How Companies Create Shareholder Value [View article]
XOM will stick to its belief of increasing dividend for many many years. When it believes it is making super-normal returns it buys back instead of a special div. Both having the same impact. To make life more complicated it may be better to look at debt adjusted cash flow per share growth vs just eps. thanks for your articles.
Nice complex refineries like VLO are getting hammered becos the spread between light-heavy oil is so narrow that their investments in cokers are of little value. If the global demand actually grows next year (irrespective of the US demand), the world will require more crude oil from Saudi Arabia, which will be heavy incrementally. This will expand the WTI-Maya and WTI-Mars spreads and VLO will make more money. I think when world grows the complex refineries will be valuable assets. Now may be the best time for long term investors to pick up these assets at below book and deep discount to replacement costs.
ATP Oil & Gas: Production Should Triple in Next 9 Months [View article]
I was wondering why the market is in the show me mode? I have no background on this company but surprised out of 15 analysts only 6 are Buys (usually a good sign to make money). have you taken a decline on the existing production for 100mmcfe/d. Although EPS is not the right measure but still followed a lot, why is consensus EPS for 2010 $1.25/sh and cash eps $9/sh versus yours $17/sh. What is the market missing? Thanks
This is probably the best time to buy XTO. You never buy a resource company on the basis of the resource it has already discovered and put on it's annual report. Market is not that foolish to leave easy money on the table. You have to work harder to have a view on how much more can they discover and if that is discounted in the stock price. You have to look at all the acreages they own and the places they are drilling and proving up reserves. I think the current low gas prices give an excellent opportunity to buy at a discount. XTO has a fantastic diversified position of shale gas in the US. These will lead to reserve upgrades for a few years.
Oil, the major component of big 5 has not given much of a return is probably also to do with having risen too fast (doubled) over 6 months but also the contango in the market that takes away a lot of the gain for indices.
XOM is such a waste of anybody's time especially when (1) Oil production continues to decline rapidly - oil being replaced by Qatari gas (LNG) trying to sell into US and UK. I am better off buying shale gas in US. (2) Cost rise as production declines and the services remain the bottle-neck (3) Capital intensity (capex) continues to rise to reduce production decline and exploit more difficult areas of the world (4) Desperate for reserves as the majors are shut out from all the attractive areas of the world and have to compete with Chinese and Indians for assets. I agree XOM is probably among the more efficient of the operators but future is much more difficult for CVX and XOM than past. So past 20 years performance is irrelevant. Buy XTO, RRC, SWN, CHK and you have a serious business model of increasing US nat gas reserves, while the prices are at their lowest point.
Natural Gas ETFs: Not a Good Investment [View article]
Vikram, Good article. Like you said ideal is to get exposure to physical spot price+storage cost and hold it for 4-5 months and sell the forward to make a nice 23% or even higher. Any way to apply this for individual investors or it is left to BP and Shell to do it. Problem in buying gas companies is that they are more than reflecting high gas prices, almost as the curve. Last time I saw, stocks reflect $6/mcf, hence we are betting on significant reserve upgrades and not the price. There is a diconnect between gas equities and gas prices ytd which remains a threat on gas equities. As the hedges are taken off and gas prices remain low,a number of gas cos will be in trouble. Hence you need to be a "long term" investor in them!
The Disconnect Between Oil and Natural Gas Prices [View article]
Oil is a clearer bet on the emerging market economic growth and dollar decline. Henry hub natural gas you are comparing is a function of US economic growth or the lack of it. Gas (LNG) is still very small trade to equalize prices across the globe. China is signing contracts with Australia for 20 years gas prices @ 3-4 times the US prices. This does not mean US gas prices are going up in a hurry. I would like to think US economic demand will eventually recover and gas prices will rise to marginal cost of production. IMHO the two commodities are likely to be driven by different factors as compared to historical heat equivalent when US priced both oil and gas being the dominant consumer.
Seismic Services and the Price of Oil [View article]
Thanks.the biggest problem for seismic is the discretionary nature of the spend - especially the exploration. Until now IOCs and NOCs have been brave to keep the total E&P spend high but have cut exploration spend somewhat. Going forward likelyhood of capex being cut by oil cos versus their divi is high. And capex cut usually means seismic hit the most. I am thinking why buy seismic cos which will helpprove up more reserves, when you can buy nat gas resources so cheap?
Thks for this article. The problem is oil services are coming from 5-6 years of very tight market which is certainly easing now as the commodity prices are looking down and a spare capacity is created. The huge pricing power the service companies had is now pretty much gone as they work through their backlogs. SLB has a big stake in exploration thru WGECO seismic which is is especially in trouble for the next few years as oil companies cut their exploration capex. Oil companies are cutting prices with a vengence becos they were being taken for a ride last few years. In the oil value chain I think power is back with the producers from services. A lot of this probably already discounted but who knows. I would prefer to be with resource holders than service cos.
Natural Gas May Be Just the Solution for This Economy [View article]
the only worry is the terrible fundamental position in the short term. Sharp decline in demand and increasing supply. It may take 12 months for the falling rigs and supply to take price to above marginal cost of $6-7/mcf
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I agree XOM is probably among the more efficient of the operators but future is much more difficult for CVX and XOM than past. So past 20 years performance is irrelevant. Buy XTO, RRC, SWN, CHK and you have a serious business model of increasing US nat gas reserves, while the prices are at their lowest point.
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The Disconnect Between Oil and Natural Gas Prices [View article]
Seismic Services and the Price of Oil [View article]
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Natural Gas May Be Just the Solution for This Economy [View article]