Energy Sector

[Spekulatius]

The Maduro Guyana play to me looks a lot like the Saddam’s Iraq Kuwait gamble in 1990: Grab the oil of your rich neighbor who can’t defend itself.

https://www.theguardian.com/commentisfree/2023/dec/10/observer-view-maduro-land-grab-guyana-venezuela

[Sweet]

Does the US intervene in there is an invasion?

[Dalal.Holdings]

The irony of the leadership of Venezuela wanting its people believe that acquiring more oil reserves will solve their problems...

 

Severe case of Dutch Disease along with a strong dose of socialism.

 

https://www.gisreportsonline.com/r/venezuela-oil/

 

Edited December 10, 2023 by Dalal.Holdings

[Spekulatius]

Venezuela has plenty of oil and it is likely that the oil field Exxon found offshore Guyana extends into Venezuela’s offshore territory but of course they have no way to unlock this and nobody want to do business there because it has no rule of law.

 

If Maduro does something it is likely his plan to get control of the oil platforms with their small Navy and then starts to negotiate, sort of like a pirate state would. If he moves, it’s likely soon because next year are elections in Venezuela and even with all his muscle from militias , he could lose them.

Edited December 10, 2023 by Spekulatius

[sleepydragon]

Anybody looking at $HES? The M&A spread is now 10%, and CVX is down quite a bit during the last couple of months.

My concerns is the spread is not as large as it looks because $CVX pays a good dividend (which HES shareholders won't get till deal close), and the deal might be further delayed now since FTC just asked for more information. 

 

[Dalal.Holdings]

Oxy buying Crown Rock for $12B. Stock and debt issuance.

 

These oil guys and gals can’t help themselves…

Edited December 11, 2023 by Dalal.Holdings

[ratiman]

Will natgas investors ever make money? It seems like the industry is stuck in a permanent glut. Another widowmaker trade. Natgas is below $2.5 which is where it was about 25 years ago.

[Stuart D]

8 hours ago, Dalal.Holdings said:

Oxy buying Crown Rock for $12B. Stock and debt issuance.

 

These oil guys and gals can’t help themselves…

It’ll be interesting to see how Buffett responds to the “what do you think of the OXY acquisition” questions he’ll get next May at the AGM.

[Dalal.Holdings]

https://www.nytimes.com/2023/12/01/business/energy-environment/us-oil-production-record-climate.html

 

Quote

“I am very surprised by how much we have produced this year,” said Scott Sheffield, chief executive of Pioneer Natural Resources, a major Permian Basin producer that Exxon is acquiring. He predicted that the country could produce 15 million barrels a day in five years.

 

Quote

Production is also growing in Canada, Guyana, Brazil and Norway.

 

Anyone want to venture a guess as to what happens to oil prices if USA continues on track to producing 15M barrels/day and more production also comes online in Guyana, Venezuela, etc ?

[Sweet]

1 hour ago, Dalal.Holdings said:

https://www.nytimes.com/2023/12/01/business/energy-environment/us-oil-production-record-climate.html

 

 

 

Anyone want to venture a guess as to what happens to oil prices if USA continues on track to producing 15M barrels/day and more production also comes online in Guyana, Venezuela, etc ?

Remember, Saudis and UAE are planning to both bring more oil to the market.

[Spekulatius]

Has anyone looked at IMO? I have rarely even heard oil bugs mention this one. It's controlled by XOM which owns ~70%. Seems like there is a lot to like - they are buying back shares like crazy with issues bids. There is another one going on for 1.5B CAD right now. Shares are down from 847M shares in 2016 to 566M and with the issue bid, it's going to be less than 550M. They also pay a small but rising dividend and the balance sheet is extremely strong - only 3.5B in debt or ~0.2X EBITDA.

 

On the issue bids, it seems like XOM is selling into those and keeps their stake constant. I do think way back they owned 80% of IMO but not sure.

 

[Saluki]

1 hour ago, Dalal.Holdings said:

https://www.nytimes.com/2023/12/01/business/energy-environment/us-oil-production-record-climate.html

 

 

 

Anyone want to venture a guess as to what happens to oil prices if USA continues on track to producing 15M barrels/day and more production also comes online in Guyana, Venezuela, etc ?

 

I think that it's equally likely that there will disruptions in the short term that may make it more expensive.  Yemen is trying to blockade Israel and Yemen isn't know for the accuracy of their intelligence agency, so if they start attacking ships that aren't going to Israel or owned by Israelis, it will either cause people to go the long way around, or escalate the conflict. It looks like Iran is trying to drag the US in by attacking ships by proxy and baiting the US to respond. 

 

There is also the Venezuela/Guyana thing.  Guyana isn't a military powerhouse and Venezuela needs cash so they are claiming that they own the part of Guyana that has all the oil.  It's possible that it could get sorted by the international courts or it's possible that fighting breaks out and disrupts oil shipments in both countries. Exxon is drilling in Guyana, if Venezuela takes over, and Exxon threatens to sue anybody who takes over their contract, there will be Venezuelans drilling that stuff and trying to sell it on the black market.  Look at Venezuelan oil production over the past couple of decades and see if it's going up or down. 

