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John Gilluly  

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  • It's Time To Buy The Oil Panic Of 2014 [View article]
    You could try LINE or NDRO. I also own those.
    Jan 7, 2015. 08:01 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    It's felt like that from the beginning. One wonders how many oil companies are short their own stock and production to protect themselves? That could be pushing the price down too.

    Have you heard Helene Meisler's quip (she's the tech analyst for the street.com). "By the time it looks good, you're too late."

    I think the oil market has moved beyond panic. It's now resigned despair: like waiting your turn in the prison yard for a post at the firing-squad. My question: WHO are the counterparties to these hedges worth millions of barrels of shale oil at $95/bbl? Any chance they are like the mortgage insurers of yore? They must be on the hook for a half-trillion in hedge money.

    I wrote an article recently that highlighted the cost of oil per ounce of gold. (see: http://bit.ly/1BIehTi)

    This was today's update: "Tuesday, January 6, 2015 - 3:30 PM (Pacific Time). Gold rose today to $1219/oz and Crude oil fell to $47.50. How many barrels of oil can you buy today for an ounce of gold? 25.67 barrels, or 5 more barrels than a month ago. To put it in perspective - relative to the oil/gold ratio mentioned in the article (above) - there has been only ONE other time in the past 70 years where you could buy that many barrels of oil for an ounce of gold - 1986/87 - the lowest tape on record. At these levels, I have to think that we are close to a bottom in crude oil."

    Finally, here is today's West Texas Intermediate Crude to GOLD (WTIC:GOLD) ratio. (See: http://bit.ly/1BIe0Qb)
    Jan 6, 2015. 06:53 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    It means oil bulls are getting slaughtered as far as the eye can see. Kinda like a natural disaster that's ripped through a forest. However, our day will come. Most of the GASL trades mentioned in the article are now in the $3s. Patience is called for. I have trained myself to move into trades when an extreme in sentiment has been reached. Is it near the bottom for oil? A poetic comment like BlueIce's might mean it's closer, because it accurately expresses the intransigent despair of oil patch investors.

    I think US gasoline prices have fallen for 110 days straight (a record). The trading in oil relative to its volatility and previous trends (10, 20, 50, 150, 200 day moving averages) is probably 4 standard deviations from normal. We are currently in the 1 or 2% of time-frames in which an oil-patch buy has moderate downside but an out-sized upside. Who's the last man standing? The one who has cash to buy. It's all probabilities at this point. I have been adding to GASL all day yesterday and today, and will add some more now, tripling-up on the $3.10 trade (11:30 AM, PST).

    I have gone through this waiting game with the previous two trades I did in volatility, and in each case they reverted to the mean, and I was successful because I began at a point where reversion to the mean was likely to begin. It will happen here, too. The when? We don't know. That's why the dollar-cost averaging at lower and lower prices.
    Jan 6, 2015. 02:55 PM | 2 Likes Like |Link to Comment
  • OVX Volatility And The Oil Panic Of 2014 [View article]
    Thank you Peter. It's a good forward-look of the intraday movement of CL. In another vein (SPX), take a look at the $VIX:$VXV ratio on a 6 month HLC bar chart.
    Jan 6, 2015. 10:09 AM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Yes, I added methodically at $3.40, 3.50, 3.60, 3.70 today (see chart above). At $3.35 today, we basically had a double-bottom from mid-December.
    Jan 5, 2015. 06:12 PM | Likes Like |Link to Comment
  • Bill Barrett Corp.: Best Hedged Small-Cap E&P Company With Tremendous Upside Potential [View article]
    Cpyles42 has a point. That is why I mentioned UPL. It is a cash flow revenue monster, even with the debt.
    Jan 2, 2015. 02:02 AM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    MerryGale,

    You are welcome. Yes, the quality of some of the commentators is remarkable, including their personal education and the former role they might have played in the business world. Many simply chose to head-out on their own; and now share their methodologies and their skills with us.

    I have heard that SA - as a compendium - is the largest independent source of research outside of Wall Street. What you might call "open-source" (available to all).

    Here are two new discoveries I have recently made with some great picks in the oil patch: http://bit.ly/1CXPxtY, http://bit.ly/1CXPzlB.

    I particularly am interested in the practical aspects of making a successful trade - and then adding commentary once the trade is placed. Dollar-cost averaging and allowing TIME - the real muscle in investing - to do its work - is key. We can never quite know where the bottom is; but we can estimate if we are closer or farther away from it.

    Take for example, the US natural gas market. Who could anticipate one of the warmest Decembers on record (after one of the coldest Novembers on record)? Natgas has now dropped 36% in a very short time. Can it continue to go where it has not gone for many a year? Of course.

    But I think it is now more likely that the next big move is up, not down. But when? We don't know. Natural Gas is selling almost for less than it takes to produce it, pipe it, and ship it. Where's the business model in that? It's time to pull the horns in; shut some rigs down, and cool-out the supply.

    That is why I have a growing interest in UPL, and tiny bait-drops in UGAZ at these levels. Yet Natgas seems to drop in free-fall each day, and in big gaps too. Buying quality energy stocks that have been sawed in half. That's what's happening this month.

