Elliott Gue's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.com/user/470666/comments http://seekingalpha.com/article/1418301/comments?source=feed#comment-18647671 18647671
One example: on May 5, 2010 Linn closed at $25.23 and on the 6th it closed at $23.69. BUT, intra-day on the of May 6, 2010 it traded to as low as $12.60. A lot of people watched their stops get hit and ended up selling at the worst possible time on that day. ]]> Thu, 09 May 2013 17:25:34 -0400
One example: on May 5, 2010 Linn closed at $25.23 and on the 6th it closed at $23.69. BUT, intra-day on the of May 6, 2010 it traded to as low as $12.60. A lot of people watched their stops get hit and ended up selling at the worst possible time on that day. ]]> http://seekingalpha.com/article/1418301/comments?source=feed#comment-18647431 18647431
Since the inception of my current publication late in 2012, however, I've had it as a "medium" risk recommendation. ]]> Thu, 09 May 2013 17:20:49 -0400
Since the inception of my current publication late in 2012, however, I've had it as a "medium" risk recommendation. ]]> http://seekingalpha.com/article/1418301/comments?source=feed#comment-18643711 18643711
In 2012, spot natural gas hit a low of under $2/MMBTU in mid-April. But, even with spot and front-month gas prices under $2/MMBTU at the lowest levels in more than a decade, futures expiring in 2015, 2016 and 2017 were trading at much higher prices.

Using April 19, 2012, an extreme low for spot gas prices, I see that NYMEX gas futures expiring in April 2015 were trading at $4.15, futures expiring in January 2017 more like $4.75/MMBTU. And this was the case if one had tried to hedge on the very day that natural gas prices hit extreme lows.

Those claiming that Linn is purchasing "in the money" put options fail to recognize that there is a big difference between the spot or prompt price of natural gas and the price of natural gas to be delivered 2, 3 or even 4 years in the future. A look at the five year average futures prices is a far better guide of what's in the money for a company looking to hedge production over a multi-year period.

So, let's take a closer look at these numbers. According to their 10-K covering the year ended 12/31/2011, Linn had puts covering total volumes of 30,660 due to expire in the year 2014. The average hedge price on those puts was $5.50. By the end of 2012, they had put hedges covering 79,628 MMMBTU due to mature in 2014. The average price on that entire position was $5/MMBTU.

So, just doing the maths suggests they hedged around 48,968 MMMBTU of 2014 gas production volumes over the course of 2012 at a price of roughly $4.69. This certainly doesn't suggest they're buying deep in the money puts to manufacture earnings; there were several occasions in 2012 when 2014 NYMEX futures prices were trading well above $4.50/MMBTU. ]]> Thu, 09 May 2013 16:16:51 -0400
In 2012, spot natural gas hit a low of under $2/MMBTU in mid-April. But, even with spot and front-month gas prices under $2/MMBTU at the lowest levels in more than a decade, futures expiring in 2015, 2016 and 2017 were trading at much higher prices.

Using April 19, 2012, an extreme low for spot gas prices, I see that NYMEX gas futures expiring in April 2015 were trading at $4.15, futures expiring in January 2017 more like $4.75/MMBTU. And this was the case if one had tried to hedge on the very day that natural gas prices hit extreme lows.

Those claiming that Linn is purchasing "in the money" put options fail to recognize that there is a big difference between the spot or prompt price of natural gas and the price of natural gas to be delivered 2, 3 or even 4 years in the future. A look at the five year average futures prices is a far better guide of what's in the money for a company looking to hedge production over a multi-year period.

So, let's take a closer look at these numbers. According to their 10-K covering the year ended 12/31/2011, Linn had puts covering total volumes of 30,660 due to expire in the year 2014. The average hedge price on those puts was $5.50. By the end of 2012, they had put hedges covering 79,628 MMMBTU due to mature in 2014. The average price on that entire position was $5/MMBTU.

