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Elliott Gue

 
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  • 4 Key Takeaways From The Year's Biggest Acquisition In The Energy Patch [View article]
    The article makes no mention of holding ACMP. One rationale for doing so would be that the terms of the merger with WPZ might be sweetened.

    At this stage, we'd prefer to own WMB, which benefits whether or not the proposed WPZ-ACMP tie-up goes forward. We cover every energy-focused MLP at EnergyAndIncomeAdvisor...
    Jul 23 10:05 AM | 1 Like Like |Link to Comment
  • Arc Logistics Partners: Near-Term Upside Catalysts, Longer-Term Questions [View article]
    Initial reaction: Move provides potential to move crude oil to West Coast refinery complex. Obviously, need to dig into this a bit more to develop a more nuanced opinion.
    Jan 23 08:40 AM | Likes Like |Link to Comment
  • Dynagas LNG Partners LP: A Dynamite Investment? [View article]
    No, actually the webinar recording is free of charge.
    Dec 27 04:12 PM | 3 Likes Like |Link to Comment
  • Icahn's Activism Prompts Transocean To Raise Dividend, But There Are Other Contract Drillers In The Sea [View article]
    One point I'd bring up is that Seadrill has actually been fairly innovative in its use of debt and asset sales so that it can continue to grow while still paying out a sector-leading dividend.

    Currently, roughly three-quarters of its outstanding debt is secured, basically a sort of mortgage on the company's rigs. This allows the firm to raise capital cheaply to fund expansion.

    I also like Seadrill's use of the MLP structure (SDLP) to essentially monetize the value of some of its rigs that are booked under long-term contracts.
    Nov 22 10:34 AM | 4 Likes Like |Link to Comment
  • Updated Outlook For Crude Oil [View article]
    My colleague Roger Conrad is a real expert when it comes to the Canadian names. He just wrote an article on Seeking Alpha that covers PGH:

    http://seekingalpha.co...
    Nov 18 03:05 PM | Likes Like |Link to Comment
  • Salute Your Drillmasters: Gains In Drilling Efficiency A Boon For Oil-Field Service Providers And Oil And Gas Producers [View article]
    It's truly a revolution underway.

    I think it's also fascinating to think that the US has no need to import light, sweet crude oil into the US Gulf Coast as of the end of this year. Also, the US is likely to overtake Saudi Arabia and Russia later this decade to become the world's largest oil producer.

    And then there are the repercussions for other industries. For example, it's now cheaper to produce base chemicals and plastics in the US than the Middle East due to just how cheap US supplies of natural gas liquids are at this time.
    Nov 18 02:30 PM | 4 Likes Like |Link to Comment
  • Salute Your Drillmasters: Gains In Drilling Efficiency A Boon For Oil-Field Service Providers And Oil And Gas Producers [View article]
    There's a link to a video of Patterson's walking rigs in the article above. If you look at the picture of a pad drilling operation in the article and then look down about three lines below that you will see the word "video" hyperlinked. Click there and it'll take you to the video on Patterson's site.

    It can be a bit difficult to see in the text above since video is a small word to be hyperlinked.

    E.
    Nov 18 02:28 PM | Likes Like |Link to Comment
  • Updated Outlook For Crude Oil [View article]
    I don't know of a source for finding the crack spread online. I use Bloomberg, which allows you to calculate several different crack spreads.

    You can calculate it, however, if you have the current price of WTI, gasoline futures and heating oil futures. For example, currently NYMEX WTI December 2013 oil futures are trading around $93/bbl, while December RBOB Gasoline sells for 266.56 cents per gallon and Dec. Ultra Low Sulfur Diesel (formerly known as Heating oil) sells for 292.59 cents per gallon. There are 42 gallons in a barrel so we do the following calculations for the 3-2-1 crack spread:

    3 barrels of oil are worth 3 x $93 = $279
    2 Barrels of gasoline are worth 2 x 42 x (266.56 / 100) = $223.91
    1 Barrel of ULSD is worth 42 x (292.59 / 100) = $122.89

    To calculate the value derived from converting 3 barrels of crude into 2 barrels of gasoline and 1 barrel of diesel:

    $122.89 (diesel) + $223.92 (gasoline) - $279 (cost of the WTI for the refiner) = $67.81

    Since Crack spreads are calculated on a per barrel basis and this is based on 3 barrels of crude, we divide by 3 to obtain the current 3-2-1 Crack spread: $22.60.

    I hope that helps.
    Nov 18 02:22 PM | 1 Like Like |Link to Comment
  • Updated Outlook For Crude Oil [View article]
    The current 3-2-1 Crack spread -- the approximate profit derived by using 3 barrels of WTI to produce a barrel of heating oil (diesel) and 2 barrels of gasoline -- currently stands at a little over $20/bbl. That's the highest level since early August and is probably the most important driver of the recent surge in the refiners.
    Nov 13 05:43 PM | 4 Likes Like |Link to Comment
  • Updated Outlook For Crude Oil [View article]
    M King Hubbert died in 1999 but the "peak oil" concept lived on long after he passed away.

    Actually, I think he was half right. The world can produce more oil but the "easy" oil is gone. Producers are increasingly targeting more technically complex and expensive-to-produce fields such as deepwater and unconventional.

