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When to buy BP?
Old 05-12-2010, 12:41 PM   #1
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When to buy BP?

52 week range is 44.62 - 62.38

Today price is 48.35

How low will this thing go?

If they don't stop the leak in the next two weeks will it fall off the table?

http://www.energyandcapital.com/arti...-overdone/1141
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Old 05-12-2010, 12:52 PM   #2
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markets hate uncertainty.

The depression in BP stock is way overdone, or so I hear. The market capitalization drop in BP just may be around 3 times the worst case scenario of anything BP will have to pay.

For a long term buy BP just may be quite a bargain.
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Old 05-12-2010, 04:06 PM   #3
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None of us knows what the liability will be. However, few are aware that this environment is 'kinder' to oil seepage than, say, Alaska. Oil has seeped out of sea pockets forever and in warm waters microbes dine on those carbons. The impact of this spill will dissipate quicker here. That said, the population is denser on the Gulf so there are more who will suffer economic damage.

I say wait a while before buying.
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Old 05-12-2010, 04:17 PM   #4
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You can buy onshore nat gas companies for a fraction of even BP's price, so why take the risk? Thinking of CHK, UPL, RRC, etc.
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Old 05-12-2010, 04:40 PM   #5
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What Brewer said...

Brewer, did you catch the recommendation for the pipeline operator discussed elsewhare on CNBC the other day?
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Old 05-12-2010, 04:46 PM   #6
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Uh, pipeline co? Nope, although I saw some stuff on Gabelli buying shares of a utility that also had a pipeline and E&P operation for the hidden reserve value. Personally, I have been buying CHK lately. Current equity price equals like $2 an MCF on proved reserves, with everything else thrown in for free. Bought during the fun last week and will slowly buy more if it stays in the low 20s.
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Old 05-12-2010, 04:55 PM   #7
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EPD was the one mentioned.
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Old 05-12-2010, 06:02 PM   #8
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as someone who is in the oil and gas business (drilling specifically), i stay clear of BP. They have many major mess ups in their MCPs. OF course, the yield on BP must be killer right now.

as far as natural gas goes (i don't have time to keep up with every little company)...$2/MCF seems like a good deal, but how did they get there? Gas storage in the US is maxxed, didn't even dent the storage this winter, and major LNG projects are coming online in the next couple of years to sell in the US market.
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Old 05-12-2010, 07:22 PM   #9
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Quote:
Originally Posted by ronocnikral View Post
OF course, the yield on BP must be killer right now.
All but 7% right now and its pretty enticing to me. I'm really tempted to snag a few shares but the one issue I can never seem to resolve is that all of the BP stations nearby are priced at 5 to 10 cents per gallon higher than every other station in the area. As a result I rarely see more than a few vehicles at any BP station here. Their business model must be above my mental comprehension, or maybe its just an issue specific to my area.
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Old 05-12-2010, 08:07 PM   #10
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imo, buying into a major oil and gas business one should not focus on the marketing end of things. gas stations are typically (as i understand it), owned by other companies which have licensing agreements. i would key more into reserves, safety record, production rate changes, investing in major upstream projects, who their partners are and divesting of refineries/downstream projects (especially in the US).

i don't think BP will fall off the table so to speak. even if they spend $1B cleaning up this mess and have another 20 years of lawsuits, the dividend shouldn't go away. otherwise, it may fall off the table. as master said, with the yield, it is probably good for the long term.
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Old 05-12-2010, 08:17 PM   #11
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Originally Posted by ronocnikral View Post
as someone who is in the oil and gas business (drilling specifically), i stay clear of BP. They have many major mess ups in their MCPs. OF course, the yield on BP must be killer right now.

as far as natural gas goes (i don't have time to keep up with every little company)...$2/MCF seems like a good deal, but how did they get there? Gas storage in the US is maxxed, didn't even dent the storage this winter, and major LNG projects are coming online in the next couple of years to sell in the US market.
Chesapeake is hardly every little company.
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Old 05-12-2010, 09:32 PM   #12
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Scott Adams has his own approach:
Scott Adams Blog: Engineers to the Rescue 05/12/2010
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Old 05-12-2010, 09:35 PM   #13
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My son worked for ARCO Marine Division. When BP was in the process of buying them out the division didn't like what they saw so they 'shopped' themselves out to Phillips. Although son still had BP stock as a result of the merger he wasn't impressed.

