I like Oil

[Ed_The_Gypsy]

I have no inside information and I wish them well, but I think there are hard times ahead for BP.

I think Chevron and ExxonMobil are better bets at this time.

However, I am not buying oil no mo.

Sent from my SM-G900V using Early Retirement Forum mobile app

 

[soupcxan]

This doesn't look good:


http://finance.yahoo.com/news/exxon-chevron-outlooks-cut-negative-040100418.html

 

[aja8888]

This doesn't look good:


http://finance.yahoo.com/news/exxon-chevron-outlooks-cut-negative-040100418.html

My old company is busier than all get out on acquisitions of producing assets. They have recruited me to help out (at a high rate also). Lots of "stuff" for sale. I just got back from ND on a 300 well sale. Crazy. Most buyers are Private equity firms or small independents that grew through acquisition and not new drilling.

 

[ESRwannabe]

I have been researching Marathon Petroleum (MPC) and I really like what I see. When I get more money I might buy some.

What originally caught my eye was when MPC's MLP (MPLX) recently acquired MarkWest (MWE).

MPC is a pretty new company (2011) which was spun off from Marathon Oil. MPC was primarily a downstream company but with the recent MLP acquisition they are also now the 4th largest midstream MLP and 2nd largest MLP when it comes to natural gas.

MPC is the fourth largest refiner in the US and also recently became the 2nd largest company owner of gas stations in the US.

Most of their business is focused on the eastern and mid-eastern part of the US. They have a really nice setup with refinery, pipeline and gas stations covering the region.

The P/E is cheap at 8.40. They also look very shareholder friendly, dividends have increased by huge amounts and the payout ratio is still only 17%. They have also done huge amount of stock buy backs (25% of shares since going public in 2011!!!).

They have done a great job exploiting the Opec-planned oil panic. As a refinery low oil price is usually good or irrelevant as what they care about is the crack spread. Anyway they took advantage of the panic to acquire their way to 2nd company owned largest gas station and now 4th largest MLP. Better yet the MLP is 2nd largest for natural gas which is going to be huge as more power plants move from coal to ng.

 

[ESRwannabe]

It looks like oil is starting to go up. I think its back to $50 now. We might find it back to $70+ by next year.

 

[hesperus]

It looks like oil is starting to go up. I think its back to $50 now. We might find it back to $70+ by next year.

thanks vladimir

 

[dallas27]

Ya, i would say it is time to buy....






Sent from my iPhone using Early Retirement Forum

 

[LOL!]

Anybody joining some of the lawsuits on some of these oil investments?

http://finance.yahoo.com/news/way-bet-oil-wipes-billions-163616721.html

 

[aja8888]

Anybody joining some of the lawsuits on some of these oil investments?

http://finance.yahoo.com/news/way-bet-oil-wipes-billions-163616721.html

Good old Ameriprise and production-based MLPs, both losers.

 

[dallas27]

Haven't heard anyone around here complaining about mlp's. Just the opposite in fact. Maybe too smart to lose, or too embarrassed to advertise their failure.


Sent from my iPhone using Early Retirement Forum

 

[Mulligan]

Haven't heard anyone around here complaining about mlp's. Just the opposite in fact. Maybe too smart to lose, or too embarrassed to advertise their failure.


Sent from my iPhone using Early Retirement Forum

They haven't been shy on other forums about the butt whippings they have taken. I am pretty much a yield only buyer. So I looked a bit, but smelled a rat. Not because I am a financial guru, but because I couldn't understand the accounting and finances behind them all. Of course I haven't been able to understand the finances behind most income producing securities so I have a small sandbox to play in. Fortunately it has been a very safe one to play.


Sent from my iPad using Tapatalk

 

[aja8888]

Haven't heard anyone around here complaining about mlp's. Just the opposite in fact. Maybe too smart to lose, or too embarrassed to advertise their failure.


Sent from my iPhone using Early Retirement Forum

I had a large position in EPD and sold 2/3 of it (my investment portion) three months ago. I'm keeping the rest in for another year or so and see where their business goes. They are a top midstream company that has liquids contracts with Cheniere Energy for sales of LNG from their terminal. Except for Kinder Morgan, they are the top dog in midstream.

