I like Oil

[Fermion]

SDLP is exciting for a trade. It goes up or down a buck a day and stays in the range of $10 to $13.

 

[Running_Man]

After unloading a pile of MLP's earlier this year, I am looking to get into XOM at around $70 - $72 for a long term hold and great dividend. This will be in my IRA account. Chevron is also on my radar as most of their operations are not in U.S. anymore and they have been beaten down pretty hard.

As crude goes further down later this year, one must look hard at the independent refiners as they are benefiting from the lower feedstock pricing. I'll have to say that premiums are already priced into these stocks (Valero, Marathon, Holley, Delek, etc).

I have worked in the oil & gas industry for 35 years and still play around part time as an engineering consultant here in Houston. Gut feeling is the service industry cuts are not finished yet and oil and gas producers are working hard to lower their service costs (contract drilling, well completions, workovers, etc). It would be prudent to stay away from the service sector stocks for a good bit.

Offshore operators are really in a funk, especially the contract drillers (Transocean, etc). This is an area I would stay very clear of.

ConocoPhillips Is Well-Positioned for Oil Downturn - Pg.2 - TheStreet
If you believe the bull case for Conoco it is pretty well outlined by the Street.com

This case is pretty much the same case that Boone Pickens is making for the oil industry as well. The issue is this, Conoco and many other companies have now figured out how to produce as much oil from 13 oil rigs as they used to produce with 32. This is not a positive to me for oil prices and oil debt but a deflationary pressure on oil prices for the medium term. If the bull case is correct and oil goes back to 70-75 next year then Conoco is going to do very well. If it does not though Conoco will not be cash neutral they will be in cash trouble, in which case they would either have to borrow to continue their dividend and capital or else cut back further, either will not be advantageous to COP.

XOM is far more flexible financially and if there is major problems ahead they will have the capital resources to take advantage of it and if there is a price recover to 75 XOM will rise as well, though probably not as far as COP.

Chevron is just not as efficient as XOM or COP in handling their capital but they would also do well if oil goes back to 75 and they pay a higher dividend than XOM and it is far less likely to be cut than the COP dividend.

 

[aja8888]

ConocoPhillips Is Well-Positioned for Oil Downturn - Pg.2 - TheStreet
If you believe the bull case for Conoco it is pretty well outlined by the Street.com

This case is pretty much the same case that Boone Pickens is making for the oil industry as well. The issue is this, Conoco and many other companies have now figured out how to produce as much oil from 13 oil rigs as they used to produce with 32. This is not a positive to me for oil prices and oil debt but a deflationary pressure on oil prices for the medium term. If the bull case is correct and oil goes back to 70-75 next year then Conoco is going to do very well. If it does not though Conoco will not be cash neutral they will be in cash trouble, in which case they would either have to borrow to continue their dividend and capital or else cut back further, either will not be advantageous to COP.

XOM is far more flexible financially and if there is major problems ahead they will have the capital resources to take advantage of it and if there is a price recover to 75 XOM will rise as well, though probably not as far as COP.

Chevron is just not as efficient as XOM or COP in handling their capital but they would also do well if oil goes back to 75 and they pay a higher dividend than XOM and it is far less likely to be cut than the COP dividend.

Thanks for the link. Looks like COP is working a plan to reduce spending by $1 Billion in 2016. Note that offshore activity is curtailed for new wells. This is pretty much the case for all the big producers as it is very costly to drill/produce offshore.

Also, the 13 drilling rigs vs. 32 working at the end of 2014 are not production, or have they stated that 13 new wells can replace the production of 32, but represent new drilling activity to develop new wells. Production from those 13 wells will not be known until they are completed and tested. Given their locations, they may be good producers.

I see the downturn in new drilling of wells (rig activity) as a precautionary measure to keep costs down and not to directly add new oil that would be available for sale or to replace sold reserves. One thing to remember is that it it typical to choke down high producing wells in the shale plays to hold back production so desired future production can be flexible. Also, leases obtained for future drilling (at a high cost) usually have a time period to develop before you lose the lease so producers will drill and complete the well to hold the lease, not necessarily immediately produce oil and gas. In big companies such as this, the task of evaluating ongoing and future production levels is very complicated and takes into account thousands of wells at various stages of their life.

