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Marathon Oil Corporation Message Board

  • jobu_saj jobu_saj Aug 19, 2005 1:41 PM Flag

    Nostra-dolphinus

    dolphin...you're analysis yesterday definately foresaw todays market dynamics...thanks for the reassurance in last nights posts

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    • News update on Katrina -- the NOAA track diagram as of 10:00 a.m. this Saturday morning EST shows the eye passing directly over the Mississippi Delta in Louisiana. This is not good for oil platforms in the Gulf and refineries in LA and MS.

      I'm expecting a pop up in NYMEX crude prices on Monday morning, possibly up to $70 because the eye will be passing directly over the Delta at about the time trading opens at 9:30 a.m. Monday morning. If there's damage to production systems, that can translate into a couple of dollars added to Nymex crude, so figure $70.00 crude might add a couple of dollars to MRO sharevalue (for a short time).

      There's number of ways to play this if it happens. Obviously buying shares would be one way.

      But if anyone out there agrees with me (and NOAA) about the prospects for a very warm winter this coming year, then a pop up in MRO might be the ideal moment to buy puts (because they will pop down to very cheap levels when the stock pops up). I like the 2007 Leaps (puts) because that way you've got the whole year in which the price of oil could go back to mid 50's or so, at which point puts bought this coming Monday might be more valuable.

      I will check insider transactions more fully on Yahoo Finance in future. But the bottom line here is that a lot of MRO stock was sold by three insiders recently (says Barron's) putting MRO almost at the top of their list for insider sales (recently).

      Believe me, if I wake up one day to find that Encana insiders have sold so much stock that they've put Encana almost at the top of any credible list for insider sales, I probably will close out that position too.

      As I say it's just a personal quirk for me, not a surefire way to make money (or avoid losing it). The warm winter (coming) and the universal agreement of all the analysts that the big oil companies were going up were major factors for me apart from the insider sales that were ringing the bell called "sell MRO". Anything the analysts agree on is almost always wrong. By the time they all get together in consensus whatever they are hot on has already peaked and is headed for a fall. Following their advice is a prescription for poverty. I guess I'm a contrarian when it comes to analysts -- I think they are always driving out of their rear view windows and trying to lead from the back of the parade (sort of like politicians).

      Independent analysis and authentic thought is required to actually call the turns. I've never seen a gaggle of analysts call a turn.

      Your Penpal,

      dolphin314etc

    • Dolphin... Actually insider activity detail is very easy to find in Yahoo Finance. Click on Insider Transactions on the left hand bar in either the MRO quote web page or the MRO message list web page. It'll give you details of MRO insider transactions, and other pertinent ownership info.

    • The Barrons article said something like $30 million "sold" by three insiders. MRO was I think second from the top of the Barron's list of biggest insider sales, way down the list was Exxon, which for same time period, which was just called "recently" sold 9 million.

      I don't have an opinion on the subject of options, except to say that, as an accounting matter, I think they should be expensed.

      Cazalot is probably in a fairly good position to jusge the short to medium term prospects for MRO sharevalue.

      Keep in mind that my idea of paying attention to what the insiders do and copying it if there's a big play is just a personal preference, it's not an ironclad rule for making money on Wall Street. In this case, my preference served me well, I got out when MRO was over $60. My Encana has been going up ever since I bought it, except today it went down a smidge, along with everything else late on a Friday afternoon after a speech by Greenspan.

      By the way my view on Katrina has changed. I now think it might be an important storm and could possibly damage some platforms in the Gulf -- including platforms owned by MRO. The track has shifted Westward since my last post dealing with this subject, it now looks like landfall might occur between the Western half of the Florida panhandle and the Eastern third of Louisiana.

      If this storm keeps shifting its track Westward, Katy Bar the Door for those oil rigs.

      Would this help or hurt MRO? Hard to say. The loss of capital could be significant and the loss of production. On the other hand if oil goes up over $70 next week, MRO's business could be more lucrative than ever, and that could more than make up for a lost platform or two and some shut in production.

      As Lord Keynes once said "When the facts change ... I change my mind ... what do you do?"

      Anyhow thanks for the information about Cazalot and his options. I had no time to get into it that deep. I saw the Barron's article and I looked for a buyer for my MRO shares.

      When a buyer that satified me arrived, I knew the shares were fully valued at least for the short term, so after selling them, I staryted buying puts 2007 Leaps. My thought is that the oil price is either going to break the world or it's going to break sometime in the next 18 months. If it breaks the world, it breaks itself. If we have a worldwide recession because oil hits $100, then demand will fall real fast and probably stay down for some time. But I think the price will just break quietly one fine day, and start to go out like the tide -- maybe sometime around February of 2006 when the unusually warm winter starts having its effect on heating oil demand. Anyhow, I've got a year and a half for the price to break, and when it does the oil companies (MRO and XOM etc) will go back to the sharevalues they were at prior to the big paper run-up. This could happen pretty quick because the paper oil fellows are real scamperers if they think a reversal is in the wind -- they are way overextended -- they bought on the "greater fool theory" and when the day comes when such fools are hard to find, the hedger stampede will look like a scene from a John Wayne western, made by John Ford.

      Thanks for the data, though, it is much appreciated -- all facts are friendly when one is making decisions.

      Your Penpal,

      dolphin314etc

    • dolphin... The $30 million insider trade that you keep referring to was an exercise of options by Cazalot, in early August. This was not a selling of any insider direct ownership of MRO shares, at least as far as I could see. He still owns the 350K+- shares that he holds as direct ownership, (which is a rather substantial portion of the MRO pie, at least IMHO) and probably puts him in your category of the head chef remains. He exercised these options at $63.55... rather good timing to lock in some of his profits on options, which if he doesn't exercise he would eventually lose. I don't find this bailing out as you seem to imply, it's a part of his salary and benefits deal. We should all be happy that the officers and employees of MRO have gotten MRO in this position where options can be exercised at a very good premium.

