Author Topic: Energy Sector  (Read 23755 times)

Viking

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Re: Energy Sector
« Reply #120 on: March 20, 2020, 06:09:42 PM »
  https://www.wsj.com/articles/opec-u-s-shale-producers-open-talks-amid-oil-rout-11584719936

This is a tough call.  If they agree to cuts and Russia is on board, I think oil pumps up a bit.  But the demand side of the equation.  It's anyone's guess at this point.  I'm still thinking WTI tanks below $20, and Brent goes to about $20.  At that point, I'm starting to buy the majors and some midstreams.  10% of the portfolio goes into this.

Is the news article essentially saying the US is going to join OPEC? Wow. Amazing how fast the world can change.


opihiman2

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Re: Energy Sector
« Reply #121 on: March 21, 2020, 10:31:00 AM »
The more I think about it, I think this is all just wishful thinking: US, SA, and Russia forming an alliance and a truce, cut back on production, and bam, we're back to $50 oil.

Knowing Russia, they have no qualms with destroying US shale.  I mean, think about it.  Why would Russia HELP US shale recover?  They recover, the mexican beer virus is gone, demand is back up, and Russia is back in the same bullshit as it was a few years ago.  No, this time, they're going to take the pain to crush U.S. oil.  Putin has said many times he think US shale tech  is barbaric.  The timing is absolutely perfect.  Probably 1 in a 100 year event just unfolded, and there's not going to be another oppty for Russia to finally take a deep stab into the heart of US oil. 

This is likely going to be a long drawn out battle.  Still, below $20 on brent, I'm starting to buy the oil majors and some mid streams.

Xerxes

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Re: Energy Sector
« Reply #122 on: March 21, 2020, 10:46:41 AM »
i am not sure if that has been stated before, but i mention it anyways. Russia's oil industry has a ruble-based cost structure whereas Saudi's oil industry has a riyal-pegged-to-USD cost structure.

What it means is that as the barrel drops in USD, the commodity-based currency ruble plunges and so does Russia's cost base, whereas for the Kingdom, they get fully crushed on their margin, because their production cost are all effectively USD. All this to say that Moscow has a built-in damper that helps it a bit when the barrel drops. Inversely as barrel shots up, ruble may appreciates too much and that would cap their gain as well.

Coming out of this, i believe the US shale producers will be consolidating under the banner of non-shale Exxon and Chevron and some of the bigger player in the Permian basin. And that Moscow and Riyadh will be looking at a much stronger opponent down the road in the US.

I own both Shell and Exxon and have seem them deteriorate. i hope they cut their CAPEX and focus on share buyback. But i think at this point with how low the barrel is, as new investor, a better directional play on the crude that doesn't involve the headaches of knowing the O&G company would be to go long on RUBLE - the currency itself.

When i bought Exxon and Shell some years back in 2017-18, my objective was not capitalize on rising oil price, but on production increase of the super majors. My view has been that the 'risk premium' has long gone since almost 5-6 years ago, we just didn't know it at the time. My bet was that Exxon will become the mega super major through its $35B CAPEX annual spend in the Permian Basin that would expand its production. Whereas Shell would pivot toward the natural gas and in time renewables. 

I desperately looking for a Daniel Yergin's follow-on book when it comes out at some point. it has been fascinating journey.
« Last Edit: March 21, 2020, 11:12:02 AM by Xerxes »

kab60

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Re: Energy Sector
« Reply #123 on: March 21, 2020, 10:58:33 AM »
Why not just go with a pipeline operator like Williams which is mostly demand driven from utilities and NG? Decent ROIC, irreplacable assets, fat yield. If rates stay low, essential infrastructure should do pretty great. Otherwise I like the idea of betting on oil by going long the ruble - perhaps through something like Sberbank. Doesn't have to constantly drill holes to keep status quo.

opihiman2

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Re: Energy Sector
« Reply #124 on: March 21, 2020, 11:58:02 AM »
i am not sure if that has been stated before, but i mention it anyways. Russia's oil industry has a ruble-based cost structure whereas Saudi's oil industry has a riyal-pegged-to-USD cost structure.

What it means is that as the barrel drops in USD, the commodity-based currency ruble plunges and so does Russia's cost base, whereas for the Kingdom, they get fully crushed on their margin, because their production cost are all effectively USD. All this to say that Moscow has a built-in damper that helps it a bit when the barrel drops. Inversely as barrel shots up, ruble may appreciates too much and that would cap their gain as well.

Coming out of this, i believe the US shale producers will be consolidating under the banner of non-shale Exxon and Chevron and some of the bigger player in the Permian basin. And that Moscow and Riyadh will be looking at a much stronger opponent down the road in the US.

I own both Shell and Exxon and have seem them deteriorate. i hope they cut their CAPEX and focus on share buyback. But i think at this point with how low the barrel is, as new investor, a better directional play on the crude that doesn't involve the headaches of knowing the O&G company would be to go long on RUBLE - the currency itself.