I sold two other MLPs I had a year or so ago (Magellen Midstream Partners and NuStar GP Holdings, LLC).

Except for a small position in Exxon Mobil and my EPD, I am out of oil and gas for the next year or so when things sort out.

One caution here is to absolutely stay clear of any oil or gas production MLPs now and going forward.

 

[hesperus]

I still hold a few hundred thousand worth of EPD & MMP, and have unrealized gains of 36% and 140% respectively. These have a 2011 cost basis, so I'm still ahead, and will hold them. It's the KMI stock that has taken a beating, down 36% since they converted their partnership shares last year. I agree with aja, don't get near the upstream MLP's.

 

[Lakedog]

I still hold a few hundred thousand worth of EPD & MMP, and have unrealized gains of 36% and 140% respectively. These have a 2011 cost basis, so I'm still ahead, and will hold them. It's the KMI stock that has taken a beating, down 36% since they converted their partnership shares last year. I agree with aja, don't get near the upstream MLP's.

There is not much difference in the % drop of EPD vs KMI over the last year (or from their 52 week highs). EPD is down slightly more than KMI over one year. I own KMI but it appears they track very closely. I am in the camp that sees oil going higher sooner rather than later so have added a few shares at these levels.

 

[hesperus]

There is not much difference in the % drop of EPD vs KMI over the last year (or from their 52 week highs). EPD is down slightly more than KMI over one year. I own KMI but it appears they track very closely. I am in the camp that sees oil going higher sooner rather than later so have added a few shares at these levels.

Yes, over the last year the drops have been spectacular in many of my energy holdings. My point is that even with those drops, I am still significantly ahead because they had even more spectacular gains over the previous 4 years. I buy and hold long term. I have also been scooping up additional shares of a couple of midstream MLP's and CVX over the last few months.

 

[ESRwannabe]

I'm invested in AMLP which follows the midestream MLP sector. Its been up and down, mostly down. I don't have any complaints so far. My market timing guess was pretty descent all in all.

Should be getting another dividend next week. My guess is that it will be the same or higher than the last distribution. I'm not seeing many other places where I can get this kind of yield much less have any div growth. Even if my yield got cut in half it would be better than alternatives. My expectation is that there will be dividend growth as even during 2007-8 it grew around 2%. Last couple of years its averaged around 6%.

The only thing that has surprised me is how correlated the day to day stock price is to oil, given that these companies are not directly exposed to oil price. Its a relatively small market and I guess the robots are trading with each other every day based on oil price. Anyway I don't pay much attention to it.

Next week I'm going to have to decide what to do with the extra money. Very likely I will reinvest it into the AMLP index.

 

[Ed_The_Gypsy]

The only thing that has surprised me is how correlated the day to day stock price is to oil, given that these companies are not directly exposed to oil price. Its a relatively small market and I guess the robots are trading with each other every day based on oil price. Anyway I don't pay much attention to it.

Me, too.

My oil (no gas) and pipelines stocks (gas here) have taken a really big hit, but I have reviewed them and, while I made a mistake buying one of them in the first place, they all still look like good companies to me and I expect to keep them for another couple of years. These are the only individual securities I own and I ain't gonna do that again.

I am still learning and am reconsidering my investment philosophy. I have only recently been able to find consistent historical data going back to when interest rates were at bottom then increased dramatically (1970 or 1972 or so). Things are very different today, but it is real data on what happened to the markets the last time interest rates increased from a low level. (A thousand thanks to big-papa for pointing to Simba's spread sheet (I used the updated version at BH: http://www.early-retirement.org/forums/f28/looking-for-small-cap-value-total-return-historical-data-back-to-1977-a-78452.html)

 

[Mulligan]

Me, too.

My oil (no gas) and pipelines stocks (gas here) have taken a really big hit, but I have reviewed them and, while I made a mistake buying one of them in the first place, they all still look like good companies to me and I expect to keep them for another couple of years. These are the only individual securities I own and I ain't gonna do that again.