So, just doing the maths suggests they hedged around 48,968 MMMBTU of 2014 gas production volumes over the course of 2012 at a price of roughly $4.69. This certainly doesn't suggest they're buying deep in the money puts to manufacture earnings; there were several occasions in 2012 when 2014 NYMEX futures prices were trading well above $4.50/MMBTU. ]]> http://seekingalpha.com/article/1157491/comments?source=feed#comment-14710031 14710031 Thu, 07 Feb 2013 15:08:23 -0500 http://seekingalpha.com/article/1125191/comments?source=feed#comment-14350001 14350001
I am long E]]> Wed, 30 Jan 2013 08:32:20 -0500
I am long E]]> http://seekingalpha.com/article/1102671/comments?source=feed#comment-13519851 13519851 Wed, 09 Jan 2013 23:00:00 -0500 http://seekingalpha.com/article/1102671/comments?source=feed#comment-13519831 13519831 Wed, 09 Jan 2013 22:57:47 -0500 http://seekingalpha.com/article/1102671/comments?source=feed#comment-13519801 13519801
1. Basically, the only cash withheld from the trust cash flows consists of $1.0 million in its first quarter for the establishment of an initial cash reserve, post-production expenses such as gathering and compressing, property and Texas franchise taxes, and trust administration expenses paid to the trustee and SandRidge. I don't think they're really building a war chest but do reserve cash each quarter for the payment of future taxes.

2. Yes. The trust's current estimate is that the final value of the trust units will be $1.80 each due to the sale value of the remaining reserves. I just adopted that estimate in my analysis but it really doesn't matter all that much to the valuation target as $1.80 paid in 2031 is worth less than $0.50 per unit discounted to a present value at 7.5%.

The NPV calculation simply estimates future distributions, discounts them using a particular rate and then sums up these payments to give you a current dollar value.

What I think many people are missing when it comes to the trusts is that it doesn't matter that the units lose value as the termination date approaches. If I sold you a piece of paper for $10 that pays a total of $1.50 per year for 10 years and then is absolutely worthless, you are still earning an return on your investment over your holding period even though the piece of paper has no value at expiration.

3. Basically, yes. that is how I performed the calculation. To estimate the value of the hedges you need an assumed price for WTI-Cushing, the total amount of hedges that are part of the trust and the price at which oil was hedged. This information is provided in summary form in the prospectus. ]]> Wed, 09 Jan 2013 22:56:04 -0500
1. Basically, the only cash withheld from the trust cash flows consists of $1.0 million in its first quarter for the establishment of an initial cash reserve, post-production expenses such as gathering and compressing, property and Texas franchise taxes, and trust administration expenses paid to the trustee and SandRidge. I don't think they're really building a war chest but do reserve cash each quarter for the payment of future taxes.

2. Yes. The trust's current estimate is that the final value of the trust units will be $1.80 each due to the sale value of the remaining reserves. I just adopted that estimate in my analysis but it really doesn't matter all that much to the valuation target as $1.80 paid in 2031 is worth less than $0.50 per unit discounted to a present value at 7.5%.

The NPV calculation simply estimates future distributions, discounts them using a particular rate and then sums up these payments to give you a current dollar value.

What I think many people are missing when it comes to the trusts is that it doesn't matter that the units lose value as the termination date approaches. If I sold you a piece of paper for $10 that pays a total of $1.50 per year for 10 years and then is absolutely worthless, you are still earning an return on your investment over your holding period even though the piece of paper has no value at expiration.

