Author Topic: Energy Sector  (Read 23821 times)

Spekulatius

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Re: Energy Sector
« Reply #130 on: March 21, 2020, 05:14:38 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.

Do you even need primers? Just study the income and foremost the cash flow statements and everything else flows from that. Primers tend to get you into rabbit holes that make you blind for collective shortcomings of an industry.
Life is too short for cheap beer and wine.


NewValueinvestor

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Re: Energy Sector
« Reply #131 on: March 21, 2020, 05:31:56 PM »
yes but you still need to understand the dynamics of energy companies, the more you read the better your prepared.

A MLP or pipeline company is quite different from say, a natural gas exploration company.
Here's blog I found useful as a start:

https://www.canadianvalueinvestors.com/oil-and-gas-investing-101

My understanding is that there are 3 main sections in crude oil:

Upstream - Oil exploration, drilling, service providers

Midstream - Refiners, pipelines, chemical facilities, etc.

Downstream - Oil & Gas distribution, marketing of petrochemicals, gas stations, jet fuel sales, etc.

Depending how the energy company operates you need value each one a little differently, like Enbridge would be a little different than say range resources. For integrated majors, supermajors, I think it's a good idea to value their main separate segments listed above then do sum of the parts and add it together.

I could be very wrong, but this is how I'm approaching looking at energy companies.

Mephistopheles

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Re: Energy Sector
« Reply #132 on: March 22, 2020, 03:55:50 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.

Do you even need primers? Just study the income and foremost the cash flow statements and everything else flows from that. Primers tend to get you into rabbit holes that make you blind for collective shortcomings of an industry.

Well how else to learn about competitive dynamics for instance? Not only between horizontal competitors but between upstream, mid, and downstream players. I'm sure I can buy a basket of shale producers and if oil shoots back up I can make a killing but I'd rather be able to understand nuances between different companies.

Spekulatius

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Re: Energy Sector
« Reply #133 on: March 22, 2020, 05:03:32 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.

Do you even need primers? Just study the income and foremost the cash flow statements and everything else flows from that. Primers tend to get you into rabbit holes that make you blind for collective shortcomings of an industry.

Well how else to learn about competitive dynamics for instance? Not only between horizontal competitors but between upstream, mid, and downstream players. I'm sure I can buy a basket of shale producers and if oil shoots back up I can make a killing but I'd rather be able to understand nuances between different companies.

I would avoid shalers altogether. If you do invest in upstream at all, stick with majors or those with long live resources like the Canadian oils Sand plays CNQ and SU or perhaps CVE if you like an option like play.

The reason why long live resources can survive longer is because they don’t have to reinvest as much once the resources is operating, except for maintenance capital. Shale is a short live resource and thy constantly nerf to drill or the resources are going to run dry.

But in a way, that is also obvious through the cash flow statement, if you dig enough, hence my remark. Midstream is similar in this way as are refineries. All of them are better than shale E&P‘s imo.
« Last Edit: March 22, 2020, 06:58:31 PM by Spekulatius »
Life is too short for cheap beer and wine.

opihiman2

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Re: Energy Sector
« Reply #134 on: March 22, 2020, 06:57:13 PM »
Damn, I think I might have been too optimistic on oil, and I'm now backing out of going long oil under $20.  This damn thing is heading under $10.

samwise

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Re: Energy Sector
« Reply #135 on: March 25, 2020, 09:06:09 PM »
Question for those who follow refiners. Does the crack spread get affected by crude prices? I would have thought it shouldn’t.

Why are refiners down so much more than the market then ? Is it just an anticipation of lower demand and capacity utilization. Or is something else .

Thanks in advance.

shhughes1116

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Re: Energy Sector
« Reply #136 on: March 26, 2020, 05:00:17 AM »
Question for those who follow refiners. Does the crack spread get affected by crude prices? I would have thought it shouldn’t.

Why are refiners down so much more than the market then ? Is it just an anticipation of lower demand and capacity utilization. Or is something else .

Thanks in advance.

It is most definitely affected by crude prices.  The crack spread represents the difference between the incoming cost of crude (usually a function of the cost of crude from a particular basin that is accessible to the refinery), and the value of the outbound products (e.g. gasoline, diesel, jet fuel, asphalt).  Light crude and heavy crude produce a different ratio of outputs, and that ratio depends on the complexity of the refinery (e.g. presence of absence of a hydrocracker).

Anyways, the cost of crude is falling, and it looks like the value of the outputs is falling as fast, if not faster.  Hence, crack spreads are tightening, which is negative for refiners.   

opihiman2

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Re: Energy Sector
« Reply #137 on: March 27, 2020, 11:50:03 PM »
I haven't heard about Kupperman in a LONG time.  I thought Praetorian Capital was doing pretty bad with that whole weird real estate thesis in Mongolia.  Like, what the hell were they thinking?  But, this sounds like a pretty good idea:

https://moiglobal.com/crisis20-harris-kupperman/?utm_source=rss&utm_medium=rss&utm_campaign=crisis20-harris-kupperman

I haven't looked at bulk shippers since the BDI blew up many years ago and people lost their shirts on companies like DRYS.  But, thoughts on this?  VLCC companies might be getting some huge tailwinds soon.

sleepydragon

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Re: Energy Sector
« Reply #138 on: March 28, 2020, 06:38:40 AM »
Is OXY a good buy here?

opihiman2

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Re: Energy Sector
« Reply #139 on: March 28, 2020, 11:12:01 AM »
Is OXY a good buy here?

I would avoid it.  Anything in hydrocarbon exploration and drilling is going to get fucked.