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User 353732

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  • Energy stocks hit hard as crude inventories surge [View news story]
    How are these Wall St experts able to distinguish between inventory build up because of domestic production and foreign crude that is increasingly stored in the US because the only place in the world with spare onshore storage now is the US Gulf? The EIA certainly provides no disaggregation by source, only by location.

    Prices will keep falling until there is at least a 25% reduction in global upstream capex for 2015 versus 2014 and much greater recontractng of rigs worldwide, but especially in the US, at day rates that are 30 to 40% below the 2014 peaks( ie scores more rigs will have to be idled in the US alone). 4th Q 2014 drilling momentum is so great that US production will keep increasing in Q1 2015 and probably Q2 2015.
    Jan 28, 2015. 05:20 PM | 2 Likes Like |Link to Comment
  • Are Exxon, Chevron And Shell Low Cost Oil Producers? [View article]
    There are no competent or even reasonably honest NIOCs. Where these entities dominate production is stagnant or declining( eg Mexico, Brazil, Venezuela, Nigeria, Iran, India, Indonesia). Russian oil growth has also been driven by private or quasi private risk capital. Almost all major discoveries in the past 10 years have been made by private companies.

    Production growth has come precisely in areas where private risk capital is the driver( North America, Kurdistan, Southern Iraq, Africa outside Nigeria).

    There is no public information that allows a reliable comparison of total F&D costs amongst Integrated Majors, Super Independents, Large Independents and Medium/Small independents.
    Jan 28, 2015. 10:57 AM | 4 Likes Like |Link to Comment
  • Energy Transfer deal could pave the way for more sector M&A [View news story]
    Maybe the next step is to do a KMI?

    Scale, scope and competitive cost of capital are becoming the defining attributes of strategic and financial success in the North American midstream business. tremendous new entry into a growth business is usually followed by massive consolidation once rapid growth and indiscriminate financing come to an end for a couple of years.

    When growth resumes during the next price upcycle the top 5 midstream players are likely to completely dominate the industry.
    Jan 27, 2015. 02:42 PM | 2 Likes Like |Link to Comment
  • Merrill Lynch suggests five large-cap energy stocks to buy [View news story]
    Why buy upstream or integrated companies until there is some confirmation that the price downcycle is near the bottom?
    Prices would have dawdle along in the mid $40s for several weeks, for example as one indicator , global supply growth would have to halt as another or Venezuela( and maybe Nigeria) and weakest small independents would have to defacto default on debt as a third indicator..
    In the 2nd quarter we will see less consumption while supply will continue to increase in North America and Iraq/Kurdistan, even if modestly, creating the conditions for more price pressure
    Jan 26, 2015. 03:51 PM | 2 Likes Like |Link to Comment
  • Exxon, other oil names downgraded at Credit Suisse [View news story]
    Is there a greater and more predatory form of massive, repeat, organized theft than Wall St(After Washington Dc , of course) ?

    When equities and energy prices are falling Wall St "research" declaims that they will fall further( stampede the retail investor into selling) and when they are rising the "research" announces that they will rise further( stampede the retail investor into buying)
    Jan 23, 2015. 10:08 AM | 10 Likes Like |Link to Comment
  • Chevron Earnings Q4 Preview: Spending, GoM, Permian [View article]
    Only capital investments that earns notably above cost of capital create shareholder wealth. Volumetric growth by itself is empty: it may feed the management bonus pool and pander to executive vanity but it is not in shareholder interests.
    A deep price and cash flow downcycle requires deep cuts in Capex and in organizational and project development costs that have escalated because money was no object until a few weeks ago.
    CVX can certainly delay several projects by 2 to 3 years and wait for cash flow acceleration during the next upcycle to fund them. It will not lose any opportunities because its peer group companies will also be concerned with balance sheet preservation while keeping the dividend whole.
    Arctic and deepwater new projects and most new investments in Africa, Russia and Latin America as well as new LNG export facilities( outside the US Gulf coast) require oil prices north of $90/bbl to be net wealth generators and new shale developments in the US or Argentina make little business sense at prices below $80/bbl for anyone whether its CVX or XOM or COP.
    Jan 22, 2015. 03:46 PM | 4 Likes Like |Link to Comment
  • Who investors should watch as oil patch fire sale heats up [View news story]
    1. Highly unlikely that CLR can be taken over given its ownership and the fact that it can cut Capex but hundreds of millions of dollars in 2015 to conserve cash and preserve liquidity.

    2. No small independent will sell its core assets at low valuations: without these assets they have no way to recover during the upcycle. They will try everything else including cessation of all drilling or they will sell the entire company for shares in a stronger company providing shareholders with the option of equity recovery during the next upcycle.