3. Basically, yes. that is how I performed the calculation. To estimate the value of the hedges you need an assumed price for WTI-Cushing, the total amount of hedges that are part of the trust and the price at which oil was hedged. This information is provided in summary form in the prospectus. ]]> http://seekingalpha.com/article/1102671/comments?source=feed#comment-13519491 13519491
I'll try to post more trust-related analysis on SA in future.]]> Wed, 09 Jan 2013 22:32:15 -0500
I'll try to post more trust-related analysis on SA in future.]]> http://seekingalpha.com/article/1082511/comments?source=feed#comment-13101361 13101361
But, you will find that the vast majority of MLPs set up to grow via drop downs are structured with IDRs. If you look at the industry over the past few years you'll find that many of the fastest growing MLPs share a similar trait: they began their growth spurts as newly listed MLPs that are still in the low tiers of their IDR structure but have a sponsor with MLP-able assets. As the sponsor drops down assets to the MLP, they can quickly move the MLP through the tiers and generate even more rapid growth in their IDRs.

More broadly, understanding IDRs and how they're calculated is important. That's why I wrote this article on the topic. However, IDRs are not the only fundamental factor of importance when analyzing MLPs. If you had ignored all of the MLPs with an IDR structure over the past five years you would have passed up on several of the best-performing MLPs of all.]]> Sat, 29 Dec 2012 15:16:34 -0500
But, you will find that the vast majority of MLPs set up to grow via drop downs are structured with IDRs. If you look at the industry over the past few years you'll find that many of the fastest growing MLPs share a similar trait: they began their growth spurts as newly listed MLPs that are still in the low tiers of their IDR structure but have a sponsor with MLP-able assets. As the sponsor drops down assets to the MLP, they can quickly move the MLP through the tiers and generate even more rapid growth in their IDRs.

More broadly, understanding IDRs and how they're calculated is important. That's why I wrote this article on the topic. However, IDRs are not the only fundamental factor of importance when analyzing MLPs. If you had ignored all of the MLPs with an IDR structure over the past five years you would have passed up on several of the best-performing MLPs of all.]]> http://seekingalpha.com/article/1082511/comments?source=feed#comment-13081091 13081091
SBR, PBT and CRT are all US royalty trusts, not MLPs. While I haven't covered these three before, I have written about the group in general on Seeking Alpha in the November 2, 2012 piece "US Oil and Gas Royalty Trusts: Good Buys for Disciplined Investors." http://bit.ly/TvmkOo

I'll be writing more about trusts early in the New Year. ]]> Fri, 28 Dec 2012 19:10:06 -0500
SBR, PBT and CRT are all US royalty trusts, not MLPs. While I haven't covered these three before, I have written about the group in general on Seeking Alpha in the November 2, 2012 piece "US Oil and Gas Royalty Trusts: Good Buys for Disciplined Investors." http://bit.ly/TvmkOo

I'll be writing more about trusts early in the New Year. ]]> http://seekingalpha.com/article/1082511/comments?source=feed#comment-13080981 13080981
However, I disagree with you on the IDR issue and think there is considerable merit to the argument that IDRs offer an incentive for GPs.

In fact, over the years some of the best performing and fastest-growing MLPs I've covered are drop-down growth MLPs. For anyone unfamiliar with drop-downs, I covered this concept in a free article on my website about MPLX LP (NSDQ: MPLX), a recent IPO http://bit.ly/VIEZ75 that's ultimatelty run by Marathon Petroleum Company (NYSE: http://bit.ly/rnof7p)

Basically, these drop-down MLPs are typically set up by a company that owns a large number of assets that generate steady cash flows and are, therefore, ideal for the MLP structure. Typically the parent company IPOs the MLP with a few choice assets and acts as the General Partner. Over time, the GP sells its remaining MLP-able assets into the MLP (known as drop-downs) at prices that are immediately accretive to distributable cash flow and, therefore, distributions.

One example of this is Western Gas (NYSE: http://bit.ly/UruCrM) and the MLP's GP Anadarko Petroleum (NYSE: http://bit.ly/Jr1Qou). WES went public in May of 2008 and was trading around $16 per unit. At that time, it was paying a quarterly distribution of $0.30 per unit.

