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Posted

Well, if you invested in the stronger energy names, you have nothing to worry about.

 

In fact, tomorrow is likely to be a great buying opportunity for stronger energy names 2-3 years from now.

 

Energy services will get hit, but those companies that are able to survive the next 1-2 years will have flourishing business going forward.

Posted

Gg. It’s gonna be a bloodbath tmr. I’ve somewhat lucked out with only a 5% position in mostly integrated, but it still sucks.

Posted

I'm fairly dumb when it comes to energy, but I would think low oil prices have little to no effect on businesses that primarily transport non-associated gas.  Moreover, low gas prices may help them by increasing demand for gas, and thus volume of it that needs to be transported.  On the other hand, I assume a natural gas transmission company could be hurt if it has invested in gathering associated gas.  And, of course, a slowdown in economic activity could affect volumes.

 

So, what natural gas midstream company is least exposed to a potential decline in associated gas? Is it Williams, despite some of its gathering assets?

Posted

You guys are gonna get fucked:

 

https://www.reuters.com/article/us-saudi-oil-prices/saudi-arabia-slashes-april-crude-oil-prices-after-opecs-supply-pact-collapsed-idUSKBN20U0Y4

 

Sorry for the bad news.  My prediction is there's going to be a decade long bear market for oil.  Shale will consolidate, many producers will get wiped off the planet with the majors taking over assets, and it will keep a permanent lid on prices. 

 

edit: holy shit, I'm now hearing predictions that WTI is likely to go sub $20/bbl in a few months.  LOL!  Time to go short, even now!

 

WTI crude traded down to $28 today.  Wow. 

Posted
I'm now hearing predictions that WTI is likely to go sub $20/bbl in a few months.  LOL!  Time to go short, even now!

 

Maximum pessimism?

Posted

The obvious solution is to make the US part of OPEC+, and settle on both a price and a supply quota agreement. Maybe USD 60/bbl. so that everyone who supplies makes some money, and those that don’t, go out of business.

 

It seems pretty clear that Russia is concerned about gas market share, and that OPEC is concerned about the volume of light liquids. Shut in some of the US shale, and both go down in a big way. More importantly, the remaining US shale consolidates under the majors, and ongoing production stays down as long as the USD 60/bbl. is maintained.

 

Until the end of the month, there is still 1.7M bbl/d of supply being held off the market. OPEC claim they need an additional cut of 1.5M bbl/d, however the market believes that the entire 3.2M bbl/d plus surplus is already in the market, hence the contango. Negotiate an agreement between now and the end of the month, and we’re going back up.

 

If you want to get re-elected in November … you are going to negotiate. 

 

SD

 

Posted

The obvious solution is to make the US part of OPEC+, and settle on both a price and a supply quota agreement. Maybe USD 60/bbl. so that everyone who supplies makes some money, and those that don’t, go out business.

 

It seems pretty clear that Russia is concerned about gas market share, and that OPEC is concerned about the volume of light liquids. Shut in some of the US shale, and both go down in a big way. More importantly, the remaining US shale consolidates under the majors, and ongoing production stays down as long as the USD 60/bbl. is maintained.

 

Until the end of the month, there is still 1.7M bbl/d of supply being held off the market. OPEC claim they need an additional cut of 1.5M bbl/d, however the market believes that the entire 3.2M bbl/d plus surplus is already in the market, hence the contango. Negotiate an agreement between now and the end of the month, and we’re going back up.

 

If you want to get re-elected in November … you are going to negotiate. 

 

SD

 

Good thing we have the Negotiator in Chief!  ;D

Posted

Between Trump, hacksaw MBS, and “dick” Putin, comrade Maduro they should be able hammer away a nice deal . Maybe invite the Ayatollah to the table and call it the “chosen five”.

Posted

If this isn't blood in the streets then I dont know what is. I dont really pay much attention to most of these names on a regular basis, but my god what carnage!

Posted

Between Trump, hacksaw MBS, and “dick” Putin, comrade Maduro they should be able hammer away a nice deal . Maybe invite the Ayatollah to the table and call it the “chosen five”.

 

Has the world ever been run by a bigger bunch of assholes?

Posted

If this isn't blood in the streets then I dont know what is. I dont really pay much attention to most of these names on a regular basis, but my god what carnage!

 

Unfortunately when there is a lot of blood in the streets almost everyone is dead. I frame it that way - politics determines the price here, so it makes sense if things don’t make sense.

Posted

If this isn't blood in the streets then I dont know what is. I dont really pay much attention to most of these names on a regular basis, but my god what carnage!

 

Unfortunately when there is a lot of blood in the streets almost everyone is dead. I frame it that way - politics determines the price here, so it makes sense if things don’t make sense.