 

Russia's shadow fleet is using some of the oldest, sketchiest tankers you've ever seen, and all it will take is one big spill in a place like Greece for people to avoid those rust buckets and the demand tightens up there too. 

 

In the long term I'm bullish oil, but weird stuff happens in the short and medium term.  Like when it went negative during COVID.  

[Spekulatius]

The Guyana thing seems worrisome. there is a meeting between Maduro and the President of Guyana later this week. Maduro going through all the trouble with a referendum etc and then do nothing does not make any sense.

 

As I mentioned before, he has elections coming up next year and he could lose, even with this militia controlling the streets. there is also a chance that if he rigs the election too overtly, there is going to be backslash from within Venezuela. So he may see himself forced to make a move prior to election to get a patriotic wins.

 

Just because it is stupid and doesn't mean it does not happen.

[Saluki]

1 hour ago, Spekulatius said:

The Guyana thing seems worrisome. there is a meeting between Maduro and the President of Guyana later this week. Maduro going through all the trouble with a referendum etc and then do nothing does not make any sense.

 

As I mentioned before, he has elections coming up next year and he could lose, even with this militia controlling the streets. there is also a chance that if he rigs the election too overtly, there is going to be backslash from within Venezuela. So he may see himself forced to make a move prior to election to get a patriotic wins.

 

Just because it is stupid and doesn't mean it does not happen.

 

Yes, I agree.  When Argentina's military junta was losing popular support they decided on their catastrophic invasion of the Fawkland Islands a war with the UK. They gambled that the UK would do nothing because those islands weren't worth fighting for.  They were wrong.  And those islands didn't even have oil. 

 

And speaking of Yemen attacking the wrong ships:  

https://www.reuters.com/world/middle-east/cruise-missile-yemen-strikes-tanker-ship-us-officials-2023-12-12/#:~:text=DUBAI%2FOSLO Dec 12 (Reuters,has shaken the Middle East.

[Spekulatius]

28 minutes ago, Saluki said:

 

Yes, I agree.  When Argentina's military junta was losing popular support they decided on their catastrophic invasion of the Fawkland Islands a war with the UK. They gambled that the UK would do nothing because those islands weren't worth fighting for.  They were wrong.  And those islands didn't even have oil. 

 

And speaking of Yemen attacking the wrong ships:  

https://www.reuters.com/world/middle-east/cruise-missile-yemen-strikes-tanker-ship-us-officials-2023-12-12/#:~:text=DUBAI%2FOSLO Dec 12 (Reuters,has shaken the Middle East.

The Houthi's in Yemen essentially try to close the Suez shipping route which is one my of the most important shipping routes for trade. My guess is that these cruise missiles come from Iran.

 

My guess is that the US and allies won't let this happen and there will be a price to pay for the Houthi's of doing so.

[Xerxes]

On Guyana, nothing to see here moving on. So says my gut feeling. 
 

Maduro has more to lose distrupting the current arrangement with the US Government. There is a bit of info I have seen about some Wagner assets in Venezuela. I don’t know what all this means. Mostly noise I would wager. 
 

So don’t think this in anyway being close to Iraq-Kuwait or the Argentinian bid for the Falkland Islands. And even if it’s real how the execution would go about. It will come down to some royalties I think. Etc 
 

Unless you believe in conspiracy theories that the Hess folks knew that was coming, so sold out to Chevron. 

[Xerxes]

1 hour ago, Spekulatius said:

Has anyone looked at IMO? I have rarely even heard oil bugs mention this one. It's controlled by XOM which owns ~70%. Seems like there is a lot to like - they are buying back shares like crazy with issues bids. There is another one going on for 1.5B CAD right now. Shares are down from 847M shares in 2016 to 566M and with the issue bid, it's going to be less than 550M. They also pay a small but rising dividend and the balance sheet is extremely strong - only 3.5B in debt or ~0.2X EBITDA.

 

On the issue bids, it seems like XOM is selling into those and keeps their stake constant. I do think way back they owned 80% of IMO but not sure.

 

IIRC Exxon had held the exact % of Imperial Oil for decades. Do not remember 80%. 

[Xerxes]

7 minutes ago, Spekulatius said:

The Houthi's in Yemen essentially try to close the Suez shipping route which is one my of the most important shipping routes for trade. My guess is that these cruise missiles come from Iran.

 

My guess is that the US and allies won't let this happen and there will be a price to pay for the Houthi's of doing so.

The Houthi already paid the price multifold when US manufactured planes and bombs incinerated their livilhood, cities and schools. 
 

The cost that you are alluding to was frontloaded in 2015 and years after when Saudi invaded using American h/w. Only to leave with their tails between their legs, six years later. All the while with full support of US Government. 
 

my guess is most Westerners don’t really look at that part of history.

History starts Now ! when they do things to us. Not when we do things to them. 

