Author Topic: Natural Gas IDeas  (Read 881 times)

DeepValuePlay

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Natural Gas IDeas
« on: April 30, 2020, 05:47:36 AM »
Natural gas is probably going to benefit from all of the well shut ins as it is a byproduct of oil in many instances.
What is a pure gas play you guys think can go up multiples of today's price?

Thanks!
DVP
"What the wise man does at the beginning, the fool does in the end"


thepupil

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Re: Natural Gas IDeas
« Reply #1 on: April 30, 2020, 06:04:17 AM »
I think virtually every pure play natural gas name can go up multiples at least the levered ones. They can also be donuts.

I own BSM (see thread) which is a 1x (and going lower) levered royalty trust which has a concentrated position in the Haynesville but acreage across the US and accounts for like 10% of drilling permits in the US; itís the biggest publicly traded (and maybe just the biggest period, outside of majors that own fee simple fields) royalty owner. Millions of leased and unleased acres.

I have no idea what it is worth. I believe strongly itís worth more than zero and that it will be around in 3,5,10 years.

It has no capex, will soon have no debt, and will distribute somewhere between 20-60% of its stock price in distributions over the next 5 years and 40-100%+ over the next ten (all my opinion). This capital return will decrease risk/ mincrease IRR and ďreduce the j curveĒ as the PE suits like to say

The upside case is that we start to trade to the teens (from $6) and this becomes THE advantaged consolidator of royalty interest held in the private market. If youíre a Jed Clampett type in Texas and you die and distribute your minerals to your 8 heirs, they may prefer to tax efficiently monetize by selling to  BSM. Likewise bankrupt and post bankrupt corporates May move to using income statement leverage(royalties/drillcoís etc) instead of junk bonds going forward.

Show me an energy stock with the institutional sponsorship (blue chip endowments) and family/insider ownership, balance sheet and low capital requirements of BSM.

I started with BSM. As my high cost lots become eligible for tax losses (last lot purchased in the $4ís on 3/31), Iíll swap the high cost lots into DMLP as my secondary gassy royalty trust that has no debt with long tenured management.


A large % of 2020 oil is hedged and itís mainly gas.

« Last Edit: April 30, 2020, 06:08:45 AM by thepupil »

KJP

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Re: Natural Gas IDeas
« Reply #2 on: April 30, 2020, 06:04:55 AM »
Natural gas is probably going to benefit from all of the well shut ins as it is a byproduct of oil in many instances.
What is a pure gas play you guys think can go up multiples of today's price?

Thanks!
DVP

What is your view on NGL pricing?  Currently difficulties in NGL markets have caused wet gas producers to cut production.  (See, for example, the CNX Midstream Q1 conference call.)  Do you believe that will continue?  If so, dry gas producers would do the best. 

That being said, Black Stone Minerals might interest you.  Some of its acreage should do well in the scenario you describe, but it has other acreage that would do well in different scenarios, so it allows you to be a bit more agnostic (or, in my case, dumb) about how everything will play out. 

EDIT:  Pupil beat me to the punch with a more coherent analysis. DMLP's restrictions on what management can do probably help it avoid doing dumb things.  BSM doesn't have those restrictions, so there's more room for mismanagement.
« Last Edit: April 30, 2020, 06:11:40 AM by KJP »

KJP

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Re: Natural Gas IDeas
« Reply #3 on: April 30, 2020, 06:21:13 AM »


I started with BSM. As my high cost lots become eligible for tax losses (last lot purchased in the $4ís on 3/31), Iíll swap the high cost lots into DMLP as my secondary gassy royalty trust that has no debt with long tenured management.


How "gassy" is DMLP?  My basic understanding was that it was quite "oily," but I'm no expert on all of its holdings.  See, e.g., slide 9 here:  http://www.dmlp.net/static-files/1e23a42a-e04a-4cf9-af0c-c9f5da8e0e50.  Note also that some its gas is associated gas from Permian and Bakken, rather than from gas directed drilling.
« Last Edit: April 30, 2020, 06:32:56 AM by KJP »

thepupil

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Re: Natural Gas IDeas
« Reply #4 on: April 30, 2020, 06:28:17 AM »


I started with BSM. As my high cost lots become eligible for tax losses (last lot purchased in the $4ís on 3/31), Iíll swap the high cost lots into DMLP as my secondary gassy royalty trust that has no debt with long tenured management.


How "gassy" is DMLP?  My basic understanding was that it was quite "oily," but I'm no expert on all of its holdings.  See, e.g., slide 9 here:  http://www.dmlp.net/static-files/1e23a42a-e04a-4cf9-af0c-c9f5da8e0e50.  Note also that some its has is associated gas from Permian and Bakken, rather than from gas directed drilling.

Great point; my impression is wrong or dated; working on too much and need to revisit, thanks!

SharperDingaan

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Re: Natural Gas IDeas
« Reply #5 on: April 30, 2020, 08:12:53 AM »
Stay away from US gas producers. The domestic market is very limited, and the global price has nowhere to go but down.
For Iranian gas to displace Russian exports to Europe, the price has to drop - and the Iranians can go a lot lower than the Russians.
US gas is not competitive unless it's shale by-product.

https://oilprice.com/Energy/Natural-Gas/Oil-Price-War-Claims-Another-Victim.html
https://oilprice.com/Energy/Natural-Gas/Iran-Reaches-Production-Milestone-At-Worlds-Largest-Gas-Field.html

SD

Uccmal

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Re: Natural Gas IDeas
« Reply #6 on: April 30, 2020, 08:50:39 AM »
Enbridge - Pipe is getting harder and harder to build.  An oligopoly is being created. 
GARP tending toward value