 

I had a costly mistake in this sector(now almost a decade ago) that stays with me to this day. You can get 99/100 things right with these and still just get blasted. Way to many moving parts and things out of the control of management/company. The toll collectors sounded like a solid idea as well, but often the capital structures just made them too much of a pain. I fuckin hate energy. Drill, baby, drill, should be explained to the shareholder as kill, baby, kill. Cuz thats what happens with your capital. That, and the cyclical nature of many, almost guarantee repurchases or dividends are done peak cycle...not appealing.

Posted

If this isn't blood in the streets then I dont know what is. I dont really pay much attention to most of these names on a regular basis, but my god what carnage!

 

Unfortunately when there is a lot of blood in the streets almost everyone is dead. I frame it that way - politics determines the price here, so it makes sense if things don’t make sense.

 

I had a costly mistake in this sector(now almost a decade ago) that stays with me to this day. You can get 99/100 things right with these and still just get blasted. Way to many moving parts and things out of the control of management/company. The toll collectors sounded like a solid idea as well, but often the capital structures just made them too much of a pain. I fuckin hate energy. Drill, baby, drill, should be explained to the shareholder as kill, baby, kill. Cuz thats what happens with your capital. That, and the cyclical nature of many, almost guarantee repurchases or dividends are done peak cycle...not appealing.

 

I have been investing (if you wan to cal, it that ) in midstream since 2008. The issue is capital structure as you mentioned which makes the sector vulnerable to stress in credit markets (seen in 2008 and 2016j, but it is wrong or right correlated with energy prices. For the most part, it doesn’t really make sense, because the midstream are toll keepers, but to some extend they are tied to the mast , so to speak. If shale really goes to hell, a lot (but not all) midstream will go to hell with it, because E&P  bankruptcies will impact the midstream as well.

 

WMB has two sides of the coin - the Transco/Northwest piper , which is basically and utility and demand driven, but they also own G&P assets (which tie into Transco and Northwest pipes). If the producers will go bankrupt, one can see that the economic of the G&P asserts will be impacted to some extend. While it is correct, that the  G&P contract is third to the land, not the E&P entity it could still occur that the next owner drills much less and hence pays much less for G&P toll fees.

 

What we are seeing now is most likely an overreaction in midstream, but I think we are seeing  looking at an extremely unfavorable newsflow with some economic impact on the midstream said too. Maybe it is priced in,  but in my experience those things are nice priced in before they actually happen. For example, CHK looks quite distressed and they own many NG producing asset that feed into WMB pipes in the Northwest (WMB actually bought them from CHK a couple of years ago). What will happen when CHK inevitably raises the white flag and declares bankruptcy? There is no way they can survive with the current capital structure.

Posted

If this isn't blood in the streets then I dont know what is. I dont really pay much attention to most of these names on a regular basis, but my god what carnage!

 

Unfortunately when there is a lot of blood in the streets almost everyone is dead. I frame it that way - politics determines the price here, so it makes sense if things don’t make sense.

 

I had a costly mistake in this sector(now almost a decade ago) that stays with me to this day. You can get 99/100 things right with these and still just get blasted. Way to many moving parts and things out of the control of management/company. The toll collectors sounded like a solid idea as well, but often the capital structures just made them too much of a pain. I fuckin hate energy. Drill, baby, drill, should be explained to the shareholder as kill, baby, kill. Cuz thats what happens with your capital. That, and the cyclical nature of many, almost guarantee repurchases or dividends are done peak cycle...not appealing.

 

Exactly. Drill baby drill no matter what is what will kill the industry.  This board should sticky the Sandridge Energy thread as the poster child of how these non-sense multi year value analysis can end up, especially in the energy sector.  B&M retail and energy are two sectors value investors should just avoid from now on.

Posted

I'm less of an alarmist that Spek here. I don't think that shale is going anywhere anytime soon. A little rationalization sure, but nowhere close to extinction.

 

The way I see it the system is very complex and has a lot of inertia. A lot of money and time has been invested to use shale production. Think of the Houston petochemical complex. That used to be fed by shipbourne oil. Now a lot of it is fed by shale product and Canadian stuff. So they actually need the shale. I don't see that complex flipping back to shipbourne feed stock.

 

In the case of CHK/WMB that speck was talking about. CHK may very well go bankrupt. But CHK's customers are not gonna stop needing gas. Are they gonna use Quatar LNG? No they're still gonna use gas from the same old field, coming through the existing pipe that they have.

 

Then there's also the political aspect of all of this. There are a lot of jobs in shale. These are well paying jobs too and you don't need a university degree for it. Good high paying jobs for regular folk. The kind that politicians hate to loose. And they're in red states and blue states. This basically means that there is zero political will to let the sector die. Especially is said death comes from a dick measuring contest between Russia and Saudi Arabia.

 

Now whether the names of the companies that own the fields will be the same or different remains to be seen. But those fields will pump. Whether the ones doing the pumping will make money, that's another matter. But think of it another way. For most of its existence air travel has been an uneconomic endeavour (I'm not sure it still isn't). Yet we still had planes, and airports, and airlines, and we didn't stop flying.

