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ConocoPhilips: Time to Embrace Natural Gas Transportation

Fitz,

I am not anti-NG, just not too crazy about badly managed companies like COP and CHK.

I choose to play NG through better managed companies like BP, RDS, TOT, CVX, ECA and XOM..

ConocoPhilips: Time to Embrace Natural Gas Transportation

Long_on_oil

I agree with you on COP vs BP but for a totally different reason.

COP is bathing in debt, $52 billion dollars debt on a market cap of $75 billion. And its EPS is negative $16.38 share and so it is paying shareholders dividends with borrowed money, not earnings. This is the same problem with CHK.

BP has high debt of $65 billion, but it is small compared to its market of $175 billion. Its EPS is a positive $3.76, so at least its dividends are coming from actual earnings.

After being burnt by many times by stories of potential growth by companies like COP and CHK , now I always look at the balance sheet carefully before sinking a dime into any company.

Three Companies with Positive, Long-Term Potential

Stephen,

Don't you find that COP is overextended in debt, a potential problem especially if NG prices remain low next year ?
COP's EPS is negative 16.38 per share.
Wouldn't one of the other majors (like XOM, CVX, BP, RDS, STO or TOT) by better investments since they have better control of their debt.

A Crude 10 Year Perspective: The DJIA, Oil and Gold

Fitz,

I have the highest respect for both Hefner and Boone, but both have their personal agendas.

1) I read Hefner book (the GET) and I find he is a bit too chummy with CEO Aubrey McClendon of Chesapeake that he glosses over all the serious issues associated with non-conventional gas. While the book is the most comprehensive I have read on natural gas, he is far from neutral.

2) T. Boone Pickens wants the federal government to pay for the cost transmission line infrastructure to his wind farms.

A Crude 10 Year Perspective: The DJIA, Oil and Gold

The stock market was artificially inflated in the late 1990's thanks to the internet boom. Normally stock market indexes appreciate anywhere from 10 to 12% per year on average. In the short period of 1995-2000 we saw the DJIA shoot up 150% and NASDAQ go up 500%. Anything over 15% gain per year is unsustainable over the long term. The current DJIA = 10000 is actually the value it should have grown to since 1995.

Although gold is a good hedge. I can live without gold.

I cannot live without oil, which is used in thousands of applications (besides transportation). I think my money will appreciate the most over the long run invested in oil and gas.

The 95% of the world's energy mix (according to the BP statistical survey and the EIA) comes from oil, gas, coal & nuclear. Oil and Gas will be the key energy sources from the next 40 years. Alternative energy is still in its infancy. Solar and wind account for only 1% of the world's energy mix. Natural gas would be a good transitory solution, since existing cars can be modified to run on it for only a few thousands dollars. This is a much cheaper alternative than hybrid, hydrogen or electric cars.

The End of the Oil Age? Not Quite

I recently read some interesting data on the "Cash for Clunkers" program. Over 16,000 people that bought new Ford F150 trucks qualified for the CARS program. Similarly another 16000 people bought Chevy Silverados and also got the CARS rebates. What did these people trade in ? Hummers, Sherman tanks ???

The most interesting fact was that more people bought new Ford F150 trucks than new Toyota Prius Hybrids with the CARS program. So much for encouraging fuel efficent vehicles.

The End of the Oil Age? Not Quite

Hybrids (gasoline/electric) have a long way to go , besides the $50,000 price tag. TV commercials claim hybrids have saved 1 billions gallons of gasoline since they were introduced. Assuming a 40% yield (17 gallons) of gasoline from 1 barrel of oil and factoring in that the US consumes 22.5 mbls/ day, we get the following result: 1 billion gallons of gasoline translates to an insignificant 59 million barrels of oil (2.5 days worth) saved in the United States over a 10 years period. Conclusion, hybrids technology is over-hyped.

I agree with you that natural gas transportation will help, but to a point.

But remember three things:
1) Natural gas will also exhibit "Peak Gas" one or two decades after "Peak Oil".
2) Conventional natural gas reserve declines are much steeper than oil reserves.
3) Non-conventional gas fields exhibit an even faster decline, up to 50% to 80% reserve decline after only one year. Larry Bellehumeur's SA article of August 18, 2009 had an interesting discussion around this point.

Why Exxon Should Significantly Increase its Dividend

Check out the news headlines this morning:

"Cnooc challenging Exxon over Ghana oil""

www.marketwatch.com/st...

This is exactly why it is good that Exxon is hoarding cash. The Chinese have trillions in USD. Only totally solvent companies with cash surpluses like XOM or CVX can challenge the Chinese majors like PTR and CNOOC and guarnatee the US access to what-ever little oil is left in the world.

Why Exxon Should Significantly Increase its Dividend

long_on_oil

I have XOM and CVX as my main US holdings, but I agree having several foreign oil companies in your portfolio as a hedge against a falling USD and future windfall taxes.

In Canada, COSWF and ERF are great income picks that pay good dividends as well as ECA for growth as natural gas picks up.

In Europe I think BP, TOT, RDS and STO are all good bets.

PTR (China) and PBR (Brazil) are probably safe bets and have great potential.

