Energy Sector

[Ulti]

https://www.stitcher.com/show/rose-bros-podcast/episode/137-dan-pickering-pickering-energy-partners-compounding-at-20-the-value-of-trust-in-business-what-makes-a-good-energy-investment-306196877

 

excellent podcast on all thing’s energy / energy investing 

[UK]

3 hours ago, rkbabang said:

In the short to medium term I'm far more bullish on fission nuclear power.  I think the US is going to eventually get off its ass and reduce the regulatory burden and allow advanced reactors to be built and built more quickly.  Even if the US doesn't do this other parts of the world will.

 

Nuclear Power Will Grow "Exponentially" In Low-Carbon World – Citigroup White Paper

https://www.wealthbriefing.com/html/article.php?id=198695

 

I'm invested in SRUUF right now and am looking for other ways to take advantage of this trend as well.

 

Fusion is interesting, and will probably eventually be how humanity generates its power, but it's not really actionable yet for an individual investor. 

 

 

https://www.bloomberg.com/news/articles/2023-08-09/sweden-needs-to-treble-nuclear-power-as-electricity-demand-soars#xj4y7vzkg

 

Sweden said it needs to treble nuclear power capacity over the next couple of decades to meet a surge in electricity demand. At least 10 new conventional reactors need to be built by 2045, Romina Pourmokhtari, the nation’s climate and energy minister, said in a statement on Wednesday. The biggest Nordic nation has six reactors in operation today. Sweden needs all the new power capacity it can get as demand is poised to double in the next few decades amid the electrification of industries and transportation. New nuclear plants are at the heart of the government’s strategy to expand power output.

[Blake Hampton]

Does anyone know the best way to value proven reserves? Is it simply multiplying it by a conservative spot price and then discounting it?

[Ulti]

https://arjunmurti.substack.com/p/lessons-from-asia-tigers-significant

 A non believer in peak oil

[LearningMachine]

On 6/28/2023 at 12:06 AM, Viking said:

I do like listening to Arjun Murti (depth to what he has to say, with focus on return on capital);

 

Another talk with Arjun Murti: https://www.youtube.com/watch?v=oqCsZuJfCm0&list=PLtt4Fntz3tuvRPlel5NlFuiPq5A6U2igu&index=109 .

 

Found him to be a more rational thinker than Jeff Currie.  Arjun Murti doesn't seem to get carried away by some dogma or agenda to sell a narrative, and instead looks at issues from multiple perspectives, and doesn't take extreme positions. 

[NnnnotSoSmart]

Arjun is excellent.  He is now employed by Veriten. Some may find Veriten's podcasts interesting on all things energy.  

 

You can register to get weekly e-mail updates of podcasts on their website. 

 

https://veriten.com/streams/cob-tuesday/

[NnnnotSoSmart]

Always thought Cole Smead was just Daddy's (Bill's) boy.  This interview changed my mind.  He's not an empty suit.

 

https://rosebros.ca/blogs/podcast/cole-smead

 

The interview with Dan Pickering was excellent as well:

 

https://rosebros.ca/blogs/podcast/137-dan-pickering-pickering-energy-partners-compounding-at-20-the-value-of-trust-in-business-what-makes-a-good-energy-investment

[james22]

“Geothermal has historically been overlooked,” Sen. Lisa Murkowski, R-Alaska, said at a hearing. But with innovation, she added, “the potential is out there, I think, that’s pretty extraordinary.”

 

https://news.yahoo.com/vast-source-clean-energy-beneath-190543814.html

[SharperDingaan]

On 7/1/2023 at 11:39 AM, SharperDingaan said:

We have also put on a roll or two over the last little while  Simply because a great many very good o/g companies in the WCSB have been severely sold down to ridiculous levels, and Alberta's recent election has added to the round-trip opportunities.      

 

Closed out our old rolls at good gains, before going on vacation.

 

Proved (2P) reserves are independently valued every year at a conservative price deck and a 10% discount rate (year-end reserve report). Multiply by 50% to get the loan value that the 2P will support, and the impact on the drilling budget. Most times it's smarter to just buy the more isolated 2P at 50-70c on the dollar and run the wells down, versus drill.

 

The US SPR refill just puts a floor under the price of heavy sour (VZ, CAN, MEX, etc.). Most would expect the fill to come with significant opportunism and political leveraging. Essentially, the do what we want, and we'll take some of your sanctioned production thing.   

 

Cold fusion/nuclear has merit, but it's so far out that its essentially worthless when compounded at a standard risk-adjusted 25%. The much lesser wind/battery improvements delivering sooner, are a lot more valuable.

 

SD

  

[50centdollars]

On 8/19/2023 at 7:58 PM, NnnnotSoSmart said:

Always thought Cole Smead was just Daddy's (Bill's) boy.  This interview changed my mind.  He's not an empty suit.

 

https://rosebros.ca/blogs/podcast/cole-smead

 

The interview with Dan Pickering was excellent as well:

 

https://rosebros.ca/blogs/podcast/137-dan-pickering-pickering-energy-partners-compounding-at-20-the-value-of-trust-in-business-what-makes-a-good-energy-investment

Cole is a smart dude.

