I like Oil

[Fermion]

WOW, SDLP is trading at $2.60 now.

Everything is getting trashed.

 

[NW-Bound]

Even oil refiners are going down big time today. Valero down 9%, Tesoro down 12%. No one is immune to selling.

Is the end near? Capitulation? Buy, buy, buy?

 

[Lakedog]

I guess if I liked oil before, I like it more now since everything oil/energy is closing in on zero. I did buy a bit today -- just cannot resist when looking out a few years (expect I have the time left to see oil much higher).

 

[ESRwannabe]

I have a very small amount of dry powder but I was saving it up for taxes... Very tempted to use it and just file a tax deferral so I can save money for taxes latter on this year.

Complete bloodbath today. Even downstream like Marathon Petroleum was down almost 9%...

AMLP is down 6.27% today.

SDLP... wow, it is priced for bankruptcy.

I think I need to teach myself options so I can start hedging my long only portfolio in the future... To me oil going to $10 makes no sense at all, but damn I wish I had known how to hedge. Not that I would try to do it now. Way too late for that now.

Does anyone have a book recommendation on how to hedge your trades with shorts? I know nothing about options, but need to learn to protect myself from more stupid market panics.

 

[petershk]

I'm trying to more or less ignore the oil price itself and the stock prices as indicators at this point. I think changes in supply demand, debt levels of companies and financial management matter a lot.

I think companies with the larger debt and higher cost structure are at much bigger risk to go bankrupt or be forced to sell cheaply... And I think that's what it a going to take for demand to outstrip supply... Especially if Saudi and Iran use it as a proxy battle.

I'm just glad I dont live in a country with an undiversified source of revenue... The people in those countries may have a very rough few years ahead

Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[Fermion]

I took a 2000 share purchase of SDLP today. Got it for $2.61.

Currently pays $1 a year in dividend.

 

[aja8888]

I took a 2000 share purchase of SDLP today. Got it for $2.61.

Currently pays $1 a year in dividend.

Maybe you should change your handle from Fermion to No Fear!

 

[Fermion]

Maybe you should change your handle from Fermion to No Fear!

No something. Maybe No Brains. Or No Money.

 

[Running_Man]

Another update on some of the frequently mentioned stocks on this thread:

XOM was $90.00 Nov 2014 --$83.79 3/31/15 -- $79.29@ 8/15/15 $75.67 1/13
UCO was $16.60 Nov 2014 --$ 6.96 3/31/15 --$5.50 @ 8/15/15 $1.76 (adjust for reverse split of UCO 1 for 5)1/13/16
COP was $66.00 Nov 2014 --$61.00 3/31/15 --$50.37@8/15/15 $39.00 1/13
CVX was $108.00 Nov 2014--$101.00 3/31/15 --$88.45@8/15/15 $81.36 1/13
PEO was $24.00 Nov 2014 --$22.50 3/31/15 --$20.48 @8/15/15 $15.43 1/13
NADL was $2.43 Nov 2014 --$ 1.18 3/31/15 ---$ 0.91 @8/15/15 $0.14 (adjust for reverse split of NADL 1:10)
SDRL was $14.66 Nov 2014 --$ 9.65 3/31/15 --$8.91 @ 8/15/15 $2.39 1/13/16
BHP was $51.63 Nov 2014 --$46.47 3/31/15 --$38.37@ 8/15/15 $20.38 1/13

At the start Boone Pickens was sure WTI Oil would not fall below $70 by 3/31/15 he was sure it would be $70 by year end. On 8/15/15 he was even more sure it would be $70.00 by year end and now on 1/13/16 he is positive it will be well over $70.00 by year end.

It is obvious that Chevron and Exxon Mobil have performed far better though still down quite a bit better than the other stocks. COP and BHP continue to fall and they are the ones that most strongly aligned their corporate strategy with Boone Pickens thoughts. I wonder how that 15 year 1.5% BHP Euro bond is doing....

 

[mathjak107]

I took a 2000 share purchase of SDLP today. Got it for $2.61.

Currently pays $1 a year in dividend.

i couldn't care if they paid 2 bucks in dividends . it would only steepen their losses with each payout . boy the 1 year is down 66% in total return . you lost 1/3 of your money a year the last 3 years . it don't matter what you got in dividends that is your bottom line

 

[Fermion]

i couldn't care if they paid 2 bucks in dividends . it would only steepen their losses with each payout . boy the 1 year is down 66% in total return . you lost 1/3 of your money a year the last 3 years . it don't matter what you got in dividends that is your bottom line

I think you have to look at any oil stock like that. You bought KMI for a trade (then stopped out) when it had already dropped some 75%.

SDLP has 91% contract coverage for 2016 and IIRC some 70% for 2017. They don't really start getting into trouble until 2019.

I guess if deep sea drilling is indeed over, but I bet it comes back eventually.

 

[ziggy29]

An unconventional play on the oil market: cowboy boots?