Over the ensuing years, it has received a steady stream of drop-downs from Anadarko starting with its December 2008 acquisition of the Hilight and Newcastle gathering system. As a result of the additional cash flows it generated from these new assets, WES has grew its distribution by 10% in 2009, 15.2% in 2010, nearly 16% in 2011 and 19% over the past year alone. Management expects growth of 15% next year as well. Since distribution growth tends to drive performance in this group, the stock has generated an annualized return of over 33% since its 2008 IPO, among the best in the MLP group.

WES has grown consistently even as it has climbed straight through its IDR structure and is now in the high splits (above $0.45 Anadarko takes 50%). In fact, it is this very IDR structure that provided the incentive for Anadarko to continue dropping down assets into the MLP as the firm benefited directly from these deals in the from of higher fees.]]> Fri, 28 Dec 2012 19:03:14 -0500
However, I disagree with you on the IDR issue and think there is considerable merit to the argument that IDRs offer an incentive for GPs.

In fact, over the years some of the best performing and fastest-growing MLPs I've covered are drop-down growth MLPs. For anyone unfamiliar with drop-downs, I covered this concept in a free article on my website about MPLX LP (NSDQ: MPLX), a recent IPO http://bit.ly/VIEZ75 that's ultimatelty run by Marathon Petroleum Company (NYSE: http://bit.ly/rnof7p)

Basically, these drop-down MLPs are typically set up by a company that owns a large number of assets that generate steady cash flows and are, therefore, ideal for the MLP structure. Typically the parent company IPOs the MLP with a few choice assets and acts as the General Partner. Over time, the GP sells its remaining MLP-able assets into the MLP (known as drop-downs) at prices that are immediately accretive to distributable cash flow and, therefore, distributions.

One example of this is Western Gas (NYSE: http://bit.ly/UruCrM) and the MLP's GP Anadarko Petroleum (NYSE: http://bit.ly/Jr1Qou). WES went public in May of 2008 and was trading around $16 per unit. At that time, it was paying a quarterly distribution of $0.30 per unit.

Over the ensuing years, it has received a steady stream of drop-downs from Anadarko starting with its December 2008 acquisition of the Hilight and Newcastle gathering system. As a result of the additional cash flows it generated from these new assets, WES has grew its distribution by 10% in 2009, 15.2% in 2010, nearly 16% in 2011 and 19% over the past year alone. Management expects growth of 15% next year as well. Since distribution growth tends to drive performance in this group, the stock has generated an annualized return of over 33% since its 2008 IPO, among the best in the MLP group.

WES has grown consistently even as it has climbed straight through its IDR structure and is now in the high splits (above $0.45 Anadarko takes 50%). In fact, it is this very IDR structure that provided the incentive for Anadarko to continue dropping down assets into the MLP as the firm benefited directly from these deals in the from of higher fees.]]> http://seekingalpha.com/article/1082511/comments?source=feed#comment-13075531 13075531
One has to be very careful in defining and calculating what's meant by paying out more than they earn. I still see a lot of commentary out there that discusses earnings and earnings per share (EPS) with reference to MLPs and that's just plain wrong. Earnings measures include a host of non-cash charges like depreciation that must be eliminated before calculating a particular MLP's payout ratio. ]]> Fri, 28 Dec 2012 16:10:55 -0500
One has to be very careful in defining and calculating what's meant by paying out more than they earn. I still see a lot of commentary out there that discusses earnings and earnings per share (EPS) with reference to MLPs and that's just plain wrong. Earnings measures include a host of non-cash charges like depreciation that must be eliminated before calculating a particular MLP's payout ratio. ]]> http://seekingalpha.com/article/1082511/comments?source=feed#comment-13075401 13075401
My goal was to explain how IDRs are calculated and what impact it has on an MLP's cash flows as I believe there's a lot of confusion out there about this.

And, you're right MLP math can definitely fill up a spreadsheet. ]]> Fri, 28 Dec 2012 16:06:34 -0500
My goal was to explain how IDRs are calculated and what impact it has on an MLP's cash flows as I believe there's a lot of confusion out there about this.