COP also stated in the transcript they have proven reserves for the next 30 years and have stated they will maintain the dividend (at least going forward for a while). I would suspect we heard the "optimistic plan" during the quarterly report and they have a downside plan in their pocket if things get worse.

 

[NW-Bound]

I should have bought oil refiners late last year, when the news of the oil gush became well-known. With the gasoline usage up and them having better operating margins, these guys are having a good time. Darn! Despite my oft-claimed superior memory, I remember nuthin'. Wonder if it is not too late to get some.

 

[aja8888]

I should have bought oil refiners late last year, when the news of the oil gush became well-known. With the gasoline usage up and them having better operating margins, these guys are having a good time. Darn! Despite my oft-claimed superior memory, I remember nuthin'. Wonder if it is not too late to get some.

I think the independent refiners are high priced right now, but probably will do well until the price of crude goes up for an extended time. You may want to buy on a dip, if we see one. USO may be a safer bet if you think crude oil will be rising. XOM is probably a good buy for the long term.

 

[NW-Bound]

I used to own XLE and OIH (they are the granddaddies of ETF and called HOLDRs), and also individual smaller oil drillers (I like to play with fire ). I made good money in the years prior to the subprime crash. Sold most of them off some time ago, and only have a few left. Wish I had sold them all.

 

[target2019]

In mid December F-I-L purchased a small refiner (PBF - PBF Energy Inc) for $28.50, and it is up quite a bit. The yield at that time was about 4.25%.

 

[audreyh1]

It does not matter how green we want to be, the world cannot do without oil. And the low oil price already stimulates more driving, more muscle SUVs and trucks. People just do not learn.

Oil will come back, but I do not think it's any time soon. I sold off most of my energy stocks earlier in the year after they already dropped significantly off their high, as I was too slow to act. I've got too many scars on my hand for catching the falling knife, so I will wait before I buy them back. It may be towards the end of the year or early 2016.

Some smart folks I know think it will take a decade.

In the meantime it may still go lower. I occasionally hear $25 oil mentioned.

 

[NW-Bound]

It certainly takes continuous monitoring of the situation. I agree that crude price may go lower yet. The time to buy may be much later than a few months into the future, but a decade is a long time.

 

[hesperus]

Some analysts had been concerned that once the $43 bbl threshold was breached (last week), it's a fairly easy drop into the mid-low 30's.

 

[Mulligan]

Some smart folks I know think it will take a decade.

In the meantime it may still go lower. I occasionally hear $25 oil mentioned.

I listened to CNBC this morning while waking up and they said some North Dakota oil was being sold there for $29 a barrel.


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[gcgang]

Barron's ran a cover story 8/10/15 saying time to buy commodities. Despite that, I'm thinking it actually may make sense to look to add/establish positions in this sector.

I've had decent luck trading closed end funds when out of favor, and the funds' discount to NAV is above historical average. While there's no guarantee the discount will shrink again, often when a sector comes back in favor you get a double hit on appreciation, with NAV going up and the discount narrowing.

The Barron's article mention closed end fund BCX. usually a drawback to these funds is the high expense ratio, but I found only 0.29 ER. http://www.cefconnect.com/Details/Summary.aspx?Ticker=BCX

Anyone familiar with BCX, especially, is that expense ratio to be believed?


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[gcgang]

I listened to CNBC this morning while waking up and they said some North Dakota oil was being sold there for $29 a barrel.


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There has always been a discount for Bakken oil, primarily because it is so costly to get to market, mostly being transported by rail (another feature of dealing with the not so benevolent regional monopolist, Warren Buffet, who purchased Burlington RR). Having just returned from that area, and seeing all the idled rail cars sitting in Billings and Missoula, I'd think the discount would be narrowing. According to your story, it's not, however.