[james22]

Mauldin this week, echoing the first post in this thread:

 

Long-time readers will know that I am bullish on energy (oil and gas in particular), precisely because the ESG movement, including numerous governments, is limiting both the amount of money and places that can be drilled for oil and gas.

 

Economics 101 says that if you reduce a supply of something that has an increasing demand the price is going to rise.

 

Felix Zulauf and others at my conference were talking about $120-$150 oil next year. In a normal world, that shouldn't happen, yet it is.

[Sweet]

ESG is really only hindering production in the West.  The rest of the world doesn’t give a crap.  I expect energy (generally) to remain fairly static from here.  The companies need to pay fat dividends and they aren’t.

[Spekulatius]

1 hour ago, Sweet said:

ESG is really only hindering production in the West.  The rest of the world doesn’t give a crap.  I expect energy (generally) to remain fairly static from here.  The companies need to pay fat dividends and they aren’t.

US energy production is at record levels again, despite ESG. I think it’s the Saudis  reducing production that is pushing energy prices higher right now. They do need to be careful that other countries like Venezuela or Iran of Guyana don’t take share or substitution of alternative energy sources eventually starts to bite.

[Sweet]

23 minutes ago, Spekulatius said:

US energy production is at record levels again, despite ESG. I think it’s the Saudis  reducing production that is pushing energy prices higher right now. They do need to be careful that other countries like Venezuela or Iran of Guyana don’t take share or substitution of alternative energy sources eventually starts to bite.

Exactly yes.  Production be even higher were it not for ESG, even with ESG it is already all time high.  BP is really the only company that I can think of that went hard on ESG.

[Ulti]

https://arjunmurti.substack.com/p/ding-dong-new-energy-growing-pains

[petec]

17 hours ago, Sweet said:

Exactly yes.  Production be even higher were it not for ESG, even with ESG it is already all time high.  BP is really the only company that I can think of that went hard on ESG.

 

I'm not sure I really agree. I can't prove this but my sense is that plenty of companies are allocating more to debt, buybacks and dividends than they would have done in previous cycles, and less to growth. I guess it depends how you define ESG.

 

I do think some of the production now is a result of $120 oil last year. And I think the days of rapid short-cycle shale growth are likely over except at higher oil prices. My guess is oil spends most of the next few years in a 60-100 range and there are plenty of companies that are undervalued there.

[Spekulatius]

4 hours ago, petec said:

 

I'm not sure I really agree. I can't prove this but my sense is that plenty of companies are allocating more to debt, buybacks and dividends than they would have done in previous cycles, and less to growth. I guess it depends how you define ESG.

 

I do think some of the production now is a result of $120 oil last year. And I think the days of rapid short-cycle shale growth are likely over except at higher oil prices. My guess is oil spends most of the next few years in a 60-100 range and there are plenty of companies that are undervalued there.

The impact of ESG is dwarfed by the impact of prices. Yes, the high prices last year have impacted production, but so have the low prices from 2019-2020.

 

Longer term, one thing that will be interesting to watch is China. China produces 26% of the carbon emissions right now, but there is little doubt that they have a massive effort ongoing to decarbonize. I think they might be getting there quicker than thought with the massive energy consuming construction sector faltering (steel and concrete need massive amount of energy - mostly coal to produce ) This won’t impact the the balances this year or next, but I think in 5 or 10 years it will make a massive difference.

https://www.eiu.com/n/china-road-to-net-zero-reshape-the-country-and-the-world/

 

 

Edited September 18, 2023 by Spekulatius

[John Hjorth]

Meanwhile, in Europe :

 

Bloomberg [September 18^th 2023] : A Franco-German Feud Over What Will Fuel Europe’s Industry,

&

Bloomberg [September 18^th 2023] : France and Germany Clash in Feud Over Europe’s Industrial Crown.

 

- - - o 0 o - - -

 

*shrug* & *sigh*.

[Saluki]

4 hours ago, Spekulatius said:

The impact of ESG is dwarfed by the impact of prices. Yes, the high prices last year have impacted production, but so have the low prices from 2019-2020.

 

Longer term, one thing that will be interesting to watch is China. China produces 26% of the carbon emissions right now, but there is little doubt that they have a massive effort ongoing to decarbonize. I think they might be getting there quicker than thought with the massive energy consuming construction sector faltering (steel and concrete need massive amount of energy - mostly coal to produce ) This won’t impact the the balances this year or next, but I think in 5 or 10 years it will make a massive difference.

https://www.eiu.com/n/china-road-to-net-zero-reshape-the-country-and-the-world/

 

 

 

I posted on the book thread about reading the John Neff on Investing. He killed the indexes when he ran his fund during the 70s and 80s, which had periods of very high inflation and energy prices.  I wanted to see what strategy works best there and it turns out that, luckily for people here, what worked best for him was traditional Ben Graham value investing. 