And, you're right MLP math can definitely fill up a spreadsheet. ]]> http://seekingalpha.com/article/1082591/comments?source=feed#comment-13075281 13075281
Moreover, the costs you mention such as transport, storage, labor etc aren't as relevant to an analysis of these companies. That's because these costs are smaller than the cost of feedstock, tend to remain relatively constant over time (certainly less volatile than oil prices) and would tend to be similar for refiners in a particular region of the country.

When I analyze a sector or a particular stock, I tend to try and identify which fundamental factors catalyze movement in those stocks over time. In this case, the crack spread is far more important than labor costs. ]]> Fri, 28 Dec 2012 16:03:12 -0500
Moreover, the costs you mention such as transport, storage, labor etc aren't as relevant to an analysis of these companies. That's because these costs are smaller than the cost of feedstock, tend to remain relatively constant over time (certainly less volatile than oil prices) and would tend to be similar for refiners in a particular region of the country.

When I analyze a sector or a particular stock, I tend to try and identify which fundamental factors catalyze movement in those stocks over time. In this case, the crack spread is far more important than labor costs. ]]> http://seekingalpha.com/article/1082591/comments?source=feed#comment-13075071 13075071
PADD 5 (the West Coast) appears to be the least attractive market for refiners here. ]]> Fri, 28 Dec 2012 15:57:38 -0500
PADD 5 (the West Coast) appears to be the least attractive market for refiners here. ]]> http://seekingalpha.com/article/1082591/comments?source=feed#comment-13074981 13074981
As I explain in a December 26, 2012 Seeking Alpha article "MLP Investing Basics: Incentive Distribution Rights Explained" http://bit.ly/X0hmxL Incentive Distribution Rights (IDRs) are fees paid by a limited partner (LP) to their general partner (GP) as compensation for managing the assets of the MLP.

Because IDRs are based on the distributions paid to LP unitholders, they help align the interest of the LP and GP. In other words, the GP gets higher IDRs when the LP generates higher distributable cash flows for its unitholders. That said, IDRs do raise an MLP's cost of capital because the GP is essentially taking a share of the LPs cash flows.

I have no specific knowledge why Alon decided not to include IDRs for the MLP they created. I'd assume that two factors influenced1. their decision:

1. Alon USA Partners is one of the first of a handful of new variable distribution MLPs. Unlike traditional MLPs, these partnerships aren't set up to provide a minimum quarterly distribution and consistent growth over time but simply pay out the majority of their cash flows as distributions. Since investors aren't particularly familiar with this concept just yet, I suspect Alon wanted to sweeten the package a bit to make its MLP more attractive.

2. Sine Alon already owns 84% of the MLP, they already have plenty of incentive to grow the MLPs' distributions over time.]]> Fri, 28 Dec 2012 15:54:38 -0500
As I explain in a December 26, 2012 Seeking Alpha article "MLP Investing Basics: Incentive Distribution Rights Explained" http://bit.ly/X0hmxL Incentive Distribution Rights (IDRs) are fees paid by a limited partner (LP) to their general partner (GP) as compensation for managing the assets of the MLP.

Because IDRs are based on the distributions paid to LP unitholders, they help align the interest of the LP and GP. In other words, the GP gets higher IDRs when the LP generates higher distributable cash flows for its unitholders. That said, IDRs do raise an MLP's cost of capital because the GP is essentially taking a share of the LPs cash flows.

I have no specific knowledge why Alon decided not to include IDRs for the MLP they created. I'd assume that two factors influenced1. their decision:

1. Alon USA Partners is one of the first of a handful of new variable distribution MLPs. Unlike traditional MLPs, these partnerships aren't set up to provide a minimum quarterly distribution and consistent growth over time but simply pay out the majority of their cash flows as distributions. Since investors aren't particularly familiar with this concept just yet, I suspect Alon wanted to sweeten the package a bit to make its MLP more attractive.