    3. Deeply distressed asset sales are much more talked about than actually executed during the downcycle. Even desperate Venezuela is unwilling to sell Citgo at a deeply distressed price.
    Jan 21, 2015. 02:12 PM | 6 Likes Like |Link to Comment
  • Diamondback Energy launches 1.5M-share offering [View news story]
    Strengthening the balance sheet is good, of course even if existing shareholders are diluted. Even better would be a further deep reduction in Capex to conserve cash in 2015 while preserving the resource base. It does not serve shareholders interests to produce more than absolutely essential to hold leases and maintain organizational competence during the downcycle when the same resource can be produced for 2 to 3 times higher prices during the next upcycle, which could begin as soon as early 2016.
    Jan 21, 2015. 10:12 AM | 2 Likes Like |Link to Comment
  • Exxon Mobil: My Take On Dividend Security And Valuation [View article]
    XOM will have to cut Capex again in 2015 and 2016 to finance the dividend. Borrowing to pay dividends is not the kind of instant gratification most retail shareholders of XOM(or CVX or COP) seek.
    Jan 20, 2015. 02:39 PM | 4 Likes Like |Link to Comment
  • Exxon, Shell among oil majors showing early interest in Mexico bidding round [View news story]
    There is a long distance between an interest in bidding and actually committing billions of dollars to Mexican oil and gas development.
    Mexico is unlikely to see serious foreign capital investment for the next 2 to 3 years, so its production will continue to decline: a lot like Brazil and soon Russia.
    Mexico is collateral damage in the Saudi cash flow war against North American E&P, Iran and Russia.
    Jan 20, 2015. 02:36 PM | 4 Likes Like |Link to Comment
  • Range Resources to cut 2015 planned capex by a third to $870M [View news story]
    RRC is doing the right things to position the company for the next price upcycle in liquids and for organic growth in domestic natural gas consumption; the advent of significant LNG exports within 3 years and the relaxation of infrastructures constraints in the Marcellus and Utica in late 2015/early 2016.
    It is perhaps one of the best independent E&P in North America.
    Jan 16, 2015. 09:39 AM | 2 Likes Like |Link to Comment
  • Diamondback Energy to push for cuts to service costs, CEO says [View news story]
    The best E&P companies will seek to drive down the total cost of production per unit by an astonishing 15 to 20% over the next 4 quarters via innovation, faster completions, reduced rig rates, lower labor expense and multiple savings along the entire supply chain. Shale production is increasingly a scale manufacturing operation with an enormous resource base and tremendous potential for efficiency and innovation..

    The Saudi war on US shale will fail.

    It is deepwater, new Canadian tar sands, Russian , Arctic , North Sea, African and Latin American projects that will see capital starvation and hence much lower production ( than anticipated just a few months ago) for the balance of the decade. US shale will emerge as even more robust and innovative industry during the next upcycle.
    The biggest losers may well be non Gulf members of OPEC together with Brazil, Mexico and Russia.
    Jan 15, 2015. 04:08 PM | 1 Like Like |Link to Comment
  • Concho Resources Will Remain Cash Flow Negative Despite Lower Capex Budget [View article]
    Investors will generally disapprove of this financial strategy. Volume growth at any cost does not equal wealth creation.
    CXO will likely be forced to cut capex and organizational costs further in 2015(as will other independents) to conserve cash. It makes little business sense to produce liquids at $40/bbl in 2015 when they can be produced at 2 to 3 times higher prices during the next upcycle, which may be both sudden and sharp as the consequences of collapsing capital investment worldwide and lowly rising consumption become manifest in 3 to 5 quarters from now.
    Jan 15, 2015. 03:55 PM | 2 Likes Like |Link to Comment
  • Pioneer Natural reportedly receives bids for EFS Midstream unit [View news story]
    The monetization of midstream assets by upstream companies is both necessary and inevitable given the need to conserve cash, focus on the core and retain the capacity to profit handsomely from the next price upcycle.
    The 5 biggest midstream companies will do very well in this downcycle by making acquisitions that expand both scale and scope. Midstream consolidation in 2015 will be significant as entities with low cost of capital and powerful balance sheets buy those with higher costs of capital and enervated balance sheets.
    Jan 15, 2015. 03:48 PM | 4 Likes Like |Link to Comment
  • Goldman: "Shale sale" make Chesapeake Energy, Parsley Energy winners [View news story]
    Even bigger scale winners are COP, CVX and XOM and possibly OXY should they choose to expend valuable cash for large acquisitions and in the midstream industry KMI is the undoubted scale winner but so is post merger WEP.

    However acquistions make little sense in a still falling downcycle. Only when realized prices reach the cash operating costs of the most expensive unhedged fields in the US and Canada and production is shut in because of zero or negative cash flow might the timing seem right. There is much expensive production that is hedged at well above current prices thru mid 2015; the Summer might be the time for cash based consolidation when retail investors grow dispirited and the banks start to panic.
    Jan 12, 2015. 04:30 PM | 4 Likes Like |Link to Comment