 

He learned value investing in college from someone who had studied under Graham in Columbia. With energy companies, the best time was after a long bear market in that sector (check) and he felt that you should be strict about your valuation. If you sell on the fundamentals, it may still keep going up but thereafter it's just speculation and it can correct quickly. 

 

Oil has some supply constraints and unless we have a prolonged recession, I don't see it slowing down.  Yes, China wants to decarbonize, so does everyone, but that takes time.  Maersk just launched  it's first green biofuel container ship.  It's dual fuel because the factory that makes the green fuel that it needs is still being built so there literally isn't enough green energy to run it. 

 

I don't have huge exposure to energy, but I have  midsize positions in OXY, VTS and STNG, and I plan to hold until everyone is talking about oil stocks instead of AI stocks on the news, then it'll be time to move on. 

[John Hjorth]

41 minutes ago, Saluki said:

...  Maersk just launched  it's first green biofuel container ship.  It's dual fuel because the factory that makes the green fuel that it needs is still being built so there literally isn't enough green energy to run it. ...

 

Related to @Salukis post :

 

A. P. Moeller Maersk A/S Press Release [September 14^th 2023] : EU Commission President Names Landmark Methanol Vessel “Laura Mærsk”.

 

So this is not about one 'experimental' ship,  -it's by now about 25 ships, including "Laura".

 

-Everybody in the industry keeping their heads low, to avoid attention on the matter, while everybody knows the industry as such has a material reponsibility.

 

Not Mr. Robert Maersk Uggla. He's just 'head on'. No lingering.

[Viking]

For those who are looking to follow oil more closely the podcast below is done daily with different guests. Some are quite good. I wonder if oil is going to be the big story for the rest of 2023. If oil keeps going higher and busts through $100 it is going to have significant consequences on some things. 
 

Like inflation. And interest rates. Higher for longer is looking more and more likely every day.
 

Up here in Canada, i think we might be seeing things starting to crack in the economy due to higher interest rates.  We have had a monster housing bubble and everyone here has essentially what is a variable rate mortgage with a teaser rates that all going to reset over the next 30 months. Borrowers are going from 3ish % to over 6% when they renew. A segment of the population is screwed (those who bought high in recent years and have a big mortgage).
 

It is worse for investors (who bought recently). In Vancouver, the rental market is rent controlled. So your mortgage skyrockets higher and the government allows you to increase rent a maximum of 2% in 2022. Housing inventory is starting to move higher in Toronto and Vancouver - this will be something to watch in the coming months.
 

 My favourite line in the video below was something like “i got duped by the fallacy of peak oil decades ago. The new fallacy that will be disproven in another decaade? That demand for oil will peak soon.”

 

If you watch the video start at the 7 minute mark… 

 

 

Edited September 19, 2023 by Viking

[mcliu]

Not sure how accurate this is or if they're just using it to talk their book.

[Gamecock-YT]

I might be totally wrong but the thing giving my pause is next year being an election year and Biden showing no qualms over tapping the SPR. Toss in the non-zero chance of a recession and I'm still keeping the powder dry but want to be in with my positions by the end of the election year. Less incentive to keep oil prices low and non-zero chance a republican is in the white house and the green new deal gets put on the backburner. 

[Viking]

On 1/9/2020 at 5:34 AM, james22 said:

You've recently been writing some very bullish thoughts on the oil and energy sector. What's your case there?

 

When people get excited about this ongoing cyclical trade, they should look at oil as the ultimate distressed value asset out there. To me, oil stocks are incredibly cheap.

 

There are technical reasons for that, because of the large passive investment flows, and oil is a smaller and smaller part of the index. Also, there are more and more institutional investors who can’t buy oil stocks anymore because of ESG limitations.

 

On the other side, there is no sign that oil demand is weakening. Consumption in emerging markets continues to grow, while conventional oil investments have been reduced significantly, precisely because of all this talk that the fossil fuel era is ending.

 

So in your view, energy the one remaining cheap sector out there?

 

Yes, without a doubt. But I will freely admit that there are all sorts of technical issues because as I said many investors can’t buy oil stocks anymore. We have this bizarre situation where people can’t buy oil stocks, but people continue to consume oil.

 

https://themarket.ch/interview/oil-stocks-are-incredibly-cheap-ld.1384

 

Anyone else see an opportunity?

 

I'm thinking of making Energy (VGELX) a 5% position.

This post was the first made on this thread back in 2020. @james22 freaking brilliant call. Just as relevant today? 

 

Eric Nutall is not my favourite oil analyst… but i do like his chart (i prefer Arjun Murti and Josh Young). 

 

Edited September 21, 2023 by Viking

[Viking]

You can’t make this stuff up. We haven’t even reached peak coal usage yet. Peak oil or gas?

 

Global Coal Use Set to Stay at Record Levels This Year, IEA Says

 

“Lower natural gas prices in the US are also encouraging a move away from coal, the IEA’s report said.”

 

https://www.bloomberg.com/news/articles/2023-07-27/global-coal-use-set-to-stay-at-record-levels-this-year-iea-says