the difference if someone who is still a bear on the prices or does not know which will it will go (like me) will miss out on an opportunity (among several other possible opportunities). this fund manager has bet his reputation and possibly a lot of his own money on being right ..so he better be right for his sake :) Link to comment Share on other sites More sharing options...
Guest wellmont Posted November 29, 2015 Share Posted November 29, 2015 i am no expert on all this "influence" stuff but it seems to me he is kind of doubling down and making a career bet here on something very much out of his control in the short term. markets can and will do extraordinarily strange things. There seems a real possibility of confirmation bias in this huge report. I know of no other "generalist" that has decided to put all the assets in the fund into oil. he may own a number of different stocks but they would seem to be all correlated. a true all or nothing bet. I wonder how many of the clients thought their money would end up being managed like this? at it's base, he really is trying to predict the fairly st future, and is making a massive macro bet. i have decent sized bet on this general theme and the vol has been off the charts. but it's nothing like this bet. Link to comment Share on other sites More sharing options...
JayGatsby Posted December 1, 2015 Share Posted December 1, 2015 Are there any interesting secured bonds that aren't 144A (ie, available to non-institutions)? My challenge with the equity of many of these companies is the leverage. The only one I've come across is Forbes Energy Service, which has a weird Bermuda corporate structure. Link to comment Share on other sites More sharing options...
sswan11 Posted December 4, 2015 Share Posted December 4, 2015 Icahn and Pickens reminisce and talk about "eventual" oil price recovery: Link to comment Share on other sites More sharing options...
kevin4u2 Posted December 4, 2015 Share Posted December 4, 2015 By the way last numbers show that american production is still (slowly) declining: http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_3.pdf - look at Aug to Sept. With number of shale DUCs going to 0 and shale productivity numbers showing a plateauing since pre-middle 2015 in NA and average production prices of new barrels at 60+ in the average, I do not see how what you describe is a sustainable trend at all. What has slowed down the decline in NA production is GOM projects (long life) which have been coming online all year long. This is not going to be repeated in 2016 as new projects have all been cancelled due to low prices. We have not yet repealed the "the cure for low prices is low prices" law... Why do people assume that the oil market is going to behave any different since the gas shale revolution. Perhaps this is a paradigm shift and people are just not accepting the new reality. I know some consider me a perma bear on oil. That is not the case. I have been looking but there is are so few opportunities right now. Why do the bulls think an "eventual recovery" in prices is right on the horizon? The NG market has been in a tailspin since the shale gas revolution took over and today are at record lows. Why is oil going to be any different than the NG market? As I have written elsewhere, I was in total denial when the NG market tanked, not to recover for almost a decade. Until I see something compelling that oil is "different", I will be very, very skeptical. Link to comment Share on other sites More sharing options...
Uccmal Posted December 4, 2015 Share Posted December 4, 2015 By the way last numbers show that american production is still (slowly) declining: http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_3.pdf - look at Aug to Sept. With number of shale DUCs going to 0 and shale productivity numbers showing a plateauing since pre-middle 2015 in NA and average production prices of new barrels at 60+ in the average, I do not see how what you describe is a sustainable trend at all. What has slowed down the decline in NA production is GOM projects (long life) which have been coming online all year long. This is not going to be repeated in 2016 as new projects have all been cancelled due to low prices. We have not yet repealed the "the cure for low prices is low prices" law... Why do people assume that the oil market is going to behave any different since the gas shale revolution. Perhaps this is a paradigm shift and people are just not accepting the new reality. I know some consider me a perma bear on oil. That is not the case. I have been looking but there is are so few opportunities right now. Why do the bulls think an "eventual recovery" in prices is right on the horizon? The NG market has been in a tailspin since the shale gas revolution took over and today are at record lows. Why is oil going to be any different than the NG market? As I have written elsewhere, I was in total denial when the NG market tanked, not to recover for almost a decade. Until I see something compelling that oil is "different", I will be very, very skeptical. Your logic is sound. I would not say I am a bull or a bear on oil. There are differences between oil and natural gas markets. Nat. gas is a stranded market in NA at the moment. The story is very different in Europe with gas being 3 times the cost here (6.24 usd per Million BTU, Nov. 30). Anyway, Oil is subject to geopolitics. I think that is probably the trigger point. Today OPEC agreed to pump 31.5 Million Barrels per day. I suspect they have been pumping at that level all along, but we will never know. To me there are several trigger points that might raise the price of oil: Only some more obvious ones: - Isis: So far they have preserved pipe to keep money flowing in. What if they get desperate and move to a scorched Earth policy and blow the pipe? They have shown themselves to be resourceful and agnostic where enemies are concerned - what if they blow a major Saudi refinery? - Saudi Arabia itself: This country was built by the ruling clan. They have to placate millions of people who have become used to a certain standard of living. A civil war seems a real prospect - this is the clan are so determined to contain the situation in Yemen. - Other Opec producers unravelling. No idea. - North America and offshore production for the most part is uneconomical, but surprisingly resilient so far. Does it drop enough in the near future to cause a price increase, or stability at a higher price or is $40 the new norm. No idea. - China/India/asia demand is not dropping. I keep coming back to the idea that the situation is inherently Unpredictable. No one anywhere, no matter what they claim today, saw the price drop coming last year. Is it not just as likely that we could see the opposite happening? Personally, I would like to see the price stabilize at some level that is not too high, or too low, in order to sustain global stability, but the world doesn't care about my desires or needs. Link to comment Share on other sites More sharing options...
