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Eagle Ford condensate producers win, refiners lose in oil export decision

  • The decision to allow two Texas companies to export condensates looks like a win for Eagle Ford Shale crude producers at the expense of refiners and companies planning to build processing plants along the Gulf coast.
  • Today's selloff in refiners reflected concern that the groups will lose some of their competitive edge if condensate exports become common: Valero Energy (NYSE:VLO), the largest U.S. refiner, dropped 8.3%, PBF tumbled 10.7%, PSX fell 4.2%, and HFC slid 6.7%.
  • Oppenheimer notes that PXD, DVN, MRO, COP and MUR produce the most Eagle Ford condensate, and could benefit if U.S. condensate prices close some of the gap with European prices; EOG, the largest Eagle Ford producer, produces little condensate and likely benefits little from the lifting of the condensate ban.
  • Investor reaction toward Gulf Coast gathering and processing MLPs such as EPD, MMP, KMP and NGLS was more muted, since plans to build splitters in Texas may be undermined by even modest rule changes in the crude export ban that allow Eagle Ford producers to sell condensate after running it from the wellhead to their own nearby - and much cheaper - distillation towers.
Comments (27)
  • DeepValueLover
    , contributor
    Comments (8137) | Send Message
     
    Don't forget about (XCO)!

     

    http://bit.ly/1sG5jWf
    25 Jun, 07:28 PM Reply Like
  • huskers123
    , contributor
    Comments (36) | Send Message
     
    White House came out and said their is no change in oil export policy. We maybe getting ahead of ourselves. What they allowed is not significant, about zero effect. Even if the Gov allowed exporting, it wouldn't be that significant to world daily volumes. We still import 7-8 million BPD. Let's come back to earth!
    25 Jun, 07:41 PM Reply Like
  • jerrywengler
    , contributor
    Comments (402) | Send Message
     
    I don't know who we should have in the White House next, but it's definitely nobody of the type we have now and especially not the aspiring Clinton woman, something I thought was a bad attempt at humor when I first heard of it. There are many talented women who could do better. It's time for a free-trade policy that allows American companies to grow. Huskers123, your observation that we still import 7-8 million BPD is illustration enough that the situation needs correcting. Somebody of the Ron Paul focus sounds more attractive all the time. Free innovation not regulation is what built the country. The only regulation should continue to be environmental protection, not economic manipulation.
    25 Jun, 08:43 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2564) | Send Message
     
    jerry, I'm not following your logic at all. If an export ban is lifted, that's *more* free trade and *less* protectionist. It's *less* regulation, not more. Prices that drop are falling because of fear those industries are losing the *protection* of regulations that artificially propped up their profit margins by *preventing* free market exchanges to occur.
    26 Jun, 01:29 AM Reply Like
  • jerrywengler
    , contributor
    Comments (402) | Send Message
     
    SanDiegoNonSurfer, I'm not sure that I follow your logic in return. Yes, if a ban is lifted, that's more free trade and less protectionist. It's less regulation. That's what I'm saying I favor, more free trade, less protectionism, and less regulation. If prices drop at some points because the industries lose protection, they eventually will adapt to free market forces rather than to government regulation. It ought to be that the only reason for any government interference with market forces by our government is to protect our industries from interference by foreign governments. At t times we have achieved this kind of free trade with European countries, particularly Britain, and with neighbors on our borders. It can be done. Our poorest politicians try to impose their own values, or lack thereof, through such manipulations.
    I think a simpler but similar dynamic we have all been witness to is the manipulations of the Federal Reserve in adding money to the economy. It seems generally accepted that when they cease to do this, the economy will adapt.
    Concerning your use of punctuation, do you mean your use of asterisks to be in place of single quotation marks? I'm not trying to be insulting--it's just a use I'm not acquainted with.
    26 Jun, 09:37 AM Reply Like
  • hhmcdon
    , contributor
    Comments (65) | Send Message
     
