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User 353732

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  • ExxonMobil to Expand U.S. Domestic Crude Processing Capacity at Beaumont Refinery [View article]
    The power of XOM's globally integrated business model becomes apparent only during price downcycles; During upcycles , when the upstream industry enjoys investor adulation and high multiples, XOM's model lags in performance.
    Retail investors, however, fully understand that XOM's model is designed to mitigate financial volatility while preserving the dividend: it is the least speculative investment in the oil and gas industry
    Aug 4, 2015. 09:13 AM | 2 Likes Like |Link to Comment
  • A Peek At Pioneer Natural Resources In The Downturn [View article]
    PXD has a fine portfolio of producing properties and inventory of prospects. Few companies have the upside potential of PXD during the next price upcycle and from technological and business practice innovation.

    However, PXD management did its owners and the entire industry a great disservice in the Spring with its swaggering talk of adding rigs. Just because a company has the money to drill during the downcycle does not mean it should: empty volumes do not create wealth or inspire shareholder confidence; indeed they do just the opposite. If PXD had announced further deep cuts in capital spending to conserve cash and make itself even stronger for the next upcycle both investors and industry would been much encouraged.

    In the E&P business a beggar your neighbor strategy almost always beggars oneself as well, as true for PXD as for Saudi Arabia except the latter has vastly greater financial stamina.
    Aug 3, 2015. 04:03 PM | 5 Likes Like |Link to Comment
  • Commodities Today: Oil Majors, U.S. Dollar Point To Lower Prices [View article]
    A "strong" dollar combined with astonishing complacency about geo strategic risk has driven all commodities lower.

    In addition there is the unwarranted assumption that population and economic growth in the Global South will not translate into growing net consumption of commodities, especially energy, over the next 2 to 3 years.

    (Wall St and Big Media manufacture unreasonable pessimism to create fear which magnifies the natural commodity cycle, which is very profitable for Big Money. Then they manufacture unreasonable optimism to create greed, which magnifies the natural commodity cycle, which is very profitable for Big Money).

    These factors, of course, will reverse themselves, as they always do. Retail investors as usual will miss the most profitable stages of the next upcycle. Exiting at the bottom and buying at the top is what Wall St has conditioned retail investors to do.
    Aug 3, 2015. 11:08 AM | 5 Likes Like |Link to Comment
  • Noble Energy moves lower as profit beats estimates but revenues fall 47% [View news story]
    Revenues mean little for an upstream company these days: margins; cash flow; debt coverage; undrilled inventory; capital and operating efficiency are the metrics that matter. Empty volume is not a sign of success at current prices but of wealth destruction.
    Far better to shrink today to improve the capacity to create wealth tomorrow than to grow today and die of financial asphyxiation tomorrow.

    While the midstream companies have shown prudence in their capital spending for 2015, many upstream companies have not. For an independent to invest more than necessary because of legal;contractual, safety and efficiency requirements is unjustified even if it has the cash to do so.
    Aug 3, 2015. 10:59 AM | 1 Like Like |Link to Comment
  • Chevron -1.8% as earnings tumble, paced by $2.2B upstream loss [View news story]
    CVX seems much worse than XOM in the near term even though CVX's global oil and gas portfolio will be a tremendous generator of wealth during the next upcycle.

    However, for now CVX is borrowing to pay dividends and maintaining capex at levels that seem excessive. Wealth preservation not volume should be the driver during the downcycle.

    Investors instead of being pacified by the dividends are concerned about the wealth destruction that very large negative cash flow is creating. Many investors would prefer to see a further 15 to 20 % reduction in capex and a focus on bringing major projects in on budget and schedule. Here again CVX compares unfavorably with XOM.
    Jul 31, 2015. 09:30 AM | 7 Likes Like |Link to Comment
  • Hess Corp.'s Weakness Could Tempt Exxon [View article]
    If XOM wants to increase its oil shale holdings it can easily do so by buying leases from the many independents eager to sell. Lease acquisition requires multiple transactions but is notably cheaper than buying a Hess, or EOG or PXD.