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[hesperus]

Maybe I'm missing something, but in morningstar I'm seeing the net expense ratio at about 1.10% for BCX

 

[gcgang]

Maybe I'm missing something, but in morningstar I'm seeing the net expense ratio at about 1.10% for BCX

No, I was missing it. The CEF site I listed showed 0.29, but Blackrocks site shows similar to M*, at 1.06%. Still, if the discount widens to 20%+, I'm probably going in.


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[Mulligan]

There has always been a discount for Bakken oil, primarily because it is so costly to get to market, mostly being transported by rail (another feature of dealing with the not so benevolent regional monopolist, Warren Buffet, who purchased Burlington RR). Having just returned from that area, and seeing all the idled rail cars sitting in Billings and Missoula, I'd think the discount would be narrowing. According to your story, it's not, however.


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They did mention is was being bought "on site" so I assume like you mentioned that is cost before transportation.


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[explanade]

I didn't watch it but Cramer was promoting his show the other day to feature solar companies.

Hmm, maybe not an investment for retirees or soon to be retirees.

But for younger investors?

 

[aja8888]

The NAPE conference is going on in Houston now. Actually, it's over today.

Summer Nape Expo (Aug 2015), Houston USA - Trade Show

Interesting that this year's event had quite a few less participants than in previous years. Big oil (integrated guys) was primarily not in attendance and the smaller operators were light. Seems like "deal shopping" was not that busy and many deals were to unload undrilled leases. All this was expected.

On another note, companies that are still drilling wells are focused on less expensive vertical (conventional) drilling and not horizontal, mainly in West Texas (Permian). Shale drilling has pretty much stopped as well costs are $6 - $10 million per well. This was also expected.

So it's back to 2006 again!

 

[dallas27]

Well, i hear oil broke $40 today. Time to start buying in i figure, gotta find some cash.


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[Running_Man]

XOM hit a 4% YIELD today down 8 percent on week
COP down 8 percent on week
CVX down 12 percent on week now yields 5.65%
KMI down 6 percent on week now yields over 6 percent
BHP down 8 percent on week now yields over 7 percent
MMP down 4.5% on week now yields 4.4 percent

Oil at $40 a barrel

XOM and MMP are the only 2 I would dip my toe on, did buy some MMP @67 today replacing KKR who fortunately I had sold @ 22.41 on Monday along with WFC @ 57.45 lowering my net equity exposure this week by 2 percent, I have no replaced WFC in my portfolio though the market cut that by a bit more these last 2 days.

This does have the potential to get very ugly

 

[Mulligan]

XOM hit a 4% YIELD today down 8 percent on week
COP down 8 percent on week
CVX down 12 percent on week now yields 5.65%
KMI down 6 percent on week now yields over 6 percent
BHP down 8 percent on week now yields over 7 percent
MMP down 4.5% on week now yields 4.4 percent

Oil at $40 a barrel

XOM and MMP are the only 2 I would dip my toe on, did buy some MMP @67 today replacing KKR who fortunately I had sold @ 22.41 on Monday along with WFC @ 57.45 lowering my net equity exposure this week by 2 percent, I have no replaced WFC in my portfolio though the market cut that by a bit more these last 2 days.

This does have the potential to get very ugly

Im not much of a trader and when I am its small. But I got lucky buying 100 shares of Chevron year before last at about $100 and sold at $130 about 2 months later... I wouldnt touch it at all now. My hands still have scars from catching falling knives over the years.


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[NW-Bound]

Scars on hand? That's not so bad. FF to 3:40 on this video.

 

[ESRwannabe]

XOM is trading at $72 now and has a 4% yield. Nice!

Wish I actually had money to buy it...

 

[Mulligan]

Scars on hand? That's not so bad. FF to 3:40 on this video.

Ya, I havent had one stuck in my forehead yet! But I wasn't a nice person today. A friend of mine who has just been in the market now for 2 years contributing monthly. He emailed me today complaining about his ETF carnage. I told him its just the beginning; we are just starting 1964-1982 all over again and he will lose money for 18 years. That really got him all out of sorts as he never knew you could lose money that many years.


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[ESRwannabe]

I did buy more AMLP yesterday. Too bad I didn't wait a day...