2. Sine Alon already owns 84% of the MLP, they already have plenty of incentive to grow the MLPs' distributions over time.]]> http://seekingalpha.com/article/959611/comments?source=feed#comment-11041101 11041101 http://seekingalpha.co...

My publication also covers all 86 energy-related MLPs.]]> Tue, 30 Oct 2012 10:54:26 -0400 http://seekingalpha.co...

My publication also covers all 86 energy-related MLPs.]]> http://seekingalpha.com/article/932431/comments?source=feed#comment-10662581 10662581 Thu, 18 Oct 2012 12:24:55 -0400 http://seekingalpha.com/article/932431/comments?source=feed#comment-10662491 10662491
For one, we prefer to hold securities that offer no tax protections in a retirement account and keep our MLP positions in a taxable account to take full advantage of their tax-deferral characteristics.

Also, some of the net income that MLPs allocate to their unitholders is classified as unrelated business taxable income (UBTI). Each taxpayer has a $1,000 total annual allowance for UBTI paid into a 401(k) or IRA account; annual UBTI over this threshold could incur a tax liability. However, many MLPs generate negative or modest levels of UBTI, ensuring that you likely won’t have to lose sleep over this issue.

If you exceed your annual UBTI exemption, you don’t need to file any additional forms with the IRS; the custodian of your IRA or 401(k) is responsible for filing a Form 990 and paying the tax out of your account’s funds. Most investors find that the above-average yields offered by MLPs more than compensate for any UBTI-related taxes.

Some investors avoid these problems altogether by purchasing a close-end or exchange-traded fund, neither of which produce UBTI. These investment products also disburse normal, qualified dividends to their shareholders and report these payments on a Form 1099, eliminating any vexation that might arise from dealing with the unfamiliar Form K-1.

However, these minor conveniences don’t make up for the biggest problem with closed-end and exchange-traded funds: portfolios that skew heavily toward names with the largest capitalization.]]> Thu, 18 Oct 2012 12:23:45 -0400
For one, we prefer to hold securities that offer no tax protections in a retirement account and keep our MLP positions in a taxable account to take full advantage of their tax-deferral characteristics.

Also, some of the net income that MLPs allocate to their unitholders is classified as unrelated business taxable income (UBTI). Each taxpayer has a $1,000 total annual allowance for UBTI paid into a 401(k) or IRA account; annual UBTI over this threshold could incur a tax liability. However, many MLPs generate negative or modest levels of UBTI, ensuring that you likely won’t have to lose sleep over this issue.

If you exceed your annual UBTI exemption, you don’t need to file any additional forms with the IRS; the custodian of your IRA or 401(k) is responsible for filing a Form 990 and paying the tax out of your account’s funds. Most investors find that the above-average yields offered by MLPs more than compensate for any UBTI-related taxes.

Some investors avoid these problems altogether by purchasing a close-end or exchange-traded fund, neither of which produce UBTI. These investment products also disburse normal, qualified dividends to their shareholders and report these payments on a Form 1099, eliminating any vexation that might arise from dealing with the unfamiliar Form K-1.

However, these minor conveniences don’t make up for the biggest problem with closed-end and exchange-traded funds: portfolios that skew heavily toward names with the largest capitalization.]]> http://seekingalpha.com/article/910511/comments?source=feed#comment-10346111 10346111
The rate of pricing deterioration may begin to lessen in Q3 but I'd rather see concrete signs of a turn before trying to call a bottom in these stocks. Earnings estimates for HAL and BHI continue to take a hit heading into their quarters. ]]> Tue, 09 Oct 2012 17:13:05 -0400
The rate of pricing deterioration may begin to lessen in Q3 but I'd rather see concrete signs of a turn before trying to call a bottom in these stocks. Earnings estimates for HAL and BHI continue to take a hit heading into their quarters. ]]> http://seekingalpha.com/article/910511/comments?source=feed#comment-10345921 10345921
Also, keep in mind that there are a number of dry gas basins in the US (little liquids content) like the Haynesville, Barnett, Montney in Canada and part of the Marcellus Shale that have been essentially moth-balled as producers scale back drilling activity due to low gas prices. As demand for exports ticks up and prices begin to rise, I'd expect these plays to come back on stream, pushing supplies higher.