What cowboy boot sales are saying about oil prices

 

[aja8888]

SDLP has 91% contract coverage for 2016 and IIRC some 70% for 2017. They don't really start getting into trouble until 2019.

I guess if deep sea drilling is indeed over, but I bet it comes back eventually.

Better hope those contracts don't get cancelled or pushed out several years. No one is drilling offshore with oil at $30. There is just too much of it coming from onshore sources and easier to get. What will go on offshore is ongoing well and platform maintenance (re-completions, workovers, etc) as those wells are drilled and producing, or able to.

 

[Fermion]

Better hope those contracts don't get cancelled or pushed out several years. No one is drilling offshore with oil at $30. There is just too much of it coming from onshore sources and easier to get. What will go on offshore is ongoing well and platform maintenance (re-completions, workovers, etc) as those wells are drilled and producing, or able to.

You can't just cancel a contract without some sort of concession. These are contracts with big players like Exxon and BP.

You think Exxon is preparing for BK?

 

[explanade]

United Air Lines say profits are down because less flights out of Houston by oil industry employees.

Hmm, doesn't the drop in oil prices help their fuel costs, the biggest cost for airlines, more than offset any lost business due to oil industry cutting back on travel?

 

[ESRwannabe]

I couldn't resist and used my dry powder to buy 500 more shares or AMLP. I now have 19,180 shares.

 

[papadad111]

What's your cost basis for AMLP ?

 

[aja8888]

You can't just cancel a contract without some sort of concession. These are contracts with big players like Exxon and BP.

You think Exxon is preparing for BK?

All these contracts for drilling have cancellation clauses and penalties. I'm sure your investment was made with all that in mind. I still work part time in the business and have worked in the trade for 35 years. I also worked in a corporate engineering job at one of the top three Big Oil firms for several years. I am just stating the risks and reality of the situation.

 

[Fermion]

All these contracts for drilling have cancellation clauses and penalties. I'm sure your investment was made with all that in mind. I still work part time in the business and have worked in the trade for 35 years. I also worked in a corporate engineering job at one of the top three Big Oil firms for several years. I am just stating the risks and reality of the situation.

Yes, of course. I thought you were trying to say the contracts capable of being cancelled at any time on the whim of one party.

What I have been seeing on the couple of past cancellations is an extension of other rigs (maybe at a lower day rate) until 2019 to 2021. They then dry stack the cancelled rig.

Anyway, at $2.60 a share and with contract payments indicating over 2x dividend coverage for 2016 and 2017, it is not a huge risk of completely going under anytime soon. I may even sell before the first dividend if we get a spike.

 

[ESRwannabe]

What's your cost basis for AMLP ?

I think its around $12 now. Could be a little higher. I'll check latter and update.

 

[papadad111]

Mark Haines would be wearing his hard hat today

 

[ls99]

An unconventional play on the oil market: cowboy boots?

What cowboy boot sales are saying about oil prices

Wonder how Stetson Hats are selling?

 

[Running_Man]

( August 2015) Time to review this the reality of commodity prices is starting to come home to some of these oil companies as their hedges are coming to an end, and virtually all of them are down 10% or more with BHP down 22%. Amazingly BHP has been using cash to increase dividend and pay down debt, which in about another year will all have to be undone or they will be in serious financial jepoardy.

XOM is starting to get nearer to the 70-75 where they might be a buy, smartest guy in the investment room and look at a chart of XOM and you can see where Warren Buffet sold this year. Chevron and COP have been equally poor this year.

On the 25th BHP will be having an investor first half in review, I look forward to listening to that, I presume Wolfman Jack will be their presenter.

Today BHP announced that due to low oil prices they have to write off 9 BILLION in value of an investment of 20 Billion made just 4 years ago. Dividend is almost certain here to be cancelled, I cannot envision any scenario that allows them in the near term to maintain it, their board however has been blind to this fall having planned for Boone Pickens priced oil for their 2016 plans, unfortunately they are finding out that planning on the Boone Pickens oil index is actually a fantasy and is leading to bankruptcy. Eventually oil will recover to get to the price Boone Pickens believes and he will claim victory, but by then companies like BHP may be out of business.

 

[explanade]

Seems there's a lot of handwringing about Iran's 500k barrels a day which is suppose to hit the global market soon.

A lot of the oil is being stored now, so the glut is building up but nobody is cutting back production?

 

[Running_Man]

Also the main reason banks are falling to start the year - average for big banks is about 20 percent decline --- is that with all the hedges from last year expiring many of their oil loans are now not performing as the oil companies don't have the hedge income to pay their loans. Wells Fargo took a loss of 115 million but stated that non performing oil loans are now nearly a billion dollars and expect an increase in the rate of write-off which have been 100 million per quarter. Wells Fargo is one of the least exposed banks in the US to the oil industry so the banks are being hurt and laying bare the lie that the oil price decline is great for the US economy, something that continues to be spread even after a year of failure in this area. As this becomes evident we should finally make a bottom in oil. But the pain of this oil decline is just now getting priced into non-bank areas