I like Oil

[Running_Man]

OK today with another 5% down leg in oil and Conoco (COP) under the gun for ratings downgrades and needing to borrow 4.7 Billion to pay dividend even with plan of WTI @ 50, COP has found a new low. COP realized nearly $50 per barrel in 2015 for their oil, I read an article almost comically about the CFO talking about how well their company is performing in producing almost 4 percent more oil than a year ago, only problem is they are not profitable unless oil gets back above $60 so they lose more per each barrel produced by they are able to produce it very quickly.

The dividend for COP if oil stays below $40 for another quarter is toast and I think that is being recognized by management and the market and likely for a 75% hit. COP has mismanaged it's cash so badly (it bought back 17% of shares in 2011 and 2012 when oil hit 114 and stock price was around $70, a waste of 14 billion dollars and now issuing shares @42) and then at the same time divesting the refining business to concentrate on their core. A disaster of a plan as the oil market worked out, this stock if oil stays here another 3 months, is going to $20.00.

 

[Fermion]

Someone on here told me to short COP...wish I had listened to them.

I did short FCX at $12 but exited that at $11.50. Huge mistake since FCX today is at all time low of $4.50, just a few weeks later.

 

[NW-Bound]

Oil is down to $32/barrel. Every commodity is down. After market close today, Alcoa will release earnings. Will see what transpires.

 

[valueplayer]

T Boone Pickens is just killing me! A year ago he predicted by end of 2015 oil would be 70-75. Today he says by the end of the year oil will be 70-75, he was only off by a year!! After stating that Oil then collapses in price. Now I do not pretend to know what the price of oil will be by year end, possible to be 75 also possible to be $15.00. This year is the year of major pain for oil and the related dependent companies if the price does not recover, to bank on a recovery is not a plan, it is wishful thinking. Remember that when you pick companies to invest in......

I'm not sure which character I find more amusing Pickens or Dennis Gartner...


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[aja8888]

Even though I am in the oil and gas business, I have nothing to add to this thread except it's going to get worse.

As an example, last week I was in New Mexico inventorying a few hundred conventional and coal bed methane gas wells for a potential acquisition. I get paid well for this part time work, but, I think to myself, why, in their right mind, are they buying low production (and low BTU) gas wells in this business environment?

 

[audreyh1]

Oil is down to $32/barrel. Every commodity is down. After market close today, Alcoa will release earnings. Will see what transpires.

$31.23 now

Are we gotta big to see it in the $20s?

 

[aja8888]

$31.23 now

Are we gotta big to see it in the $20s?

I remember $8, so $20's are still big time. But it won't go to $0.

 

[Fermion]

I remember $8, so $20's are still big time. But it won't go to $0.

And I remember when you could buy a new corvette for $2900.

Are we returning to those times?

 

[Lakedog]

Even though I am in the oil and gas business, I have nothing to add to this thread except it's going to get worse.

As an example, last week I was in New Mexico inventorying a few hundred conventional and coal bed methane gas wells for a potential acquisition. I get paid well for this part time work, but, I think to myself, why, in their right mind, are they buying low production (and low BTU) gas wells in this business environment?

If you have deep pockets, is it not better to buy assets when they are on sale? Of course, I realize no one knows where oil/gas prices will be in the near term but there still seem to be a few folks that don't think everything related to oil/gas is going to zero (and stay there).

 

[Mulligan]

If you have deep pockets, is it not better to buy assets when they are on sale? Of course, I realize no one knows where oil/gas prices will be in the near term but there still seem to be a few folks that don't think everything related to oil/gas is going to zero (and stay there).

I think what Aja is saying it is all about proper timing and quality of company. A person better be very good at a minimum of understanding the debt loads, capital structure, maturity dates, ability to rollover debt, etc...A lot of moving parts. Check bond prices of issues in relation to par... Those can be very telling and the storm may not be ridden out in the wrong company.
KMI is a perfect example of people going in on a company with limited knowledge and understanding of the situation. People were buying that thing hard while it kept dropping from the 30s and into the 20s just knowing that dividend was "secure and going to grow". Well Mr. Market didnt think so and proved it....Is it a good buy now? I dunno and doubt if I ever do.


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[Lakedog]

I think what Aja is saying it is all about proper timing and quality of company. A person better be very good at a minimum of understanding the debt loads, capital structure, maturity dates, ability to rollover debt, etc...A lot of moving parts. Check bond prices of issues in relation to par... Those can be very telling and the storm may not be ridden out in the wrong company.
KMI is a perfect example of people going in on a company with limited knowledge and understanding of the situation. People were buying that thing hard while it kept dropping from the 30s and into the 20s just knowing that dividend was "secure and going to grow". Well Mr. Market didnt think so and proved it....Is it a good buy now? I dunno and doubt if I ever do.


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I do think KMI is a good buy now and have been buying it at the current price level -- owned a bit before the bottom but much more after the drop. They did cut the div more than I expected but I am fine with what they did as the cash flow is going to growth which will increase future earnings and divs.