Posted

The obvious solution is to make the US part of OPEC+, and settle on both a price and a supply quota agreement. Maybe USD 60/bbl. so that everyone who supplies makes some money, and those that don’t, go out of business.

 

It seems pretty clear that Russia is concerned about gas market share, and that OPEC is concerned about the volume of light liquids. Shut in some of the US shale, and both go down in a big way. More importantly, the remaining US shale consolidates under the majors, and ongoing production stays down as long as the USD 60/bbl. is maintained.

 

Until the end of the month, there is still 1.7M bbl/d of supply being held off the market. OPEC claim they need an additional cut of 1.5M bbl/d, however the market believes that the entire 3.2M bbl/d plus surplus is already in the market, hence the contango. Negotiate an agreement between now and the end of the month, and we’re going back up.

 

If you want to get re-elected in November … you are going to negotiate. 

 

SD

 

And today we have this .....

White House likely to pursue federal aid for shale companies hit by oil shock, coronavirus downturn

https://www.washingtonpost.com/business/2020/03/10/trump-oil-bailout/

 

Money talks. You do what your biggest donors tell you to do. Exxon, etc.

What are the odds the message is to 'negotiate' a stable price, and lend them the money, to consolidate the industry. There will be some employment loss, but everybody goes back to making money, and Trump can be the hero.

 

Campaign contributions are for a reason, and its collection time.

 

SD

 

Posted

I'm less of an alarmist that Spek here. I don't think that shale is going anywhere anytime soon. A little rationalization sure, but nowhere close to extinction.

 

The way I see it the system is very complex and has a lot of inertia. A lot of money and time has been invested to use shale production. Think of the Houston petochemical complex. That used to be fed by shipbourne oil. Now a lot of it is fed by shale product and Canadian stuff. So they actually need the shale. I don't see that complex flipping back to shipbourne feed stock.

 

In the case of CHK/WMB that speck was talking about. CHK may very well go bankrupt. But CHK's customers are not gonna stop needing gas. Are they gonna use Quatar LNG? No they're still gonna use gas from the same old field, coming through the existing pipe that they have.

 

Then there's also the political aspect of all of this. There are a lot of jobs in shale. These are well paying jobs too and you don't need a university degree for it. Good high paying jobs for regular folk. The kind that politicians hate to loose. And they're in red states and blue states. This basically means that there is zero political will to let the sector die. Especially is said death comes from a dick measuring contest between Russia and Saudi Arabia.

 

Now whether the names of the companies that own the fields will be the same or different remains to be seen. But those fields will pump. Whether the ones doing the pumping will make money, that's another matter. But think of it another way. For most of its existence air travel has been an uneconomic endeavour (I'm not sure it still isn't). Yet we still had planes, and airports, and airlines, and we didn't stop flying.

 

Lucid.

Posted

I'm less of an alarmist that Spek here. I don't think that shale is going anywhere anytime soon. A little rationalization sure, but nowhere close to extinction.

 

The way I see it the system is very complex and has a lot of inertia. A lot of money and time has been invested to use shale production. Think of the Houston petochemical complex. That used to be fed by shipbourne oil. Now a lot of it is fed by shale product and Canadian stuff. So they actually need the shale. I don't see that complex flipping back to shipbourne feed stock.

 

In the case of CHK/WMB that speck was talking about. CHK may very well go bankrupt. But CHK's customers are not gonna stop needing gas. Are they gonna use Quatar LNG? No they're still gonna use gas from the same old field, coming through the existing pipe that they have.

 

Then there's also the political aspect of all of this. There are a lot of jobs in shale. These are well paying jobs too and you don't need a university degree for it. Good high paying jobs for regular folk. The kind that politicians hate to loose. And they're in red states and blue states. This basically means that there is zero political will to let the sector die. Especially is said death comes from a dick measuring contest between Russia and Saudi Arabia.

 

Now whether the names of the companies that own the fields will be the same or different remains to be seen. But those fields will pump. Whether the ones doing the pumping will make money, that's another matter. But think of it another way. For most of its existence air travel has been an uneconomic endeavour (I'm not sure it still isn't). Yet we still had planes, and airports, and airlines, and we didn't stop flying.

 

Lucid.

 

Agreed. Very interesting perspective and comparison to airlines. I'll have to chew on that one.

Posted

Keeps going down.  Below $25 / bbl.  We'll be seeing $20.  When does this turn around?  I don't think we're going to see oil turn around until coronavirus is over or Russia / SA burn Texas to the ground.  And if neither are over, oil is going to go below $20 / bbl.  Man, never ever thought I would see this in my lifetime: oil back to the Gulf War prices.  Holy shit.

Posted

Crazy valuations.. are the pipelines a going concern(?)

 

Which ones?  A pipeline that transports Marcellus gas to a power plant in New York versus a gathering system geared to oil.

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