A relatively disastrous oil report but so far the market does not want to sell off oil.
CR +4.1 mmbbls., MG +.7 mmbbls., D -.9 mmbbls. Because the US has above 5 year normal oil inventories at present for petroleum and petroleum products we don't need those builds. Imports are also discouraging in that CR rose to 9.1 mm per day. MG are still a restrained .775 mm per day.
Demand is improved a little but still lackluster even when compared to very bad numbers from a year ago. MG is +.1%, D -4.8% and JF -3.8%.
$WTIC has actually risen on the report by about 40 cents and is back to the highs of the morning.
The railfax data is similarly uninspiring. The seasonal uptick is beginning and the starting point for total traffic is where it was last year:
Leon Cooperman calling out Obama, good for him. Impressive guy, he has been in ATLS for years, usually shows up on their conference calls, and asks the critical questions, unlike the sell side analysts, who don't want to upset anyone for fear of losing investment banking fees.
The DOE report this am is very bearish but oil pricing is caught up in the euphoria of the liquidity announcement. In, fact, $WTIC jumped up $1.70 in two minutes after the announcement this am. That illustrates a problem with these sorts of programs.
What do I mean by bearish?
Inventories: CR +3.9 mm, MG +.2 mm, D +6.5 mm
Imports: CR 9.1/day, MG .619 per day
Implied demand: MG -2.9%, D +1.4%, JF +6.5%
Crude inventories should be falling this time of year, not rising. Gasoline demand is weak even though gasoline pricing has fallen by about 35 cents over the course of the fall.
With the higher oil pricing, there is more reason for the producing countries to increase shipments although it does need to be said that there has been very little contango in oil prices over the last several months and that is keeping the desire to store down.
Atlas expanding their midstream in the Permian, Pioneer is a partner, has 20%+ interest in this plant, and has 20k well locations in the Sprayberry/Wolfcamp. Nat gas is 10%, NGLs 20% of production. There are 220+ rigs in the Sprayberry, around 440 rigs in the Permian Basin total. Even in their wet gas plays of the Barnett Combo and Eagle Ford, they will produce 40% dry gas, and those area can return 80% vs 40% for the Sprayberry wells. In three years, they will be producing 60% liquids vs 52% today, gas continues to grow even with oil/liquids drilling, they aren't drilling any dry gas wells.
PHILADELPHIA--(BUSINESS WIRE)-- Atlas Pipeline Partners, L.P. (NYSE: APL - News) (“APL”, “Atlas Pipeline”, or the “Partnership”) today announced plans to construct a new 200 MMCFD cryogenic processing plant to accommodate rapidly increasing Permian production. The new facility, to be known as the Driver plant, will be constructed in two phases, with the first phase involving construction of plant and associated compression to process 100 MMCFD, expected to be in service in the first quarter of 2013. The second phase, involving placement of additional compression and refrigeration equipment to increase the plant’s capacity to 200 MMCFD, is scheduled to be operational in the first quarter of 2015. The Partnership expects cash flows from the expansion to materialize in meaningful amounts during the second half of 2013.
The DOE report is positive for oil prices.
Imports remain low: 8.6 mm per day for crude and .762 mm per day for gasoline
Inventories continue to decline: -1.1 mm crude, +1 mm gasoline, -2.1 mm distillates
Demand is lackluster but not getting worse: -.4% all products, -5.7% gasoline, +5.1% distillates, +5.3% jet fuel
Looked briefly at the Enduro Royalty Trust, buyer beware imo. You get a net profits interest in $280 million of reserves value at end of '10, probably undervalued at $80 oil and $4.40 gas, 50% gas, '11 value should be higher with increased oil price, lower with gas, call it $300 million of reserve value. There are 33 million units at $22 IPO price, $726 million value, 21 million boe, $35 per barrel and half of the reserves are gas. The projected yield is somewhat over 7% for the next year. 99% of the reserves are operated by others so the trust has no control over further development of the properties.
In a yield starved market, guess you can understand the attraction, but it seems way overpriced no matter how you slice it.
Ttango et al,
Well, you've picked a curious time to get back into DNR but beauty is in the eye of the beholder. It could be said that the e & p business got a great DOE report today:
Imports: 8.6 mm CR, .750 mm MG
Inventories: -1.4 mm CR, -2.1 mm MG, -6.6 mm D
Implied Demand: -5.6% MG, +3.9% D, +6.6% JF
The discipline evidenced all summer by the producers has returned to the market as imports drop and inventories with them. The demand numbers shows that that has to be the case. If the producers are going to get decent pricing in a world of shrinking demand, they have to bring inventories down to reasonable levels. The problem, as all good students of economics know, is that you fight a losing battle when lower demand is the issue.
So, now we have a very great tension in the oil markets--does lower demand trump all or does the diligence of the producers in restricting flows save the day?
RAM reported today, stock up 13%, but it only takes a few pennies. Still think it might be a decent speculation at a dollar. Based on cash flow and an average multiple, the value is around $1.50. And they are living within cash flow, not many companies can say that right now. The Miss play at 56k acres and $5k per acre, probably the low end of value if it is prospective, adds $3.50 per share, total $5. If the reserves are at the high end of projections, value should be in the teens. At the current price, the option value on the Miss play is nil, but it is going to take a some time, while they stay with development within current cash flow, which probably makes sense. First horizontals in early '12.