goldfinger Posted December 4, 2015 Share Posted December 4, 2015 By the way last numbers show that american production is still (slowly) declining: http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_3.pdf - look at Aug to Sept. With number of shale DUCs going to 0 and shale productivity numbers showing a plateauing since pre-middle 2015 in NA and average production prices of new barrels at 60+ in the average, I do not see how what you describe is a sustainable trend at all. What has slowed down the decline in NA production is GOM projects (long life) which have been coming online all year long. This is not going to be repeated in 2016 as new projects have all been cancelled due to low prices. We have not yet repealed the "the cure for low prices is low prices" law... Why do people assume that the oil market is going to behave any different since the gas shale revolution. Perhaps this is a paradigm shift and people are just not accepting the new reality. I know some consider me a perma bear on oil. That is not the case. I have been looking but there is are so few opportunities right now. Why do the bulls think an "eventual recovery" in prices is right on the horizon? The NG market has been in a tailspin since the shale gas revolution took over and today are at record lows. Why is oil going to be any different than the NG market? As I have written elsewhere, I was in total denial when the NG market tanked, not to recover for almost a decade. Until I see something compelling that oil is "different", I will be very, very skeptical. I am not a bull by definition, just think that 40$ is too low as demand has been growing much more quickly ww with these prices and marginal cost of new barrels is way above 40 (shale included). Why should we compare a global market like that with bat gas though? Link to comment Share on other sites More sharing options...
Valuebo Posted December 4, 2015 Share Posted December 4, 2015 Isn't the question more "Is there any region that would actually benefit from lowering it's own production?" versus "What is a correct price level for oil?" ? Short and medium term, 101 economics don't seem to matter much. All parties need oil income and don't want to cave in because if you do, you are just going to be replaced by someone else. For some isn't the question also "Why not increase production even further"? No need to delay the inevitable? Idk, I'm quite clueless on these things but then again so is almost everyone else. :) Link to comment Share on other sites More sharing options...
goldfinger Posted December 4, 2015 Share Posted December 4, 2015 Isn't the question more "Is there any region that would actually benefit from lowering it's own production?" versus "What is a correct price level for oil?" ? Short and medium term, 101 economics don't seem to matter much. All parties need oil income and don't want to cave in because if you do, you are just going to be replaced by someone else. For some isn't the question also "Why not increase production even further"? No need to delay the inevitable? Idk, I'm quite clueless on these things but then again so is almost everyone else. :) Everyone is pumping the max they can. Years of 100$ oil financed this. Projects still came online in 2015. Now at 40$ it is getting harder just to maintain production in 50+% of prod and what they called a glut has already narrowed down from 2.5mboe/day to 1-mboe/day in the last year. Stocks is the thing that allows for all these shorts to feel confident for now. Shale I think puts a soft cap on prices close to 60+$/boe. Link to comment Share on other sites More sharing options...
goldfinger Posted December 4, 2015 Share Posted December 4, 2015 http://www.businessinsider.com/baker-hughes-rig-counts-december-4-2015-12 Rig counts is relentlessly falling. What's interesting this week is that it is GOM rigs that are now falling more than other areas. 41 last year, 22 now. GOM is the area that slowed down the decline in NA but not next year... Meanwhile shale/deep see will continue to deflate until higher prices come back. Link to comment Share on other sites More sharing options...
doughishere Posted December 4, 2015 Share Posted December 4, 2015 http://www.businessinsider.com/baker-hughes-rig-counts-december-4-2015-12 Rig counts is relentlessly falling. What's interesting this week is that it is GOM rigs that are now falling more than other areas. 41 last year, 22 now. GOM is the area that slowed down the decline in NA but not next year... Meanwhile shale/deep see will continue to deflate until higher prices come back. Yeah meanwhile OPEC keeps pumping it out of the ground. I cant remember the last time i filled up a whole tank on less than 20$. I paid with cash for the first time in forever because I literally got change back. Link to comment Share on other sites More sharing options...
