I like Oil

[Running_Man]

The oil pipeline MLP's that I mostly follow all went down much more than the market today, other sectors that have MLP's I was not referring to

 

[aja8888]

thanks, so you were talking about MLPs going down in general or specific MLPs?

Right now, only the oil and natural gas related ones that are associated with oil and gas production, transportation (i.e.pipelines), and storage. Other MLPs, those associated with other industries such as coal and timber, are having bad days on their own merits.

 

[explanade]

Are they cutting their distributions or just their share prices are going down?

 

[hesperus]

Are they cutting their distributions or just their share prices are going down?

From what I am reading this morning, one of the biggest hit midstream MLP's, Plains All American (PAA), has been downgraded from 'buy' to 'hold'. They reported that they are planning to hold their distribution steady, but this is a change because they have raised distributions regularly for years now. Further, this particular company is the same one that was involved in the California oil spill near Santa Barbara recently.

 

[Running_Man]

Oil’s $4.4 Trillion Hole - WSJ

Article in Wall street journal putting dollars to the story of the oil price decline and why this is hurting certain companies so much. It talks of how the industry is coping with an implied drop in one year of 4.4 trillion in revenue when so much of the industry was built on debt expecting those revenues, also that pipeline MLP's which were thought to not be price sensitive suddenly are showing overcapacity of pipelines and counterparty risks.

The article is not significantly different in expectations than the outlook I had at the start of the year, however what is interesting is that many of these stocks are far, far lower about 20-30 percent lower on average than on December 1st.

At this point buying some Exxon would be warranted as they have the financing to take advantage of the situation in the coming years, provided one holds to about 1/2 of whatever a normal position would be, using the other 1/2 if the prices were to fall much further or else later in 6-12 months if the oil industry is showing strong signs of recovery, something I do not expect to happen.

It is probably far more likely Exxon will fall to 70 than go back above 90 but the time for avoiding the oil industry's strong players as doing worse than the overall stock market is probably nearing it's end. I would still avoid like the plague weak players, which are those that really took on a lot of debt to take advantage of high oil and low interest rates as they are still very vulnerable.

 

[petershk]

I like XOM more now than before and have been buying chunks of it as it's dropped.

There's a lot of negativity... But not outright panic yet ask hopefully that comes soon. My thesis remains that oil is a limited critical resource that won't be replaced significantly for at least a couple decades.

I like XOM because comparatively low debt and good cash flow. They can buy up the good stuff cheap and ride it out.

Maybe oil goes to 20, maybe it goes to 100. Maybe there's another war, maybe there's a huge tanker spill. Who knows.

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[turbo89]

I like XOM more now than before and have been buying chunks of it as it's dropped.

There's a lot of negativity... But not outright panic yet ask hopefully that comes soon. My thesis remains that oil is a limited critical resource that won't be replaced significantly for at least a couple decades.

I like XOM because comparatively low debt and good cash flow. They can buy up the good stuff cheap and ride it out.

Maybe oil goes to 20, maybe it goes to 100. Maybe there's another war, maybe there's a huge tanker spill. Who knows.

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I'm with you on this one. I'm planning to add to my position when it breaks $75/share.

 

[Car-Guy]

As I mentioned earlier in this thread, In effect, I have been day trading (gambling) with big oil this year and been pretty lucky, but am beginning to wonder if now is the time to start buying and holding again. The problem of course is that it could be an even better buy in the months ahead. As most of you probably know, there are plenty of other down side risks (not just falling oil prices) of holding big oil for long periods of time, but as they say, no risk, no rewards.

I'm also watching for the big players to announce some major acquisitions or mergers. I suspect they are looking for good buys and/or good fits while prices are low.

 

[Fermion]

I'm with you on this one. I'm planning to add to my position when it breaks $75/share.

You could sell October puts at $75 and then own the shares for $73 or whatever the premium is you recieve. (I mean if you are going to buy shares anyway when it breaks $75, might as well get some extra $$)

 

[aja8888]

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.

 

[hesperus]

Look out below. Oil just broke under $43 bbl support level.

 

[dallas27]

Look out below. Oil just broke under $43 bbl support level.

Wait for the iran approval. Or just before the vote. If approved, oil will plummet, at least for a bit until we can figure out what iran does next. Within a year, mid-east tensions will raise the price again.


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[explanade]

China economic slowdown could slacken demand?

They devalued the currency as a reaction against slowdown but the devaluation effectively raises oil for them, which could weaken demand further.

 

[Rothman]

I now am thinking oil on the uptick will be a good sector timing bet, but now is not the time, let's see what happens with Iran and global economy the bottom may be still to come.