Bottom line: while I believe your sentiment on LNG exports is directionally correct I think it will take longer than 2 years to get back to 6 to 8 dollar gas. ]]> Tue, 09 Oct 2012 17:08:29 -0400
Also, keep in mind that there are a number of dry gas basins in the US (little liquids content) like the Haynesville, Barnett, Montney in Canada and part of the Marcellus Shale that have been essentially moth-balled as producers scale back drilling activity due to low gas prices. As demand for exports ticks up and prices begin to rise, I'd expect these plays to come back on stream, pushing supplies higher.

Bottom line: while I believe your sentiment on LNG exports is directionally correct I think it will take longer than 2 years to get back to 6 to 8 dollar gas. ]]> http://seekingalpha.com/article/910511/comments?source=feed#comment-10345711 10345711
One thing that strikes me is that HAL and BHI also sounded more upbeat on the potential for a bottom in pressure pumping margins than Schlumberger (SLB). Since SLB is not that exposed to pressure pumping, they have less of an incentive to sound optimistic so I wonder if some of that upbeat tone might be wishful thinking.

Long: $SLB]]> Tue, 09 Oct 2012 17:04:28 -0400
One thing that strikes me is that HAL and BHI also sounded more upbeat on the potential for a bottom in pressure pumping margins than Schlumberger (SLB). Since SLB is not that exposed to pressure pumping, they have less of an incentive to sound optimistic so I wonder if some of that upbeat tone might be wishful thinking.

Long: $SLB]]> http://seekingalpha.com/article/910511/comments?source=feed#comment-10335761 10335761
For now, I like stocks in the oil services and equipment industries that are focused offshore and/or in international markets. ]]> Tue, 09 Oct 2012 13:30:24 -0400
For now, I like stocks in the oil services and equipment industries that are focused offshore and/or in international markets. ]]> http://seekingalpha.com/article/910511/comments?source=feed#comment-10301751 10301751
Not only are they facing the same cyclical headwinds as I noted for $BHI and $HAL above, I just don't see much momentum developing behind their LPG (butane and propane) fracturing process. I can't think of a compelling reason producers would switch large-scale from water/sand based fracturing fluids in the current environment. ]]> Mon, 08 Oct 2012 17:08:14 -0400
Not only are they facing the same cyclical headwinds as I noted for $BHI and $HAL above, I just don't see much momentum developing behind their LPG (butane and propane) fracturing process. I can't think of a compelling reason producers would switch large-scale from water/sand based fracturing fluids in the current environment. ]]> http://seekingalpha.com/article/715791/comments?source=feed#comment-7362481 7362481
As one of the commenters below alludes, I am a big proponent of picking individual stocks and sectors within energy rather than buying the index. And there have certainly been plenty of opportunities within energy over the past five years.

For example, how about one of my favourite groups, the Master Limited Partnerships (MLPs), which I have written about frequently here on SA? The Alerian MLP Index is up 61% over the past five years--a more than 10 percent annualized gains in one of the worst stock markets of the post-war era is hardly "dead money."

Or, how about buying into deepwater drillers when the media and public panicked in the wake of the Gulf oil spill of 2010 as I suggested in this SA article bit.ly/9UxNB1 ? Deepwater driller Seadrill (NYSE: SDRL), for example, is up 135% since June 1, 2010. That's not dead money either. ]]> Fri, 13 Jul 2012 15:18:06 -0400
As one of the commenters below alludes, I am a big proponent of picking individual stocks and sectors within energy rather than buying the index. And there have certainly been plenty of opportunities within energy over the past five years.