goldfinger Posted December 4, 2015 Share Posted December 4, 2015 http://www.businessinsider.com/baker-hughes-rig-counts-december-4-2015-12 Rig counts is relentlessly falling. What's interesting this week is that it is GOM rigs that are now falling more than other areas. 41 last year, 22 now. GOM is the area that slowed down the decline in NA but not next year... Meanwhile shale/deep see will continue to deflate until higher prices come back. Yeah meanwhile OPEC keeps pumping it out of the ground. I cant remember the last time i filled up a whole tank on less than 20$. I paid with cash for the first time in forever because I literally got change back. Contrary to what everyone is saying, today's OPEC meeting talked about focus on inventories and managing potential new prod (Iran) which can be a sign of change in direction during the next quarters. Will see... I wonder how many producers (Iraq, Venezuela) come to mind will be able to maintain prod at current prices? Link to comment Share on other sites More sharing options...
doughishere Posted December 4, 2015 Share Posted December 4, 2015 http://www.businessinsider.com/baker-hughes-rig-counts-december-4-2015-12 Rig counts is relentlessly falling. What's interesting this week is that it is GOM rigs that are now falling more than other areas. 41 last year, 22 now. GOM is the area that slowed down the decline in NA but not next year... Meanwhile shale/deep see will continue to deflate until higher prices come back. Yeah meanwhile OPEC keeps pumping it out of the ground. I cant remember the last time i filled up a whole tank on less than 20$. I paid with cash for the first time in forever because I literally got change back. Contrary to what everyone is saying, today's OPEC meeting talked about focus on inventories and managing potential new prod (Iran) which can be a sign of change in direction during the next quarters. Will see... I wonder how many producers (Iraq, Venezuela) come to mind will be able to maintain prod at current prices? The elasticity of supply are definitely out of wack a bit. I think everyone kinda just under estimated how much they have shifted from '07-'08 with 1)new technologies getting it out of the ground(fracking) and 2) new technologies in using it more efficiently(more efficient cars). Add that to the fact that it takes time to bring rigs and what not online as well as take them off line....anything know anything abou how the supertanker supply is going? Agreed Goldfinger, Iraq, Iran or Venezuela have the guys who know this....they must they cant be that stupid...but then again like any cartel...its hard to keep the other guy from cheating......(different faces, different names, different....its just the same -50cent) They'll figure it out....Its not rocket science..meanwhile enjoy $1.75/gal gas.....If i was Obama(or whoever the voters choose) now would be the time to raise the gas tax... Link to comment Share on other sites More sharing options...
doughishere Posted December 4, 2015 Share Posted December 4, 2015 Howard Marks said in an interview i saw that the oil sector is the "out of favor" sector (not exactly news according to the poll on this board) but until you can figure out those elasticizes the best move is to wait... Remember: It takes time to bring oil online as while as take it off-line..... sit here till the winds shift and there isnt enough oil online to keep up with demand.....as for going short I think you've probably missed that boat......just my thoughts. Link to comment Share on other sites More sharing options...
goldfinger Posted December 4, 2015 Share Posted December 4, 2015 Howard Marks said in an interview i saw that the oil sector is the "out of favor" sector (not exactly news according to the poll on this board) but until you can figure out those elasticizes the best move is to wait... Remember: It takes time to bring oil online as while as take it off-line..... sit here till the winds shift and there isnt enough oil online to keep up with demand.....as for going short I think you've probably missed that boat......just my thoughts. Except that the geopolitical factor is discounted at 0$ in the oil price today... Last time I checked things are heating in the ME and in many producing countries... Link to comment Share on other sites More sharing options...
doughishere Posted December 4, 2015 Share Posted December 4, 2015 At the risk of making a fool of myself(and i really got to stop this) i wouldn't add too much weight to ISIS....at least yet.... You have 4k Russians involved and no one really else from the major powers. France maybe a battle group flying only sorties(35 aircraft so far). And the Us is really only fying Sorties....so you have no "boots on the ground(maybe "advisers" only)." The Germans dont want a fight in Syria...thus the recent vote for a "non combat" role. All of this opposed to the 70,000+ that went into Iraq in 03. Plus, yeah maybe you could say well its just beginning...i cant really speak to the future. You have a ground breaking deal with Iran that was only just this summer. So in reality maybe "more peaceful ME" are priced in at the moment. I mean yea the worlds a dangerous place but I dont think its as dangerous right now as the news makes it out to be......in other words look at the numbers and not at the headlines. So now your going to say something about the Ukraine...well ask the Irish about that they've have a major power run into their cities not even 40 years ago....so im fairly confident that that will remain locally. Ever since two monkeys crushed each others brains out as there been geopolitical risk. An I stress in no way am i trying to diminish whats happening. Its a shame that it happens. I just think that the world is a "relatively" safer place....at least that's what the price of oil is telling me. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now