I am still learning and am reconsidering my investment philosophy. I have only recently been able to find consistent historical data going back to when interest rates were at bottom then increased dramatically (1970 or 1972 or so). Things are very different today, but it is real data on what happened to the markets the last time interest rates increased from a low level. (A thousand thanks to big-papa for pointing to Simba's spread sheet (I used the updated version at BH: http://www.early-retirement.org/for...urn-historical-data-back-to-1977-a-78452.html)

They may very well turn out to be a great investment, so I wanted to preface that as I do not know how the future will play out. But I did have some initial interest in maybe dumpster diving in this area, after listening to other people on other forums citing "safety", "toll collectors", "increased demand", "high dividends" etc.
But I have decided not to after getting info from people more knowledgable than me. KMI (ex-mlp) is simply passing capital back to shareholders and are paying for it with share dilution. An unsustainable model. If everything recovers I guess this may not matter. But if doesn't, I wouldn't be able to pick the winners from losers in the aftermath of extended problems. This article I found the other day over 8 months old proved very prophetic about KMI. It is a good read if nothing else. The decision to invest in these is probably more about ones tolerance for risk and reward from it. Which is probably more a reflection on my risk tolerance than on whether it should or should not be invested in.


In our view, US railroad companies make for excellent comparisons to KMI. Like KMI, railroad companies transport commodities on regulated assets; the fundamental drivers are cyclical; and they are capital intensive with high cash flow margins. Key fundamental metrics reveal how similar the economics of KMI’s and the US rails’ businesses are: both generate a ~10% ROIC and have EBITDA margins ~40%. KMI is slightly more capital intensive than the rails, as evidenced by its depreciation-to-sales ratio at 12% versus the rails at 9%. Both are growing cash flows, albeit the rails should post stronger EBITDA growth than KMI in 2015.

One might reasonably conclude that the US rails are better businesses on an after-tax basis than KMI is on a pre-tax basis.

What’s most interesting is the fact that the US rails trade at ~19x after-tax earnings, while KMI trades at ~39x pre-tax earnings with ~250% more leverage. The only plausible explanation for that massive valuation gap is the fact that KMI pays a dividend that is nearly 2x its pre-tax earnings, while the US rails payout just ~1/3 of their after-tax earnings. Eventually this market inefficiency will work itself out. And no, we don’t believe that it is the US rails that are mispriced…

http://ftalphaville.ft.com/2015/02/02/2108272/kmi-the-former-mlp-that-just-keeps-giving/



Sent from my iPad using Tapatalk

 

[Ed_The_Gypsy]

Mulligan,
I can't call my O&G stuff an investment anymore, just a gamble now and I don't like gambling.

I know I can find a good company but I have proved too many times I can't find a good stock.

Sent from my SM-G900V using Early Retirement Forum mobile app

 

[Mulligan]

Mulligan,
I can't call my O&G stuff an investment anymore, just a gamble now and I don't like gambling.

I know I can find a good company but I have proved too many times I can't find a good stock.

Sent from my SM-G900V using Early Retirement Forum mobile app

Dont feel bad Ed, I am there too with you. So I adapted my strategy and having all my individual stocks in their preferred issues. Its pretty easy to find companies that can cover their preferred dividend responsibility. Of course I believe "normalized rates" isn't happening soon and I am content with 6-7% divis that my individual preferred issues are kicking out and reinvest. I leave my common stocks to Total Stock Index fund.


Sent from my iPad using Tapatalk

 

[Car-Guy]

It's interesting to me that gas prices are holding steady or even falling a little more in my area but oil/gas stocks have recovered a good bit from their recent lows even with crude oil prices still depressed. Yes, I understand (reasonably well) there's a lot more to the price (direct and indirect) of an integrated oil stock than the price of gas at the pump.

I was disappointed that the recent ExxonMobil thread was closed since I wanted to comment and read others thoughts. (not sure why the thread was closed . I thought it was one of the more interesting discussions on this board in a long time)

So yes, I still like big oil, a lot, regardless of the current news headlines. However, I'm much more of a speculator (gambler) these days with "any stocks", but if I were to buy and hold long term again, I'd be considering a number of the big oil stocks. They made me my first million. Of course, YMMV and past results are no guarantee of future returns.