When i bought Exxon and Shell some years back in 2017-18, my objective was not capitalize on rising oil price, but on production increase of the super majors. My view has been that the 'risk premium' has long gone since almost 5-6 years ago, we just didn't know it at the time. My bet was that Exxon will become the mega super major through its $35B CAPEX annual spend in the Permian Basin that would expand its production. Whereas Shell would pivot toward the natural gas and in time renewables. 

I desperately looking for a Daniel Yergin's follow-on book when it comes out at some point. it has been fascinating journey.

That's a very interesting take, and the ruble trade is something I haven't considered.  In fact, I just watched a CNBC video this morning talking about the Russia / SA price war, and they mentioned that the ruble has been tanking.  I compared it to other petro related currencies like CAD, and it's down about 20 to 25%.  Looking longer term from the oil bust after GFC till $60+ oil, it looks like Ruble is down against both CAD and USD.

I'll probably just go long oil via the majors.  I'm thinking refinery operations will recover the fastest.  VLO and CVX look good.  I like BP and Shell based on their cash balance sheets. 

This Daniel Yergin book sounds interesting.  Care to provide a TL;DR? 


opihiman2

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Re: Energy Sector
« Reply #125 on: March 21, 2020, 12:05:15 PM »
Why not just go with a pipeline operator like Williams which is mostly demand driven from utilities and NG? Decent ROIC, irreplacable assets, fat yield. If rates stay low, essential infrastructure should do pretty great. Otherwise I like the idea of betting on oil by going long the ruble - perhaps through something like Sberbank. Doesn't have to constantly drill holes to keep status quo.

WMB is looking interesting, but I still think it's overpriced given the market dynamics.  Even in post GFC and 2016 when oil briefly tanked to 30's, WMB was a bit lower then than it is now.  But, you're right.  WMB is looking more and more interesting.  But, I still think it goes lower.  Not buying until it hits single digits.  My bet is the dividend gets cut or suspended.

Spekulatius

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Re: Energy Sector
« Reply #126 on: March 21, 2020, 01:30:29 PM »
i am not sure if that has been stated before, but i mention it anyways. Russia's oil industry has a ruble-based cost structure whereas Saudi's oil industry has a riyal-pegged-to-USD cost structure.

What it means is that as the barrel drops in USD, the commodity-based currency ruble plunges and so does Russia's cost base, whereas for the Kingdom, they get fully crushed on their margin, because their production cost are all effectively USD. All this to say that Moscow has a built-in damper that helps it a bit when the barrel drops. Inversely as barrel shots up, ruble may appreciates too much and that would cap their gain as well.

Coming out of this, i believe the US shale producers will be consolidating under the banner of non-shale Exxon and Chevron and some of the bigger player in the Permian basin. And that Moscow and Riyadh will be looking at a much stronger opponent down the road in the US.

I own both Shell and Exxon and have seem them deteriorate. i hope they cut their CAPEX and focus on share buyback. But i think at this point with how low the barrel is, as new investor, a better directional play on the crude that doesn't involve the headaches of knowing the O&G company would be to go long on RUBLE - the currency itself.

When i bought Exxon and Shell some years back in 2017-18, my objective was not capitalize on rising oil price, but on production increase of the super majors. My view has been that the 'risk premium' has long gone since almost 5-6 years ago, we just didn't know it at the time. My bet was that Exxon will become the mega super major through its $35B CAPEX annual spend in the Permian Basin that would expand its production. Whereas Shell would pivot toward the natural gas and in time renewables. 

I desperately looking for a Daniel Yergin's follow-on book when it comes out at some point. it has been fascinating journey.

That's a very interesting take, and the ruble trade is something I haven't considered.  In fact, I just watched a CNBC video this morning talking about the Russia / SA price war, and they mentioned that the ruble has been tanking.  I compared it to other petro related currencies like CAD, and it's down about 20 to 25%.  Looking longer term from the oil bust after GFC till $60+ oil, it looks like Ruble is down against both CAD and USD.

I'll probably just go long oil via the majors.  I'm thinking refinery operations will recover the fastest.  VLO and CVX look good.  I like BP and Shell based on their cash balance sheets. 

This Daniel Yergin book sounds interesting.  Care to provide a TL;DR?

Pretty much any foreign currency has been taking against the USD, but oil related currencies like MXN or NOk and RUB have done the worst. MXN and NOK are down 20% compared to the USD.
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Xerxes

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Re: Energy Sector
« Reply #127 on: March 21, 2020, 02:36:45 PM »
His earlier book The Prize finished in the 90s.
He had a subsequent book called The Quest that I actually enjoyed less than The Prize.

But in the past year, he has been hinting on Bloomberg TV that he is working on something.
No title nor any release date. I imagine the news flow keeps adding to to that story.

Mephistopheles

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Re: Energy Sector
« Reply #128 on: March 21, 2020, 04:42:36 PM »
What's the best way to learn about oil and gas for a beginner? I'm trying to read through this massive 400 page primer but it's old from like 2007, I'd like to find something more up to date.

finetrader

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Re: Energy Sector
« Reply #129 on: March 21, 2020, 05:06:44 PM »
Itís a commodity
Live to invest, invest to live