    Moreover there seems no compelling reason to make an acquisition in the near future. Rather the imperatives for XOM are cash conservation, optimizing downstream margins , reducing the costs of its major oil and LNG projects currently in the execution stage and innovating in its upstream US business.
    Jul 29, 2015. 01:03 PM | 2 Likes Like |Link to Comment
  • Is UNG About To Rally Anytime Soon? [View article]
    The secular trend for natural gas is very good. Next year will witness significant exports with acceleration through the balance of the decade, both LNG and pipeline exports to Mexico.
    At the same time power generation will be a growth market and the continued migration of natural gas intensive industries from Europe to the Gulf Coast will continue.
    The midstream industry will benefit before the upstream industry from the volume growth but by 2017 rising demand will impel prices higher to induce sustained higher levels of supply. At $4 to $4.50/mmbtu( say by 2020) supply can increase by about 20% while exports continue to be competitive.

    The US gas supply industry is on the cusp of becoming a major factor in global gas and on experiencing great increases in volume and later cash flow..
    Jul 28, 2015. 03:19 PM | 1 Like Like |Link to Comment
  • The Coming Oil Consolidation [View article]
    During every cycle there is consolidation. That is how the unproductive and the unlucky are culled.
    However, in this cycle there are 3 drivers that will also lead to substantial new entry in the upstream industry in the US in 2015 and 2016.

    First, there are vast amounts of private capital globally that view the current downcycle as an excellent time to create fresh E&P companies with no legacy burdens. Private capital believes that the next price upcycle is very likely in 12 to 18 months( they argue that the supply surge from the Persian Gulf in 2015 is disguising the fact that everywhere else supply is either stagnant or declining in July2015 while demand continues to rise by 1% annually; moreover war is the ME and North Africa is spreading not abating) when these newly formed companies can be monetized for extraordinary returns

    Second rapid technological innovation and the growing availability of attractive leases to which this innovation can be applied allow for new business models that are highly focused

    Third, there is available executive, operating and engineering talent that permits competent, motivated and experienced teams to be assembled.

    Certainly existing companies will be bought but new companies will be formed in parallel.

    It is the midstream industry that will experience dramatic consolidation with little new entry.
    Jul 27, 2015. 02:25 PM | 2 Likes Like |Link to Comment
  • Supply And Demand: The Key To Oil, Stocks, And Pork Bellies [View article]
    If there is anything all commodities have in common it is deep cyclicality driven by capital investment and technological innovation( in every segment of the value chain from production to final use) cycles.
    Oil ,in addition, has 2 more drivers:geo strategic risk(perceived even more than actual eg the threat of war causes prices to rise but actual war causes prices to fall since the worst fears are almost never realized) and the exchange rate between a reserve currency(today the US dollar). As the exchange rate of the currency rises versus gold it rises against almost all commodities traded on world markets and the dollar prices of gold and oil etc fall.

    At present the capital investment and innovation cycles have caused global supply to rise notably faster than demand; the dollar is "strong" and there is great complacency about geo strategic risk.

    Of course, these factors will reverse themselves, as they always do. For example over the next 24 months global consumption will rise faster than supply; the civil war within Islam will only get worse as Iran, encouraged and abetted by the US, becomes more confident and bellicose while Saudi Arabia, understanding an existential threat, finances and fosters a violent Arab response. Libya and Yemen are already failed states , Iraq is now defacto 3 polities, Syria is fragmented ,Afghanistan will again fall into a sectarian abyss and a defacto Kurdistan will be seen as a major threat by Turkey and Iran.

    The next price upcycle will begin as abruptly and sharply as the current downcycle . The lucky and the intuitive will profit greatly. The rest of us will wait to believe until it happens......
    Jul 26, 2015. 01:19 PM | 7 Likes Like |Link to Comment
  • Game-Changing Turning Points Across The Energy Complex [View article]
    1. Globally natural gas is a growth fuel and its share of the global energy mix will increase for at least the next 3 to 4 decades. This is excellent secular news for US upstream and midstream industries which will witness a long boom , first in volume, as the US becomes a major exporter and then in cash flow as prices rise to about $4 to $4.50 /mmbtu(enough to ensure a substantial and sustained increase in supply) but still very competitive globally. Domestically, natural gas intensive industries will continue to relocate from Europe to the US Gulf coast and as coal plants retire natural gas generators will replace them.