    Best wishes.
    John
    Jan 2, 2015. 01:42 AM | 1 Like Like |Link to Comment
  • Bill Barrett Corp.: Best Hedged Small-Cap E&P Company With Tremendous Upside Potential [View article]
    Thank you. Yes, they are highly-leveraged but I read that they are getting a very high rate of return (est 57%?) on that recent 15% increase in leverage (borrowing to buy an asset swap from Shell Oil), thus the leverage was used to boost their proven and producing reserves (certainty) by about 25%.
    Jan 1, 2015. 05:18 PM | Likes Like |Link to Comment
  • It's Time To Buy The Oil Panic Of 2014 [View article]
    That's likely, yes.
    Jan 1, 2015. 05:14 PM | Likes Like |Link to Comment
  • Bill Barrett Corp.: Best Hedged Small-Cap E&P Company With Tremendous Upside Potential [View article]
    Fireman Dan,

    Great article. What do you think of UPL, currently at 11 year lows? I read in an article that it's break-even for Natgas production was $2.86 MCFE, and Natgas is currently selling at $2.91. However, it's cost of production is estimated to be the second lowest in the industry, just above RICE at @$2.30. (See: http://bit.ly/1D8pnSA). Could be a lot of natgas rigs going quiet in the next 6 months. Your comments would be welcome.
    Jan 1, 2015. 04:05 PM | Likes Like |Link to Comment
  • OVX Volatility And The Oil Panic Of 2014 [View article]
    Showmethefacts,

    Very well said. Do you have a position in UPL? This well-respected author (http://bit.ly/1D8pnSA) says its all-in costs for Natgas are $2.86 MCFE. That's second-lowest of all the drillers, and right about where the price of Natgas ($2.90) is now. He loved it at @ $26 in August. He must be even more favorable at $13.

    What we have experienced in the oil patch - beginning in October through now - is similar to what the Financial sector in the US went through from October (2008) through March 9 (2009). Stocks at 50, 60, 70, even 80% discounts to what they were just a few months ago.

    The trading action in the oil stocks in December has the same non-stop panic quality as the financial crash and the Nasdaq dotcom bust before it. I can remember Priceline for $7, AAPL for $5 (split adjusted), GE for $7, Dow chemical for $5, Ford for a $1.25 (I owned it), BAC for $2.50. Panic Panic everywhere. Anyone remember the solar stocks in 2012? SPWR at $3.

    Long-term investors who waded-in amidst these panics did well back then (and that was not so long ago) and will likely will do well here. Dollar cost average into the best names you can find in the oil patch between now and March. That's only 60 days away.

    I wrote previous articles about using the leveraged ETFs to do that, but their out-performance will only kick-in if the sector begins to streak in a single direction for a sustained amount of time. If we kick around down at these levels for 6 months to a year, the decay in the ETFs could be extensive.

    Thus my new purchase in LINE. I remember LINE hitting these levels several years ago and regretting not buying it. With LINE you have both a monthly distribution and the chance for a capital gain. If you re-invest the distributions, it is even more appealing. A 50% cut in the dividend and it is still a good deal at these prices.
    Jan 1, 2015. 03:13 PM | 2 Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Yes, that's it exactly. You know, today might be an historic day. After the initial spike down (how many of those have we had these last 3 months?!) this morning, the OVX spiked, and then gave it all back. As a matter of fact, OVX volatility has been "giving it back" and receding for the last 2 days. If it breaks here below 50, the oil panic of 2014 may end on the last day of the year.

    See:
    http://bit.ly/1EIQ3h9

    http://bit.ly/1EIQ4Sd

    The $OVX:$WTIC ratio bottomed or peaked around January 1 in 2009, 10, 11, and 14. Tomorrow is the first day of 2015. That would make it 5 out of the last 7 January 1s.
    Dec 31, 2014. 10:26 AM | Likes Like |Link to Comment
  • Linn Energy: Distributions About To Get Slashed? [View article]
    That's an average for the 74,000 BOPD of $78.17. At $55 oil, what's not to like about that?
    Dec 31, 2014. 10:02 AM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    I am willing to ride this out and follow the parameters of the trade. I have figured out that it is useless to average up. If we go back down into the $3s, I may add some more. I have to see how the stocks fare relative to the price of oil; how well they are holding up.

    Hardly a day goes by without another company suspending drilling in 2015. All of these factors will "meet-up at the pass" come March, and we should have increased demand in the Spring coincident with a drop in production. It's the timing that no one can figure out.

    Also, if a company like Linn Energy (LINE) has 60% of ALL its 2015 and 2016 oil production hedged at $90+/bbl; why wouldn't they keep producing? At this point, it's actually the hedges of the North American drillers that's probably keeping the supply/demand balance out of whack.

    I hope the counter-parties to these hedges don't end up like mortgage insurance in 2008-09. LINE energy could make $1.29BL in Q4 alone off their hedges. There IS another side to this debacle. The GASL ETF is a who's who of North American drillers. I trust they will figure it out.
    Dec 31, 2014. 08:42 AM | 1 Like Like |Link to Comment
  • How To Identify The Bottom Of The Oil Market [View article]
    In the last week of the previous year/first month of the new year, the volatility of the OVX paired with the price of WTIC crude has peaked or bottomed (2009, 2010, 2011, 2014).

    See:
    http://bit.ly/1B2OGpE,
    http://bit.ly/1wzhfVr,
    http://bit.ly/1wzhdNn

    Could we be at that juncture here as well, with one day to go?
    Dec 30, 2014. 06:43 PM | Likes Like |Link to Comment
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