    I believe the large pull-back today in refiners stock prices is unfounded. The prices for natural gas liquids (NGL) will be supported by the decision to allow export of stabilized condensate which will help enable the present exploitation of shale oil & gas production. The "splitters" presently under construction by Kinder Morgan Partners and others will produce specific "cuts" that will add value well above that of "raw stabilized condensate" You can rest assured that KMP and BP did their homework before going ahead with the 100,000 BBL/day condensate splitter on the Houston Ship Channel. It will not be made obsolete by today's announcement.
    25 Jun, 08:48 PM Reply Like
  • King Rat
    , contributor
    Comments (564) | Send Message
     
    Agreed. Also the only fear this puts on refiners near-term is reduced margins resulting of competition with an export market.
    However that same market may one day opt for refined oil instead of raw crude which would make today's announcement a potential positive for refiners in the long-term.

     

    In reality, though, if domestic oil producers opt to sell on the global market, that would merely mean that global prices may drop (per grade of oil) so import prices would drop for refiners.

     

    Nonetheless, refining stocks such as VLO are up at least 50% since October last year, so maybe any bit of news could have led to a breather for the rally.
    25 Jun, 09:48 PM Reply Like
  • durango58
    , contributor
    Comments (268) | Send Message
     
    KMP's splitter facility output is already contracted by BP PLC for 20 years--no effect at all.
    25 Jun, 09:49 PM Reply Like
  • CapeCapMgmt
    , contributor
    Comments (711) | Send Message
     
    HHMCDON, you are absolutely correct..... This is only the very beginning by allowing the export of light condensate, even though
    Congress is not expected to pass legislation lifting the ban on crude exports before the Nov. elections, as no lawmaker wants to be blamed for a move that could significantly boost U.S. oil prices.
    You are right about homework being done, as those export terminals that are being built today have been on the drawing boards of the best Oil and Gas Companies in the country for many years now.
    25 Jun, 09:58 PM Reply Like
  • stvrob_63
    , contributor
    Comments (454) | Send Message
     
    I am confused about what is being described as "condensate". Are they talking about NGL's in the conventional sense? Or is are they describing light crude with a touch of refinement? Somehow, by the way the refiners are reacting, I don't think they are talking about NGL's. One article I read said the exported product could be refined into jet fuel when it arrived at its destination.
    25 Jun, 10:22 PM Reply Like
  • CapeCapMgmt
    , contributor
    Comments (711) | Send Message
     
    Stvrob, take a look at the attached.....

     

    http://on.wsj.com/UL4ht1
    25 Jun, 11:20 PM Reply Like
  • stvrob_63
    , contributor
    Comments (454) | Send Message
     
    Thanks CapeCap! Exactly what I was looking for!
    26 Jun, 12:10 AM Reply Like
  • mmyo3
    , contributor
    Comments (35) | Send Message
     
    Second that "Thank you," for the succinct link!
    26 Jun, 05:22 PM Reply Like
  • Invest4Wealth
    , contributor
    Comments (32) | Send Message
     
    I'm a bit confused and welcome some insight and feedback. With gasoline prices once again getting close to $4 per gallon and with all this new oil we the USA are pulling out of our ground, why are the gasoline prices still so high and why don't we keep our 'bounty' here at home to truly lessen our dependance on foreign oil and lower our gasoline and energy prices here? If we produce here and not send it into the global pool of oil and then buy it back at a high price, isn't it common sense to do this or am I way off base here?
    25 Jun, 11:05 PM Reply Like
  • stvrob_63
    , contributor
    Comments (454) | Send Message
     
    @ invest4wealth

     

    If this were a communal thing, you would have a point. The fact of the matter is, that is not "our" oil (as in community property of the nation). It is privately owned oil, and the law is preventing its owners from access to markets. The refiners are making a killing buyiing it cheap and exporting fuel, and the producers of the oil shouldn't be forced to take it on the chin by an antiquated law from the 70's. And the reality is, it won't take much actual export to correct the price discrepancy.
    25 Jun, 11:27 PM Reply Like
  • hallereugene@gmail.com
    , contributor
    Comments (93) | Send Message
     
    Im not sure I understand. How is it privately owned or rather who did they buy it from to become privately owned?