    2. India is becoming the world's largest importer of coal and in India coal is about the only option for large increases in power generation over the next 10 years. US coal producers will benefit if they learn how to market to India

    3. Global oil demand is now growing by over 1 mmbd . Next year net growth in global oil supply will be very modest even if Iran can increase exports( it does not have the technical or financial ability to increase production to pre sanction levels despite its propaganda and Russian, Chinese, European and US energy companies simply do not have the capital to commit to Iran in 2016). There will be noticeable declines in production in Russia, Mexico, Brazil, North Sea, Africa and stagnant production in North America, at best. Given depletion rates and the forced reduction in E&P spending the prospects for 2017 are no net growth in world liquids supply even as oil consumption continues to increase by about 1% annually , making 2017 a likely year for the beginning of the next price upcycle in oil.
    Jul 24, 2015. 03:17 PM | 5 Likes Like |Link to Comment
  • Could U.S. Shale Oil Companies Be The Next Coal Companies In Time? [View article]
    Accelerating innovation, sharply lower D&C costs, adaptable entrepreneurship, supportive private capital and global growth in liquids and natural gas consumption coupled with multiple sources of geo political risk and stagnant(and soon declining) production in Russia, North Sea, Nigeria, Brazil, and Mexico define the strategic and financial environment for North American shale producers.
    There will be bankruptcies and consolidation but also in parallel recapitalization of existing independents and new entry in the North American upstream business.
    The industry will emerge much stronger from the current downcycle and become a formidable wealth creator in the next upcycle. Within 2 to 3 years US shale will not be swing but base production in the global market
    Jul 17, 2015. 11:07 AM | 7 Likes Like |Link to Comment
  • Energy Transfer agrees to Williams auction process [View news story]
    A deal at any price will assuredly help WMB but just as surely damage ETE financially and impair the long term prospects for WPZ. While ETE is quite committed to the MLP model maybe it too should revisit the KMI model.
    Strategically and long term financially a WMB and WPZ combination leading to a KMI model: lower cost of capital, reduced overhead. much greater strategic and operating integration will create substantial sustainable value for shareholders in both WMB and WPZ.
    Jul 17, 2015. 09:09 AM | 5 Likes Like |Link to Comment
  • Kinder Morgan Approves Proceeding with Tennessee Gas Pipeline‚Äôs Northeast Energy Direct Project [View article]
    KMI , indeed all the Big 5, continue to find profitable growth opportunities. Natural gas deliveries will grow substantially over the next 10 years as both domestic demand and rapidly rising exports drive the need for midstream infrastructure and market making services.Moreover, even if liquids production is stagnant over the next 2 years there will be need for new midstream investments in relieving ckoke points, adding condensate strippers, and substituting for rail transportation.
    Jul 16, 2015. 12:09 PM | 1 Like Like |Link to Comment
  • Suncor, partners begin radio frequency crude extraction pilot project [View news story]
    The North American upstream industry is accelerating the pace of innovation not only in D&C but in many aspects of materials handling and management.
    Microwave pulse technology is applicable to all low permeability oil and gas resources and several US producers are studying it as well. It is perhaps 3 to 5 years from significant commercial deployment but it has the potential to notably reduce total operating costs.
    Another innovation being tested is the use of wastewater from fracing to produce low temperature geothermal electricity on site( in the Bakken) which would turn wastewater from a nuisance and political liability into a commercially useful resource and make field operations nearly self sufficient in electricity.
    The upstream indistry is on a trajectory to reduce its net water requirements dramatically and by early next decade be net neutral in the use of potable water in key basins.
    There are several shale basins in the world that are in heavily water constrained areas. These new technologies will make these basins accessible to large scale development, particularly in China and India.
    Jul 15, 2015. 12:04 PM | 4 Likes Like |Link to Comment
  • Pioneer Natural Resources upgraded at Morgan Stanley, 40% upside seen [View news story]
    First Big Money ruthlessly devalues PXD by broadcasting misinformation about the company's business model and financial quality to stampede retail investors into selling . Then having made money shorting the stock and accumulated positions at well below fair price for the stock, Big Money starts the reverse process claiming that now PXD is considerably undervalued, is best of class, has a consolidation premium etc.
    Big Money is the mortal enemy of Small Money: Wall St devours retail investors .
    Jul 13, 2015. 12:17 PM | 6 Likes Like |Link to Comment