    • It's better to have no insider ownership than to have insiders that sell 31 million dollars worth of shares recently, don't you think.

      But your point is a good one.

      As I say, I invested fairly heavily in Puts on MRO and XOM -- leap type puts, with a year and a half for my MRO puts and two and a half years for my XOM puts. But, I wanted to maintain some exposure to the possibility that hydrocarbon fuel energy would just go up and up and up. ECA gets me into a cleaner business, with less potential for the Barbara Boxer Effect in the Dems make a strong showing in 2006 and capture the White House in 2008 (which looks fairly likely to me, just as a wild guess, from a person that has no ideological ax to grind one way or the other). I also like the diversification of a Canadian company -- it gets part of my portfolio placed overseas, and that's good -- as John Templeton used to say, right?

      But basically ECA is a hedge play against my puts. I want to be on both sides of the issue until I see how it will play out, but I don't want to own a company that's not good enough for its own executive insiders to own -- if they head for the door, so do I. A company with no executive insiders is neutral in that regard -- especially when that's fairly normal for big cap Canadian companies, see also SU.

      Your Penpal,

      dolphin314etc

    • Good point -- LNG may be hypothecated like any other commodity. I haven't practiced Admiralty Law for 20 years, although I'm still listed as a Proctor. I do think that it's not mandatory that seaborne LNG be subject to hypothecation while en route. A contract is a contract. So, we may have to compete with a world market for LNG per se, but not necessarily for the stuff we get from suppliers under long-term agreements, such as those we may make with the Qataris. We've already put in a very large airport for them, and the refridgeration/compression equipment is going in at a rapid clip. There may be long-term supply agreements coming out of those capital investments -- which by the way involve a lot of fairly specialized technology.

      But let's say you're basic point is right which is that LNG on the high seas is essentially on the world market, and that's a situation where the US is not ready, willing, or able to compete pricewise.

      If that's so, the pipelines crossing Canada and North America would be particularly vital because they convey natural gas where we have a little corner on the market and can have it at a discount from high seas world market price. There's a lot of the stuff in Alberta and the Rockies, and a lot of folks that need it in New England and the Mid Atlantic states.

      I don't think the LNG technology has really gotten started in the USA yet -- there are too few terminals and we just haven't geared up for it. The Energy Bill will be very favorable by making capital invested to ramp up LNG get favorable tax treatment.

      We will see. Your point is a good one though, and I appreciate its probative value.

      Your Penpal,

      dolphin314etc

    • Why I passed on ECA is because I could find no insider ownership. Also, they are more levered to the price of gas and oil than the refiners so when the commodity price drops, ECA price drops and then some.

    • Your comments on LNG leave out a fundamental fact: once the gas is on the boat, anybody can buy it. I read a stat on one of these boards within the last couple of days that existing US LNG terminals are operating at about 57% of capacity, 'cause other folks are paying more for the product.

      I have no idea if the stat was correct, but it illustrates a very important fact: our ideas of gas markets are geared to a closed North America scenario. LNG breaks out of that, opening us to competition from people who are used to (resigned to?) paying much more. We think $10 per million btu is high, but Europeans regularly pay $15.

    • I would love to help you but I don't have the first clue about PXD.

      You might check to see if Standard & Poor's has a tearsheet on it. I also like to look at msn.com particularly their rating, and within that category the grade they assign in the area of valuation.

      Before I made my play in ECA, (dropping MRO two days ago, selling my shares for over $60), I looked at these sources. S&P tends to be on the conservative (cautious) side. Msn.com gave ECA a 10 overall and an A grade for valuation. That was helpful. Then I looked at the company history listed by msn.com and I found the 300 mile pipeline in Colorado just approved by FERC.

      My thinking was that if NOAA is right and we headed for an exceptionally warm winter, that won't hurt Canadian gas pipeline companies, but it will hurt companies selling heating oil, like Exxon and MRO.

      No point in dumping shares without buying puts. If a stock is at its high, then the puts are at their low. So I got puts in Exxon and MRO, but long term ones, leaps.

      My feeling is that Katrina is gonna be a mild hurricane. By the time it passes, with little effect on gulf oil production, folks will start to twig to the realities described by NOAA. That should be enough to break to oil price. Once broken, I'm lookin for a big tumble. Where are those Greenwich Conn hedge funds planning to store the oil they have contracted for? Nowhere right? There's much more paper oil than real oil, but once the price breaks the paper oil will need to get out fast, and they will. I'm thinking by New Year's Day oil in the high 50's, and by next year this time oil in the mid 50's, and Exxon and MRO will be back where they were pricewise before this paper oil run-up. The puts will look better, they will be chubby, and ripe for picking -- not T Boone Picken but mightly fine picken nonetheless.

      Now you want to know what time it is? Well let's start with the principle of an energy source and an escapement -- that's what you need to build a watch, and I've got the full set of instructions for you right here, right now ..... just kidding ... just don't ask me for a fish, unless you want the whole flyfishing lesson. Still blowin in the wind,

      Your Penpal,

      dolphin314etc

    • i d like your assessment on pxd. mentioned a couple of weeks ago in forbes as the most undervalued energy stock. into both oil and nat gas. pickens owned it years ago as mesa. he was right but a tad early. rainwater was involved for a time, but has sold most of his shares. give it a spin if you are not already familiar

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