For example, how about one of my favourite groups, the Master Limited Partnerships (MLPs), which I have written about frequently here on SA? The Alerian MLP Index is up 61% over the past five years--a more than 10 percent annualized gains in one of the worst stock markets of the post-war era is hardly "dead money."

Or, how about buying into deepwater drillers when the media and public panicked in the wake of the Gulf oil spill of 2010 as I suggested in this SA article bit.ly/9UxNB1 ? Deepwater driller Seadrill (NYSE: SDRL), for example, is up 135% since June 1, 2010. That's not dead money either. ]]> http://seekingalpha.com/article/715791/comments?source=feed#comment-7351321 7351321
Oil prices won't drop into the $60's unless there's a serious global recession. Politicians like to talk about oil prices but the truth is that th US President has no control over oil prices whatsoever. A President can certainly help to enact policies which will influence oil prices up or down on the margin but oil is a global market and I wouldn't put much money on politicians' forecasts of where oil is headed. ]]> Fri, 13 Jul 2012 10:31:46 -0400
Oil prices won't drop into the $60's unless there's a serious global recession. Politicians like to talk about oil prices but the truth is that th US President has no control over oil prices whatsoever. A President can certainly help to enact policies which will influence oil prices up or down on the margin but oil is a global market and I wouldn't put much money on politicians' forecasts of where oil is headed. ]]> http://seekingalpha.com/article/715791/comments?source=feed#comment-7351021 7351021
Eventually, sustained high oil prices will prompt consumers and companies to make the shift from oil but it's probably a multi-decade shift. ]]> Fri, 13 Jul 2012 10:26:03 -0400
Eventually, sustained high oil prices will prompt consumers and companies to make the shift from oil but it's probably a multi-decade shift. ]]> http://seekingalpha.com/article/715791/comments?source=feed#comment-7350911 7350911
So while I think stocks could see some more downside this summer I think oil has limited downside from here. I believe the Fed will announce as much as $500 billion in QE in August or September and that also tends to be bullish for commodities.

The opening of the Seaway pipeline from Cushing to the Gulf Coast will help to narrow the WTI-Brent discount to a degree but I think WTI will continue to trade at a sizeable discount to Brent due to the fact that the US production growth outlook is so much better than for any other non-OPEC country. ]]> Fri, 13 Jul 2012 10:21:39 -0400
So while I think stocks could see some more downside this summer I think oil has limited downside from here. I believe the Fed will announce as much as $500 billion in QE in August or September and that also tends to be bullish for commodities.

The opening of the Seaway pipeline from Cushing to the Gulf Coast will help to narrow the WTI-Brent discount to a degree but I think WTI will continue to trade at a sizeable discount to Brent due to the fact that the US production growth outlook is so much better than for any other non-OPEC country. ]]> http://seekingalpha.com/article/675271/comments?source=feed#comment-6763801 6763801
Legacy's use of hedges isn't a commentary on where they think oil and gas prices are going, rather it's simply the recognition that MLP investors are typically looking for a sustainable, gradually growing yield. You can't deliver sustainability if you're cash flows are dependent on the vagaries of commodity prices.

I'd also say that you generally don't want to see MLPs generate GAAP earnings. The reason is that those accounting charges--like depreciation for the pipeline MLPs--are the main reason MLPs offer a tax shield for investors. ]]> Mon, 25 Jun 2012 10:34:17 -0400
Legacy's use of hedges isn't a commentary on where they think oil and gas prices are going, rather it's simply the recognition that MLP investors are typically looking for a sustainable, gradually growing yield. You can't deliver sustainability if you're cash flows are dependent on the vagaries of commodity prices.

I'd also say that you generally don't want to see MLPs generate GAAP earnings. The reason is that those accounting charges--like depreciation for the pipeline MLPs--are the main reason MLPs offer a tax shield for investors. ]]>