Like you, I don't require investment returns for living expenses so I am not as risk averse as many folks but have done very well with my investing style since retiring. I do like to see fear in the market and/or specific sectors as that provides the opportunity to find oversold quality equities.

 

[Mulligan]

I do think KMI is a good buy now and have been buying it at the current price level -- owned a bit before the bottom but much more after the drop. They did cut the div more than I expected but I am fine with what they did as the cash flow is going to growth which will increase future earnings and divs.



Like you, I don't require investment returns for living expenses so I am not as risk averse as many folks but have done very well with my investing style since retiring. I do like to see fear in the market and/or specific sectors as that provides the opportunity to find oversold quality equities.

I am Captain Obvious with critiquing someones common stock purchases as it takes the earth to move for me to have the courage to do it. But I sure as heck would rather own it at the price point you got it than the ones that did 6 months ago.


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[aja8888]

If you have deep pockets, is it not better to buy assets when they are on sale? Of course, I realize no one knows where oil/gas prices will be in the near term but there still seem to be a few folks that don't think everything related to oil/gas is going to zero (and stay there).

Depends on the assets. Gas producing assets are pretty much a U.S. locked business. We have more gas shut in in the U.S. than ever before and not enough customers, probably for decades to come. It's not like crude oil where the pricing market is worldwide. Loading up on low BTU natural gas may get you bankrupt if you end up facing increasing production costs and stagnant margins. Not that all deals are bad, but these times are very risky in the gas business. Ask Chesapeake and Southwestern Energy how it's going for them.

 

[VFK57]

Saudis and their closest allies UAE, Qatar, Kuwait etc are creating huge oil oversupply in order to damage their enemies economy: Iran and Russia. They have large budget deficit themselves and pulling their reserve funds but destroying enemies economy is priority for them. Of course there is Global slow down for oil demand but still I think the price drop is mainly due to Saudis policies.

 

[Mulligan]

Depends on the assets. Gas producing assets are pretty much a U.S. locked business. We have more gas shut in in the U.S. than ever before and not enough customers, probably for decades to come. It's not like crude oil where the pricing market is worldwide. Loading up on low BTU natural gas may get you bankrupt if you end up facing increasing production costs and stagnant margins. Not that all deals are bad, but these times are very risky in the gas business. Ask Chesapeake and Southwestern Energy how it's going for them.

I swear I have read somewhere they burn off more natural gas at the source than they actually pipe...Is that true?


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[aja8888]

I swear I have read somewhere they burn off more natural gas at the source than they actually pipe...Is that true?


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Flaring is happening only where there are no pipelines to bring it to market (mostly North Dakota and the Eagle Ford play in west Texas). However, North Dakota has passed rules mandating a minimum of 77% gas capture or your well will be curtailed to 200 BBL/day production, or completely shut in. This is being accomplished by the use of high tech low and high pressure flares, vapor control equipment or 98% efficiency thermal combustors.

Texas does not have this restriction and allows ground flares while wells are being brought into production but once completed, they must capture gas or only use an emergency flare.

Open flaring (uncontrolled) is becoming a thing of the past.

 

[audreyh1]

$30.17! The $20s are imminent!

 

[Christine]

My friend convinced me that we should sell our small part of Statoil two years ago. An her hunch was excellent. I need to ask her what she think about when to buy again. Not yet I'm sure.

$30.17! The $20s are imminent!

I remember my twenties - it wasn't all bad.

 

[Mulligan]

My friend convinced me that we should sell our small part of Statoil two years ago. An her hunch was excellent. I need to ask her what she think about when to buy again. Not yet I'm sure.




I remember my twenties - it wasn't all bad.

If you remember your twenties, Christine, you didn't play hard enough, especially the early twenties. I know mine were good because I barely remember them and that isn't because of Alzheimer's either.


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[NW-Bound]

Today, West Texas Intermediate crude is down to $29.93/barrel, where it was in 2003.

But adjusted for cumulative inflation which is 31%, that's down to $22.8 in 2003 dollars. Aye, aye, aye...

 

[explanade]

Several forecasts for oil at $20 including Goldman Sachs.

One is saying $10 may be possible.

So now it should shoot up the other way.

 

[Nemo2]

Several forecasts for oil at $20 including Goldman Sachs.

One is saying $10 may be possible.

So now it should shoot up the other way.

From the Melbourne, Australia, Age:

Oil price slump: Let's face it, nobody knows what the hell is going on

 

[papadad111]

Warren is buying Philips 66

Buffett finds value as oil sinks http://www.cnbc.com/id/103299253

 

[aja8888]

Warren is buying Philips 66

Buffett finds value as oil sinks Buffett finds value in oil wreckage

Not a bad choice as it's a midstream and refining company that will benefit from lower crude prices.

 

[ESRwannabe]

I like Marathon Petroleum as a downstream company.