    The End of easy oil is one of the most powerful themes in the energy markets today.
    Nov 13 05:41 PM | 2 Likes Like |Link to Comment
  • Updated Outlook For Crude Oil [View article]
    Not to put too fine a point on it but....

    The premium for California oil isn't due to the size of California's energy (or oil demand) but to a lack of sufficient in-State production, requiring the import of more expensive supplies from abroad.

    I didn't mention natural gas in the article because it was an article about the outlook for oil. I agree that natural gas is an extremely promising fuel long term but oil and gas aren't really substitutes for one another. Oil is a transportation fuel and natural gas is primarily a fuel used for heating and electricity production. The idea that natural gas will become a key transportation fuel in the short-run is unrealistic. Even Exxon Mobil, a company which made a $41 billion bet on the future of nat. gas when it purchased XTO, sees gas accounting for just 4 percent of global transport demand in 2040 compared to 1 percent today.

    Currently, the US imports about 500,000 barrels of gasoline per day and exports 375,000 for daily net imports of roughly 125,000 bbl/day. Since we use 9.3 million barrels of gasoline per day, US net gasoline imports account for 1.4 percent of supply so I think you're exaggerating the importance of cheap US gasoline imports.

    Finally, solar (like most alternative energy sources) isn't really a disruptive technology at all. Solar is expensive and completely unreliable as a baseload power source. The idea that solar (or wind or tide or any other "alternative" energy source) will supplant fossil fuels like oil, gas and coal for the foreseeable future is an unrealistic dream.

    Of course, that doesn't mean you can't make money buying momentum-driven alt energy names from time to time. But, the bigger longer-term opportunity is in efficiency and companies that are making the internal combustion engine more efficient. Also, groups like freight rail are benefiting as its cheaper from an energy perspective to move goods by rail than truck.
    Nov 13 05:37 PM | 5 Likes Like |Link to Comment
  • Updated Outlook For Crude Oil [View article]
    Like any physical commodity, it's true that oil will benefit from inflation/currency weakness.

    That said, I think this is often exaggerated as a driver of oil prices. The real story globally with Brent is that demand is on the rise and accelerating thanks to a bit of an improvement in the global economy of late. At the same time, non-OPEC production growth outside North America has been disappointing; the global oil market and OPEC spare capacity remain tight. The Saudis, in particular, are spending big to try and increase their production capacity and maintain global spare production capacity close to current levels.
    Nov 13 10:39 AM | 2 Likes Like |Link to Comment
  • Updated Outlook For Crude Oil [View article]
    That will depend on where the major oil company is producing and where their refining capacity is located. Generally the more they're exposed to US/Canada oil production, the more wide differentials will hurt them. In contrast, US/Canada refining and chemicals capacity are positives because they give these companies access to cheap North American feedstocks.

    More broadly, I would be selective with the oil majors. One of my big problems with the large integrated names like Exxon is that they really aren't showing much production growth right now. Nor do they offer particularly attractive yields.

    That's why we've been focusing more on faster growing producers and services companies for investors interested in growth and on groups like the MLPs/LLCs and US trusts for those focused more on yield.

    I recently wrote up a piece on Linn Energy and on the oil services names for Seeking Alpha. Here are the links if you're interested:

    http://seekingalpha.co...

    http://seekingalpha.co...
    Nov 13 10:36 AM | 1 Like Like |Link to Comment
  • Updated Outlook For Crude Oil [View article]
    That's not really how the oil markets work as it ignores the crude quality and infrastructure bottlenecks I covered in the article.

    WTI delivered to Houston and Light Louisiana Sweet (LLS) (priced in St. James, LA by definition) would compete with imported light, sweet crude oils like Brent and Bonny Light. US demand for imported light, sweet crude oil is fast approaching zero and is next-to-zero on the US Gulf Coast, the largest refining center in North America. So, US oil prices -- including the prices of WTI and LLS -- would not need to rise to continue attracting imports because those imports aren't necessary.

    What the US will have to continue importing (as my chart above shows) is heavier oils like Maya from Mexico. Most refineries are set up to blend a particular mix of crudes and the refineries on the US Gulf Coast are already maxed out on light sweet and need more heavy, sour oils to run properly. Fortunately, these heavier grades of crude trade at a significant discount to light, sweet varietals like Brent on world markets.
    Nov 13 10:27 AM | 5 Likes Like |Link to Comment
  • Updated Outlook For Crude Oil [View article]
    That's not really how the oil markets work as it ignores the crude quality and infrastructure bottlenecks I covered in the article.

    WTI delivered to Houston and Light Louisiana Sweet (LLS) (priced in St. James, LA by definition) would compete with imported light, sweet crude oils like Brent and Bonny Light. US demand for imported light, sweet crude oil is fast approaching zero and is next-to-zero on the US Gulf Coast, the largest refining center in North America. So, US oil prices -- including the prices of WTI and LLS -- would not need to rise to continue attracting imports because those imports aren't necessary.

    What the US will have to continue importing (as my chart above shows) is heavier oils like Maya from Mexico. Most refineries are set up to blend a particular mix of crudes and the refineries on the US Gulf Coast are already maxed out on light sweet and need more heavy, sour oils to run properly. Fortunately, these heavier grades of crude trade at a significant discount to light, sweet varietals like Brent on world markets.
    Nov 13 10:27 AM | Likes Like |Link to Comment
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