Dec. 12, 2014, 4:19 PM
Dec. 11, 2014, 10:45 AM
- Investors in giant gas export terminals from Australia to Canada are facing the prospect of losing nearly $250B plowed into the projects during the past seven years, as weaker oil prices threaten to wipe out returns.
- Oil-linked pricing means LNG producers stand to get much less revenue than expected on delivery of their first shipments, and oil prices have fallen so low that U.S. shale gas producers with plans to export the usually cheaper fuel to Asia suddenly find themselves facing a much tougher competitive environment.
- LNG prices in Asia have sunk below $10/MMBtu, while most Australian LNG projects would need to sell the commodity for at least $12-$14 to break even; for example, the breakeven point for the $54B Gorgon project under construction by Chevron (NYSE:CVX), Exxon (NYSE:XOM) and Shell (RDS.A, RDS.B), is ~$17.7/MMBtu.
- Other relevant tickers: LNG, TOT, COP, CEO, FCG, GASL, OTCPK:BRGXF, OTCQX:BRGYY, OTCPK:STOSF
Dec. 10, 2014, 3:49 PM
- OPEC no longer exists in any meaningful sense and crude prices will slump to $50/bbl over coming months as market forces shake out the weakest producers, Bank of America warns.
- Francisco Blanch, BofA’s commodity chief, says OPEC is “effectively dissolved” after it failed to stabilize prices at its last meeting, and “the consequences are profound and long-lasting.”
- At least 15% of U.S. shale producers are losing money at current prices, and more than half will be under water if U.S. crude falls below $55, the bank says, adding that the high-cost producers in the Permian basin will be the first to feel the pain and may have to cut back on production soon.
- Following the 40% drop in oil prices, "the bulk of the damage to the sector is now done," Deutsche Ban's Lucas Herrmann says, "but it's hard to see what's going to drive share prices higher."
- Nevertheless, Herrmann upgrades BP to Buy from Hold, citing the likelihood that its troubles in the Gulf of Mexico and Russia will see a turning point in 2015.
- ETFs: XLE, ERX, VDE, OIH, XOP, ERY, FCG, DIG, GASL, DUG, IYE, XES, IEO, IEZ, PXE, FENY, PXJ, RYE, FXN, DDG
Dec. 5, 2014, 4:18 PM
Dec. 2, 2014, 10:33 AM
- BofA Merrill Lynch downgrades the energy sector to Marketweight following OPEC’s decision to maintain rather than cut production, now seeing $70-$75 as Brent crude's 2015 range, while warning of value traps.
- "With the collapse in crude, the sector now trades at a 20% discount to the S&P 500, where it has historically traded in-line with the market," the firm says, "but further estimate cuts are likely to come, [as] prices are falling faster than earnings are deteriorating."
- Seeing WTI possibly falling as low as $50 in the coming month, BofA warns that "volatility in oil prices translates to volatility in earnings."
- For exposure to the sector, the firm prefers big, lower beta stocks such as Exxon Mobil (XOM +0.5%).
- Citi also cautions against assuming that oil prices have found a bottom, and wants to see a more thorough confirmation of a technical base of support before proclaiming anything more than the latest trading bottom; however, Citi's Scott Gruber recommends moving aggressively on oil services if WTI crude falls into the $50s - his top picks, in order, are Baker Hughes (BHI +0.1%), Halliburton (HAL -1.3%) and Weatherford (WFT +2.7%).
- ETFs: XLE, ERX, VDE, OIH, XOP, ERY, FCG, DIG, GASL, DUG, IYE, XES, IEO, IEZ, PXE, PXI, FENY, PXJ, RYE, FXN, DDG
Nov. 28, 2014, 1:26 PM
Nov. 28, 2014, 7:25 AM
- OPEC yesterday decided to hold production numbers despite the bear market in oil. WTI crude is down about $5 per barrel to $69.
- A premarket look at the top 10 holdings of the XLE: Exxon Mobil (NYSE:XOM) -4.1%, Chevron (NYSE:CVX) -4.1%, Schlumberger (NYSE:SLB) -4.6%, ConocoPhillips (NYSE:COP) -4.4%, EOG Resources (NYSE:EOG) -4.3%, Pioneer Natural Resources (NYSE:PXD) -4.8%, Occidental Petroleum (NYSE:OXY) -4.3%, Haliburton (NYSE:HAL) -4.7%, Anadarko Petroleum (NYSE:APC) -5%, Williams Companies (NYSE:WMB) -1.6%.