 

[petershk]

I like oil because of the headlines . That said I've really kept it to xom (feels "safe"), nov (I just love the company and management) and the vanguard energy etf. I'm mostly indexed... But my strategy is mostly index + tilt to things way out of favor.

I got burned in the past so have a checklist... Short version is finding companies that have the cash to survive longer than ones that don't.

Of course an entire industry can disappear but what I like about both Exxon and Nov is that many others will go bankrupt before they will and since oil and oil services is a supply/demand equasion bankruptcies or increases in demand move prices up... So I figure if I invest in companies with staying power it's a waiting game.

Even in xom now, down 15% on Nov and up 5% on vanguard. Positions roughly equal size. Very stressful run back in August .

Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[haha]

I like oil because of the headlines .

The newest headline and one that either heralds the demise of my oil and gas investments or the final whacko capitulation stage of the oil rout is the fear of "stranded assets". IOW, forget deepwater, forget Canadian oil sands, forget pipelines, these will never even be amortized, let alone make a profit. With Elon making batteries in Nevada and our fearless fathers in Washington behind photovoltaics those terrible oil barons will finally get their comeuppance.

I realize that betting against this is betting against technology, which has often been proven to be a foolish bet, but IMO it world take something as highly motivated, generously funded, and successful as the Manhattan Project to do much in the near future. And since there is no real oil glut, only what is very likely to be a temporary failure of producer discipline, there will be ample opportunity for oil price spikes long before the long term asserts itself.

It does make me nervous though. I wish that I were less exposed.

Ha

 

[petershk]

I remember a year ago headlines were indicating that somehow people had suddenly become uber health conscious and so mcd was dead and chipotle was going to just kill everyone. Low and behold... McDonald's is up about 25% and suddenly chipotle is mired in an ecoli scandal (which will also blow over and they will probably be fine).

I've been reading that somehow Wal-Mart is dead because no one wants to go shopping anymore and everything will be bought online and shipped via drones. Maybe... But when I go to Costco and Wal-Mart they're pretty busy and when I look at brick and mortar retail growth since internet boom in late 90s I'm skeptical.

Car sales are globally dominated by gas cars... So that gives you at least 10-15 years and the NUMBER of cars is going up... In some places very quickly.

Oil is is integrated into all elements of infrastructure it'll take decades to unwind. I suspect what will kill it is that eventually it'll be so expensive to find, alternatives will be cheaper.

I read a history of the whale industry published in 1908. Really neat stuff. People knew in the 1880s that the industry was dead and would be replaced by kerosene (oil wasn't a big thing yet) but the price of whale oil and the profits to the industry remained strong for decades... Because of infrastructure. It took decades to build oil pipelines, refineries, combustion engines, etc etc. It'll take decades to replace... And it'll take lots of oil to move stuff around to build those replacements .

I hope we see the replacement in my lifetime but I'm pretty sure you'll see it coming... It's not like Facebook and MySpace imo

Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[Mulligan]

The newest headline and one that either heralds the demise of my oil and gas investments or the final whacko capitulation stage of the oil rout is the fear of "stranded assets". IOW, forget deepwater, forget Canadian oil sands, forget pipelines, these will never even be amortized, let alone make a profit. With Elon making batteries in Nevada and our fearless fathers in Washington behind photovoltaics those terrible oil barons will finally get their comeuppance.

I realize that betting against this is betting against technology, which has often been proven to be a foolish bet, but IMO it world take something as highly motivated, generously funded, and successful as the Manhattan Project to do much in the near future. And since there is no real oil glut, only what is very likely to be a temporary failure of producer discipline, there will be ample opportunity for oil price spikes long before the long term asserts itself.

It does make me nervous though. I wish that I were less exposed.

Ha

Well stated Ha. The merging of technological advances with energy production has been both a benefit and possible detriment to certain segments. I invest down on the low end of the totem pole, mostly in utility preferreds stocks. But even there, as a layer of protection from technology, I invest mostly in transmission and distribution utilities. In other words avoiding the potential risk of "stranded power producing assets" from growth of solar and wind etc. At this point market doesn't differentiate in yield between the two types of companies, so I take the safer route with same yield.


Sent from my iPad using Tapatalk