ARCO was very careful because a spill could bankrupt them. BP is too big to be careful IMHO.
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Old 05-13-2010, 06:01 AM   #14
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Quote:
Originally Posted by ronocnikral View Post
as someone who is in the oil and gas business (drilling specifically), i stay clear of BP. They have many major mess ups in their MCPs. OF course, the yield on BP must be killer right now.

as far as natural gas goes (i don't have time to keep up with every little company)...$2/MCF seems like a good deal, but how did they get there? Gas storage in the US is maxxed, didn't even dent the storage this winter, and major LNG projects are coming online in the next couple of years to sell in the US market.
CHK got to $2 an mcf all in through the equity because the market hates nat gas, full stop. But this is the foremost shale gas player with the lowest finding and cash production costs of the public gas-oriented companies and they have vast untapped areas for more drilling. And what the do with every penny they have is drill, so proved reserves just keep growing depite their quite significant production. Eventually nat gas prices will rise and that will be reflected in CHK's stock price. The big unknown is how long it takes for gas prices to rise.

CHK also makes a good "Texas hedge" for my equity positions in Bermuda reinsurers.
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Old 05-13-2010, 06:39 AM   #15
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CHK got to $2 an mcf all in through the equity because the market hates nat gas, full stop. But this is the foremost shale gas player with the lowest finding and cash production costs of the public gas-oriented companies and they have vast untapped areas for more drilling. And what the do with every penny they have is drill, so proved reserves just keep growing depite their quite significant production. Eventually nat gas prices will rise and that will be reflected in CHK's stock price. The big unknown is how long it takes for gas prices to rise.

CHK also makes a good "Texas hedge" for my equity positions in Bermuda reinsurers.
True, true. The company I worked with in 2003 was partner in a well with chesapeake. Everyone said they were overly aggressive as they would buy out all partners on dry holes. We've all thought their aggressiveness would land them on their face, but i've got to hand it to guys, they have proved me wrong. And you've got to tip your hat to any company adding reserves in the US via a bit.

projects such as this will keep the natural gas price low in US for many years. 1 BCF/day coming to the US for the next 30 years (at least that is the plan). There is another being built in Nigeria (or there about), longer time horizon to completion. Not to mention the multi-train T&T LNG plant that has been kicking for years. And CVX's gorgon project to take care of Japan's needs for years to come.

But...since I indexed my electric bill to the natural gas price, it's price will most likely rise...
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Old 05-13-2010, 07:52 AM   #16
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Could be that all of this will keep natgas prices low forever, but I rather doubt it. The cure for low prices is low prices. While production may not respond with as much in the way of curtailments as in the past, the demand side could be quite strong. It has been fascinating to watch the methanol market as a shareholder of the largest producer. Because methanol is basically just natgas that has been transformed into something that can be a substitute for diesel (dimethyl ether aka DME), methanol is priced at the margin based on the value of oil/refined products yet its feedstock is natgas. Prolonged low natgas prices coupled with lofty oil/refined prices will see this and other methods used to substitute natgas for oil.
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Old 05-13-2010, 09:26 AM   #17
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Because methanol is basically just natgas that has been transformed into something that can be a substitute for diesel (dimethyl ether aka DME), methanol is priced at the margin based on the value of oil/refined products yet its feedstock is natgas. Prolonged low natgas prices coupled with lofty oil/refined prices will see this and other methods used to substitute natgas for oil.
Brewer what you say is chemically true, but how much of world methanol production is currently going into DME?

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Old 05-13-2010, 11:43 AM   #18
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Have a look at slide 13:

http://methanex.com/investor/documen...pr29-FINAL.pdf

With global annual methanol demand at something like 150 or 160MM tons, I suspect we are a year or two away from 10% of the global market being energy applications (and rapidly growing from there).
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Old 05-13-2010, 05:29 PM   #19
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Thanks Brewer.

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Old 05-14-2010, 06:14 AM   #20
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I would buy BP the day before the gulf well is plugged. You can thank me later.
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