The only region I would not touch is Russia. You probably know all too well about the forced renegotiations on BP with its TNK venture, I would avoid Gazprom and Lukoil like the plague. I can see Putin and gang screw foreign investors again once oil and gas prices pick up.

Why Exxon Should Significantly Increase its Dividend

MJE_PDX:

Buying the Kosmos stake in Ghana at $4 billion is chump change for Exxon. Exxon earns $40 billion profit per year and the Ghana stake would take them only 5 weeks to pay off in full.

I can see the "seven sisters" reunited as well in the near future. Already Exxon has swallowed up Mobil and Chevron has had Texaco and Gulf under their banner for a while. Exxon + Chevron is a definitely possibility. The non-US seven sister members like BP, Shell and the eighth sister Total (former CFP) might form a European super oil company. A XOM/CVX plus BP/RDS/TOT merger might be a bit trickier because of all the potential anti-trust issues. But then again American Lucent (former ATT) merged with French company Alcatel.

Why Exxon Should Significantly Increase its Dividend

Fitz,

I agree the CEO at Exxon is overpaid, but Exxonmobil's finances are completely in order. Now, compare this to the CEO salaries in the following banking and investment firms in 2008.

1) Lloyd Blankfein, Goldman Sachs Group Inc., $42.9 million
2) Kenneth Chenault, American Express Co., $42.9 million
3) Vikram Pandit, Citigroup Inc., $38.2 million
4) Jamie Dimon, JPMorgan Chase & Co., $35.7 million

As a shareholder of Exxon, I say I got my money's worth. If I were a shareholder of bank or investment firm I would say I was cheated.

Why Exxon Should Significantly Increase its Dividend

long_on_oil,

I have to disagree with you that investments in oil companies are all going to zero for several reasons:

1) All major oil companies are continuously buying up their competitors or new reserves (Exxon in Ghana, Shell in Australia, and everyone is a player in the Canadian oil sands), but I agree this is a losing game that ends in 10 to 20 yrs.

2) All major oil companies are buying back their shares. They are shrinking their share base. Exxon spends half its money (30 billion / yr) on share buybacks. At the current rate, Exxon will be a private company before 2020. Every buyback campaign cranks up the share value.

3) I am a believer that significant advances in alternative energy will come from big oil companies. They all know peak oil is real. CEO's from Total, BP, Chevron, etc. have all publicly admitted this. Their current spending on alternative technology is small at the moment, but they have they have money to scale up production when the time comes. You have Exxon investing algae, Chevron in biobutanol, Shell in biofuels &hydrogen, Total in biomass, GTL & hydrogen and BP in wind, solar & biofuels. Unlike the internet revolution where quantum leaps came from two guys working in their garage, alternative energy technology needs big money to advance.

Why Exxon Should Significantly Increase its Dividend

Fitz,

I would like to see Exxon increase its dividend as well. But I would prefer Exxon keeps its immaculate balance sheet over a higher dividend payment. Exxon has a higher credit rating than the US government at the moment. I think the best investments in big oil are Exxon, Chevron, BP, Shell and Total.

I do not like Chesapeake or ConocoPhilips that are over extended in debt. I am quite surprised to see COP and CHK rising every day while XOM and CVX stay dormant.

Climate Change: How to Invest for the Possibility

Joseph,

I would NOT take Al Gore opinions very seriously. His record speaks for itself. I have to question Al Gore's real motives.

His global warming crusade is making a lot of green for him. He gets a minimum of $100,000 for every 90 minute talk his gives on global warming. No wonder he did not want to run again for president in 2004 nor in 2008 and get only a measly $200,000 / year salary.

thesmokinggun.com/...

You would think someone worth $100 million would do these talks for free, especially if he really believes in climate change.

A report by the Nashville Electric Service that showed Gore used an average 16,000 kilowatt hours a month for an average monthly bill of $1,206 in 2006. The typical Nashville home uses about 1,300 kilowatt hours. So much for leading by example !

Furthermore, look at Gore’s accomplishments with Clinton from 1993-2001. The CAFE standard was in good hands with Ford, Carter, Reagan and Bush 41. It rose from 15 to 27 mpg during 1975-1992. Clinton and Gore (Mr. "Earth in the Balance") were pandering for UAW votes in the 1990's and they expanded the light truck exemption to include Hummers, SUV, Jeep and Minivans and that essentially killed CAFE and it is now been flat at 27 mpg.

The real motive for Gore’s climate change crusade is to make more green for himself. He stands to gain the most from cap-n-trade and may become the first carbon billionaire, if the legislation goes through.

network.nationalpost.c...

Why Is Congress Agnostic About Natural Gas?

Carter did lay the ground work for reducing oil imports by 50% with his spreadheading of the CAFE standard. It took 15 years though to get to the 50% reduction. CAFE was 15 mpg in 1976 and was gradually increased to 27 mpg by 1991.

Then Clinton and Gore butchered CAFE legislation with the light truck exemption clause to buy UAW votes in Detroit and it stayed plateaued at 27 mpg from 1992 to the present.

If the Obama rhetoric holds out, it will be increased again to above 30 mpg in 2011.


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