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[aja8888]

Good article on the supply imbalance:

Oil Guru Andrew Hall's (Astenbeck Capital) July Letter to Investors - GuruFocus.com

"Despite the lackluster price action, underlying fundamentals for oil continue to improve. It is becoming increasingly clear that the huge oil surplus that most analysts predicted for the first six months of 2015 failed to materialize. The current global inventory surplus is probably around 240 million barrels – most of it crude oil. This is about half what was being projected earlier this year. The difference can be attributed primarily to phenomenal demand growth in most markets. Contrary to the counter-intuitive beliefs of the analyst community, oil demand is price elastic. The collapse in prices in Q4 of 2014 has been met by a surge in consumption. Here in the U.S., apparent oil demand so far this year is running 862 kbpd or 4.6% above 2014. For the past four weeks the year over year growth in apparent oil demand is a whopping 1.34 million bpd or 7.2%. Vehicle miles traveled, as reported by the U.S. Department of Transportation, are up 3.9% for the year through April. Data published by the Bureau of Economic Analysis shows U.S. gasoline consumption up 5.1% in May compared to 2014 – this despite a rise in retail gasoline prices compared to April."

 

[redduck]

I like XOM more now than before and have been buying chunks of it as it's dropped...

..Maybe there's another war, maybe there's a huge tanker spill. Who knows.

You may like XOM a bit less if that huge tanker spill involves
the Exxon Valdez II.

 

[petershk]

redduck: heh. I never wish for a natural disaster... but that's no different than risks to any other company. My point is that there's no way to know what problem will happen to what company at what time. Hence most of my money is just indexed and I use a small percentage of it to try and learn investing better. I find it lots of fun but I do wish I was actually "good" at it...

[edit] also, if you bought after the last oil spill you did quite well...

 

[ESRwannabe]

So, I finally read this thread yesterday and saw SDLP mentioned a few times and it peeked my interest to look into it. Looks like a nice business to take a small gamble on. Basically gambling on oil price in 2017 and beyond being better (or contracts being renewed with someone at any rate).

Bought 300 shares this morning for around $11.68. I've got some dividends coming in the next few days and may bump shares up to 500 or 600, and then sit on it. See what happens in 2+ years.

Edit: Just a funny observation, but SDLP is the only thing I own that is down today. I apologize to any longs for cursing the stock with my bad luck. lol

 

[freebird5825]

Disclaimer...I am by no means a good stock picker.

However...since I have been watching BHP very closely for the past few months, and I had enough spare cash to pull it off...I bought 80 shares today at $37.60 when the market opened. That brings my total shares owned to 500.

I'm in for the long run, so hopefully that will help offset my cost basis on the previous 420 shares a bit.

Time will tell.

 

[redduck]

[edit] also, if you bought after the last oil spill you did quite well...

Unfortunately, I bought EXXON way, way, way, way, way after their last oil spill. So, while I'm getting a nifty dividend from EXXON, the total return leaves much to be desired. (I hate it when that happens).

 

[NW-Bound]

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.

 

[MichaelB]

It may be towards the end of the year or early 2016.

Oil prices will probably rise again, but it may a bit longer than this. A lot of new supply has come online in the last couple of years, while demand growth has slowed. Absent a new supply restriction, prices may stay low for a while.

As interest rates return to their historic averages, energy dividend payers may find themselves strapped for cash.

 

[Mulligan]

Oil prices will probably rise again, but it may a bit longer than this. A lot of new supply has come online in the last couple of years, while demand growth has slowed. Absent a new supply restriction, prices may stay low for a while.

As interest rates return to their historic averages, energy dividend payers may find themselves strapped for cash.

It is certainly a crapshoot. Heck as of today, if I had to bet, I would bet on oil returning to over $75 a barrel before we see historic averages of interest rates again. Who knows...


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[NW-Bound]

There are different segments of the energy sector, and they do not peak or bottom out at the same time. I need to understand more about oil refiners, tankers, pipeline owners, etc..., vs. the integrated oil companies. The drillers may be suffering for a while.

 

[ESRwannabe]

As long as the entire MLP sector doesn't go bankrupt I'll be in good shape... The only large bet I've made on the oil crash is the AMLP index. I bought in the other week at a share price that was lower than five years ago when the ETF was created.

I am planning on making some tiny bets (no more than $5k each) in individual companies. First one will be SDLP which I put about $3,500 in the other day and will add $1,500 more next week when I get some dividends.

After that I'm looking at adding one or more of the majors (XOM, CVX, BP, RDS.A, COP).

After that I'm probably done and will just have to wait a few years to see how this plays out.

So, out of the majors which one(s) are the best to gamble on? I'm thinking XOM is probably the safest.