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Hot Take Of The Day Interview: Oil, Gas And Tankers

May 06, 2020 10:32 AM ETAR, AM, STNG7 Comments
Josh Young profile picture
Josh Young


  • Hot Take Of The Day interview with David Ramsden-Wood.
  • How I find and analyze oil and gas investments.
  • Various current opportunities including low decline oil producers, natural gas producers, and product tankers.

Recent interview with Hot Take Of The Day's David Ramsden-Wood.

Core investment theses as summarized by DRW:

1) the marginal cost of a barrel of oil in the world is much higher than the current price, biasing towards $50-60 oil or higher

2) unconventional (shale) companies were inflated because of a series of debt bubbles, equity bubbles, and capital allocation bubbles - at the core, they weren't a profitable business and require higher prices, possibly even higher than the past 5 year range.

3) its harder to predict the next "new" thing than to find and analyze existing assets available for potential substantial discounts to replacement cost - finding "the last thing for a giant discount to the cost to replace it."

4) commonalities between Tesla (TSLA) and Amazon (AMZN) and shale drillers - pricing in future hypothetical profits and similarities to the 1001 days in a life of a Thanksgiving Turkey:

The life of a Thanksgiving turkey perfectly illustrates what ...

Subjects include: investment philosophy, conflicts of interest of banks and media companies, long term investment thesis in low decline oil producers, shale mal-investment, and opportunities in natural gas producers and product tankers.

Relevant tickers: Antero Resources (AR), Antero Midstream (AM), Scorpio Tankers (STNG), Exxon (XOM), Shell (RDS.A), Chevron (CVX), Whiting (WLL), Northern Oil (NOG), EOG (EOG), Concho (CXO), Pioneer (PXD), Oil and Gas ETFs: USO USL UNG UNL XOP XLE PSCE FCG GUSH UCO DRIP

This article was written by

Josh Young profile picture
Josh Young is the Chief Investment Officer of Bison Interests, an investment firm focused on publicly traded oil and gas companies. And he is the former Chairman of the Board of Iron Bridge Resources, which sold to Warburg Pincus and CPPIB backed Velvet Energy in 2018 for $142 million. He is a value investor primarily focused on energy stocks, natural resources stocks, and companies trading at low multiples to earnings, cash flow, or book value. He has presented at numerous investment conferences, including Platts, LD Micro, Oil & Gas Money, Louisiana Energy Conference, and the Global Resources Investment Conference and has been featured in media including Barrons, Bloomberg, Business Insider, Fox Business News, RT and Oil & Gas Investor Magazine. He is a graduate with honors from the University of Chicago in economics.

Analyst’s Disclosure: I am/we are long AR, AM, STNG.

Important Disclaimer: Opinions expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment adviser capacity. This is not an investment research report. The author's opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies' SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication and are subject to change without notice. The author and funds the author advises may buy or sell shares without any further notice.

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Comments (7)

Great interview!
B___________ profile picture
great interview
1. With respect to (1), the marginal cost depends a lot on the supply/demand picture. Oil and gas is extremely inelastic in supply and demand. On the supply side, it is cheap to product oil from existing wells, but expensive to drill new ones. Thus shifts in demand (up or down) can drive significant short term price gyrations. In other words, the marginal cost for another barrel is dramatically different at world consumption levels of 70, 80, or 90 MM bopd.

Similarly, on the demand side, supply shocks will drive significant price changes (up or down) since there are limited substitutes for liquid transport fuels (especially on a short term basis). IOW demand is relatively fixed. This means that actions of cartel suppliers such as N/OPEC and in particular SA and key Gulf allies can have significant short term impact on prices--when they restrict oil output or "let the juices flow". A strong OPEC restriction will allow shale p;layers to flourish, especially in the short term. And the opposite, when OPEC, which has extremely low production costs, competes freely.

2. I think the whole bubble/Fed discussion wrt oil is way overplayed. The big issue was the outlook for prices. If anything shale has overdelivered in terms of "how much you can get out of the rock at what cost". The problem is that prices for oil and gas have crashed--much lower than strip anticipated.

In addition, many of the mistakes were made many years ago (pre-2015 for oil and pre 2011 for gas). And you are still seeing a lot of those old mistakes get revealed. But it's old news, economically. A point I often make to those hooting about write-downs--the market already knew that land was crap at these prices! It's just accounting--not new economic information.
yeah, i.like turkey also. where is.the.recipe?
spend my cash profile picture
waste of my time
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Antero Resources Corporation
Antero Midstream Corporation
Scorpio Tankers Inc.

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