warmsnow's  Instablog

This is my first post so be gentle with me. Here is how I see the landscape in US energy right now

The large integrated oil companies are share losers

National oil companies are cutting them out of new mega projects. Just look at the bidding in Iraq, The Iraqis are retaining 98% of the economics of these fields. This contrasts with perhaps 90% in Libya and mid 50% in the US and West Africa

Costs are going up. Service costs troughed after the oil price troughed, but despite the oil price going from $140 to $50 to $80, service costs were down only approximately 20% and now rebounding. This is based on E&P (producing) company commentary and numbers

And then there are the E&P companies.These guys are growing, maybe because they are smaller, but growing nonetheless. This will have been a key thought in XOM's purchase of XTO (in addition to the gas / crude $ per unit of energy difference reaching ridiculous levels)

Bullish market / energy strategy: 
Short CVX, COP
Long SWN, RRC if bullish gas prices here
Long CXO, WLL if you prefer crude

I am not saying short XOM as it is probably too cheap at this time versus history

You will notice this in my future posts, but I talk an 'on the other hand game'

If you are bearish oil prices and the market then the reverse will work a treat. SWN, RRC, CXO, WLL will naturally decline much more than XOM, CVX if the market takes a hit

Currently I am short COP, long CXO


Disclosure: short COP, long CXO