- ETFs: ERX, VDE, OIH, XOP, ERY, FCG, DIG, PBW, GASL, DUG, IYE, XES, IEO, QCLN, IEZ, PXE, PXI, FENY, PXJ, PSCE, RYE, PUW, FXN, DDG, HECO
Nov. 20, 2014, 11:59 AM
- With crude at $75/bbl - the price Goldman Sachs says will be the average in next year's Q1 - 19 U.S. shale regions including parts of the Eaglebine and Eagle Ford in Texas are no longer profitable, according to data compiled by Bloomberg.
- At least a dozen companies including Continental Resources (NYSE:CLR) and SandRidge (NYSE:SD) said on conference calls in the past month that they would reduce capital spending plans because of lower prices; Apache (NYSE:APA) said today it would cut spending in North America by 25% while still increasing production 8%-12% vs. an annual average of 29% since 2009.
- By contrast, the biggest-producing fields - North Dakota's Bakken and the Permian and Eagle Ford in Texas - pump a combined 4.7M bbl/day, and those regions remain economic at $55-$65/bbl.
- ETFs: XLE, ERX, VDE, OIH, XOP, FCG, ERY, DIG, GASL, DUG, XES, IYE, IEO, IEZ, GASX, PXE, FENY, PXJ, RYE, FXN, DDG
Nov. 14, 2014, 4:38 PM
Oct. 10, 2014, 4:21 PM
Oct. 3, 2014, 4:18 PM
Oct. 2, 2014, 2:35 PM
- Liquefied natural gas projects in Africa, Canada and Australia face delays or even cancellation as global demand growth slows and U.S. output increases, Goldman Sachs says in a new report.
- Worldwide demand for LNG will grow 5%/year compounded by 2020 and 4% by 2025, the firm says after previously forecasting growth of 6% and 5%, respectively.
- Even the U.S. will not be spared from the pullback given the substantial contracts signed in recent years with U.S. LNG projects, Goldman says, adding that "investors should seek exposure to low-cost LNG export capacity, and be realistic about expectations for further contracts.”
- Several projects in Canada and Australia likely will face deferrals due to uncertain production costs and price-sensitive buyers, with Papua New Guinea having perhaps the lowest risks as it expands LNG production, Goldman says.
- "Given the industry’s renewed focus on capital discipline in recent times, we are observing a number of high-cost LNG projects deprioritized in the investment queue by major companies" such as Chevron (NYSE:CVX), Royal Dutch Shell (RDS.A, RDS.B), BG Group (OTCPK:BRGXF, OTCQX:BRGYY) and Exxon (NYSE:XOM).
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, GASX, NAGS, DCNG
Sep. 30, 2014, 4:06 AM
- The U.S. is set to become the world’s largest producer of liquid petroleum, with output likely to exceed Saudi Arabia’s this month or next for the first time since 1991.
- U.S. production of oil and related liquids such as ethane and propane was level with Saudi Arabia in June and again in August at about 11.5M barrels a day, according to the International Energy Agency.
- U.S. crude oil production in August was still lower than both Saudi Arabia and Russia, but overall U.S. leadership in petroleum is accounted for by its higher production of natural gas liquids such as ethane and propane.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, GASX, NAGS, MLPG, DCNG, USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, USL, UWTI, DNO, DWTI, SZO, OLO, TWTI, OLEM
Sep. 26, 2014, 4:25 PM
Sep. 16, 2014, 7:27 PM
- A new study finds that it's not the actual process of fracking that can cause water pollution; the bigger problem is faulty well construction.
- The real concern, according to an analysis published yesterday by the peer-reviewed Proceedings of the National Academy of Sciences, are leaks in the steel-and-cement casings surrounding the well bore, which let gas escape before it gets to the surface, making water undrinkable and in some cases explosive.
- "Where contamination occurs, it related strictly to well integrity," says a co-author of the study, who adds, "The answer is not to stop drilling. The fix is better executions on the construction of the well and improving well integrity."
- The study is fueling calls for stricter standards for well construction that could increase costs for energy companies.
- ETFs: XLE, ERX, VDE, OIH, ERY, FCG, XOP, DIG, GASL, DUG, IYE, XES, IEO, IEZ, GASX, PXE, PXJ, DBE, FENY, RJN, RYE, FXN, JJE, DDG, ONG, RGRE, UBN
Sep. 5, 2014, 4:25 PM
FCG vs. ETF Alternatives
The First Trust ISE-Revere Natural Gas Index Fund is an exchange-traded fund. The investment objective of the Fund is to seek investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the ISE-Revere Natural Gas Index. The ISE-Revere Natural Gas IndexTM is an equal-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas. The Index is constructed by establishing the total population of stocks listed in the U.S. of companies involved in the exploration and production of natural gas and then eliminates stocks whose natural gas proved reserves do not meet certain requirements.
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