     

    Just use the Eagle Ford Shale as an example since that is what the article is referencing.
    27 Jun, 05:22 AM Reply Like
  • lakochin
    , contributor
    Comments (65) | Send Message
     
    All the oil produced in the US is produced by companies not owned buy US governments. Essentially all the new oil being produced from shale is being produced on privately owned land leased to private oil companies. The federal government has for the last five years refused to lease any significant
    amount of oil rights. Over the last five oil output on private land has risen by more than three million barrels per day and oil output on federal leases has declined.
    27 Jun, 04:56 PM Reply Like
  • hallereugene@gmail.com
    , contributor
    Comments (93) | Send Message
     
    I understand privately owned land. I also understand property taxes. So unless you make use of the land its a liability. Just wondering when did it come into private hands and who sold them the land?

     

    How did it come to be in private hands? Is it owned by a mining company or 1000 little cattle ranchers?

     

    Really just curious.
    28 Jun, 08:07 AM Reply Like
  • raykrv6a
    , contributor
    Comments (2465) | Send Message
     
    Some of us like to own land. It's hard to create more land even though some rich countries have done that in the middle east.

     

    I'm sure some of the newly rich land owners that are millionaires from selling their oil rights might regret it, but I wouldn't call owning land a liability.
    28 Jun, 09:16 AM Reply Like
  • Invest4Wealth
    , contributor
    Comments (32) | Send Message
     
    @ stvrob

     

    Thanks for the comments!
    8 Jul, 04:40 PM Reply Like
  • CapeCapMgmt
    , contributor
    Comments (711) | Send Message
     
    Two things Invest4wealth:
    1). Every year, as the summer season approaches, gasoline refineries switch to their more expensive summer blends, causing an increase in the price.

     

    2). In the US, oil can't be shipped out as there are restrictions on oil exports as you know, but not on gasoline/diesel exports. So what's happening is all that new found oil that we're pumping in The country is getting down to the refineries and being refined into gasoline and/or diesel, and then exported, which is up significantly this year. This in turn reduces the domestic supply, thus increases price.

     

    Hope this helps!

     

    25 Jun, 11:41 PM Reply Like
  • Invest4Wealth
    , contributor
    Comments (32) | Send Message
     
    CapeCapMgmt - Thanks for the insight.
    8 Jul, 04:43 PM Reply Like
  • JB204zz
    , contributor
    Comments (41) | Send Message
     
    Also complicating the matter are the different type of gasoline formulations required by different state agencies. California CARB gas is a special formulation that cannot be easily made in other parts of the country. There is limited refining in the US because of tough environmental laws and many refineries have been shut down. Also, you have ethanol blending which further complicates the pricing. I cringe when people talk about expensive gasoline and the mean oil companies when much of the price increases are from government environmental regulations and subsidizing farmers. I can say that oil companies love these regulations because it does raise and maintain the price of retail products. Thank your local politician.
    26 Jun, 12:46 AM Reply Like
  • Patent News
    , contributor
    Comments (1312) | Send Message
     
    worthless lies and fabrications. look at update. no real changes to policy.
    26 Jun, 03:00 AM Reply Like
  • Uain53
    , contributor
    Comments (1346) | Send Message
     
    Clarification...
    The more expensive summer blend is dictated by the various states, like California. It is not something the oil/ refining companies are doing of their own will. The advertised reason is that it is supposed to reduce smog.

     

    So what are the unspoken side effects?
    26 Jun, 03:03 AM Reply Like
  • fredj
    , contributor
    Comments (128) | Send Message
     
    Crude oil still illegal to export per the Mafia running the WhiteHouse. No change in policies they said.
    26 Jun, 03:21 AM Reply Like
  • medzjohn
    , contributor
    Comments (218) | Send Message
     
    Looks like someone figured out how Washington lawyers can refine oil.
    26 Jun, 11:45 AM Reply Like
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