[Spekulatius]

35 minutes ago, Xerxes said:

The Houthi already paid the price multifold when US manufactured planes and bombs incinerated their livilhood, cities and schools. 
 

The cost that you are alluding to was frontloaded in 2015 and years after when Saudi invaded using American h/w. Only to leave with their tails between their legs, six years later. All the while with full support of US Government. 
 

my guess is most Westerners don’t really look at that part of history.

History starts Now ! when they do things to us. Not when we do things to them. 

Houthis have been attacking ships including US warships since 2015. These idiots never learn.

 

Edited December 12, 2023 by Spekulatius

[Xerxes]

29 minutes ago, Spekulatius said:

Houthis have been attacking ships including US warships since 2015. These idiots never learn.

 

Yea. That is just the way the world is.
No one is innocent. 
 

Yemen was to Saudi Arabia, what Ukraine was to Russia.
 

A satellite state of a mighty overlord, who dared moving away from its master’s orbit. and the overlord didn’t like it. US took the opposite role in each conflict. That is just facts. There is no “Saudi Invaded Yemen” thread in this COBF with hundreds of pages scorning the Russians, is there ? 
 

Samething with Qatar. Though they were saved by their massive bounty in natural gas. Without their bounty it would have been another Saudi project. 
 

In any case, moving on.
didn’t mean to poke. 
 

 

[Spekulatius]

@Xerxes Yemen was always about controlling trade routes for spices in the Medieval times (and probably before) and now for all sorts of things including crude / NG through the Suez canal. Attacking ships is unlikely to make them friends - they get similar status than the Somali pirates on the African side.

[Dalal.Holdings]

Look across the Strait...there are many countries with interests and capabilities to respond to piracy/threats to trade in Bab-el-Mandeb.

 

Some rebels are not going to credibly be able to harm trade for long with so many of the world's powers able & ready to take them on.

 

Maduro's threats are a red herring. He's got Chevron coming in to help rebuild his exports and Biden helping bail him out so long as he plays ball. A hot incursion into Guyana is not feasible. Even Brazil and other Latin/Caribbean nations would oppose and the U.S. would most definitely respond switfly and militarily (& Brazil might join). His popularity is a mirage and his economy in tatters with millions fleeing. Any confrontation would end faster than you can say "Desert Storm".

 

Edited December 12, 2023 by Dalal.Holdings

[Castanza]

53 minutes ago, Dalal.Holdings said:

Look across the Strait...there are many countries with interests and capabilities to respond to piracy/threats to trade in Bab-el-Mandeb.

 

Some rebels are not going to credibly be able to harm trade for long with so many of the world's powers able & ready to take them on.

 

 Maduro's threats are a red herring. He's got Chevron coming in to help rebuild his exports and Biden helping bail him out so long as he plays ball. A hot incursion into Guyana is not feasible. Even Brazil and other Latin/Caribbean nations would oppose and the U.S. would most definitely respond switfly and militarily. His popularity is a mirage and his economy in tatters with tens of millions fleeing. Any confrontation would end faster than you can say "Desert Storm".

 

 

The problem is rules of engagement for many of these piracy attacks. Not sure if it's still the case but for a long time ships weren't allowed to have lethal force on board. They were told to perform evasive maneuvers to create wakes and to turn on the water hoses. When the pirates figured out how to get by that you ended up with situations like Captain Philips getting taken hostage. Everything was reactionary instead of proactive. Parka few Merchant Marines on board with some small arms and your flip flop wearing chum bucket pirates would disappear. 

[Dalal.Holdings]

https://www.statista.com/statistics/266292/number-of-pirate-attacks-worldwide-since-2006/

 

Piracy attacks have fallen precipitously over the years, likely due to anti-piracy measures taken by USA/etc since the Maersk Alabama incident (the Djibouti bases are evidence of this).

 

I think a few recent headlines of Houthis taking ships are leading to overestimation of the impact to trade in the strait.

Edited December 12, 2023 by Dalal.Holdings

[Sweet]

5 hours ago, Xerxes said:

On Guyana, nothing to see here moving on. So says my gut feeling. 
 

Maduro has more to lose distrupting the current arrangement with the US Government. There is a bit of info I have seen about some Wagner assets in Venezuela. I don’t know what all this means. Mostly noise I would wager. 
 

So don’t think this in anyway being close to Iraq-Kuwait or the Argentinian bid for the Falkland Islands. And even if it’s real how the execution would go about. It will come down to some royalties I think. Etc 
 

Unless you believe in conspiracy theories that the Hess folks knew that was coming, so sold out to Chevron. 

I agree.  I think nothing happens.

 

If Venezuela does invade Guyana it will barely move the market, it produces what, 400 kbd of oil?  Nothing in the grand scheme of things.

 

Venezuela invading might actually be bearish for oil.  It would give the USA an excuse to intervene, over throw the Maduro, lift sanctions causing oil production rocket.

 

I see it weighted heavily towards bearish for oil.