Thanks for your reply. I have to admit, I am struggling to understand what will drive this stock. I thought the Brent West Texas spread, plus discounts for Western Canada Select and locally gathered crude were the main drivers for CVRR. However, this is turning out to be too basic and probably naïve on my part. Any suggestions you may have, please provide. I just read that distillate prices and refined products, in general, are down which will ultimately hurt refining margins- where is a good source to see that. I see the crack spread on RBn energy is hitting lows everyday lately but not sure what that entails as I am not a premium subscriber. All in all, I am convinced oil will drop to 80 and thought refiners was where to be, but now I am not so sure. Maybe the entire energy space is a bad place to be if oil drops to 80. My only other holding is Crestwood midstream as they say their business is not affected by underlying commodity prices, but again, I am questioning that reasoning. Appreciate your ideas, insight and thanks in advance. Ken
Just read ALJ's November investor presentation and they base their crack spread margins, 3-2-1, on the West Texas Brent differential. Three barrels of oil equals two barrels gasoline and one barrel distillate, FYI. I think they do this because gasoline and distillate tend to be priced off Brent and when the differential widens their margin increases. That is my thought and would appreciate any commentary on that. From Baird, the highest crack spread margin is 2-1-1, two barrels oil equals 1 barrel gasoline and 1 barrel distillate, which they list for PADD 2 refiners, of which CVRR belongs. On last quarter conference call the CEO mentioned they were increasing distillate production. Couple of positives is that 135k of the 185k CVRR uses is discounted to WTI because they use WCS, etc. Additionally, due to local gathering their WTI is also discounted by $3-5 per barrel. So even at the $14 Brent WTI spread, CVRR gets additional margin. Hope this helps the conversation here. Ken
I disagree that spread will be hurt when Keystone comes online. Why? Look at Light Louisiana spread against West Texas. That should be a signal that the Gulf Coast cannot use the supply that will be coming down from Cushing. In fact, the Gulf is awash in crude due to Eagle Ford exceeding even the best estimates. I think the three day pop in West Texas is traders only and not indicative of the actual supply situation. The market should figure it out and the Brent spread should widen back towards 20. Just my opinion and think this stock, and CVRR, are winners.
Hopefully, this gain holds throughout day and marks beginning of uptrend. Like to see us consistently close above 50 DMA at 37.58. Two weeks ago I sold all my other energy holdings and moved into CVI. I am over allocated but convinced the market is missing the underlying fundamental reason for owning CVI. That is that the U.S. is awash in oil and that the collapse in the WTI Brent spread earlier this year was unjustified. Refiners are the place to be in energy for 2014 until some sort of oil production washout happens, I believe at $75 oil. Virtually all the smaller, highly levered E&P's, and including offshore operators, NEED $85 oil to justify production. Currently, there is a market imbalance that will correct itself. Refiners, especially ones like CVI that source almost half their feedstock from Canada, will benefit the most. My two cents and will read, consider any feedback that challenges my view. Thanks. Ken
WTI Brent spread at $19 this morning. Think it will easily push through $20. Market will realize CVI is going to exceed Q4 easily. Cannot tell you when but patience will be rewarded. On another front, UAN gains nice margin at NG above $3.65, it is $3.87 this morning. UAN is the only plant using petcoke instead of fertilizer. Input costs for both CVI units are positive for share price. Again, market seems oblivious but we can enjoy the 8% yield while we wait.
Listen to conference call. Coffeyville back on line in September. Throughputs going forward will be over 190k bpd. WTI to Brent spread at 17 dollars today, an eight month high. Even more important, WCS is at the highest discount of year to WTI and CVRR sources 80k bpd from Keystone and Spearhead. Their cost advantaged crude is approx. 140k bpd of the 190k total. RIN will be lowered or even possibly eliminated for 2014. Lastly, CVI on their conference call is actively looking for acquisitions to drop down to CVRR with the massive cash they have on books. Collectively, I believe these factors are extremely bullish for CVRR and CVI and justifies mwalk's position.
I agree with your assessment. We need the company to provide a Q4 outlook, which I think will be positive. Look at what has happened. Coffeyville back online in September. Brent-WTI spread near highs of year. Even more important for CVI is that the WCS spread to WTI is at highs of year. This will bode well as they source this crude heavily. The macro environment favors refiners right now over producers. Guess I just need to be patient but it is hard to accept this stock being nears lows of year.
Sentiment: Strong Buy
Ivana. Seeing you referenced my post thought I would direct you to RBN energy. They currently have their latest article on main page, which is free, that addresses what I took away from DUG East, in great detail. The article title is Under Pressure, Natural Gas Prices held in Check by Abundant Supply. Quite amazing the way it is laid out. The main thing to me is that speculators are leaving the gas futures market due to low volatility which will ultimately mean stock speculators won't get the beta either, thereby leaving as well. I will say it again, find a diversified E&P with a great balance sheet, generating free cash flow for share buybacks or dividends and wait. If the great NG price appreciation Rainbow thinks happens, you still win but are protected and get paid to wait. Think the RBN article makes a pretty compelling case that NG prices will not rise meaningfully for many years. Lastly, the Mexico portion of the article is concerning as there is much written about how Mexico is exploring its own resource plays for development. Take away that part of demand and NG prices may never exceed 4. Anyway, I am interested in your takeaway if you read the RBN article. Ken
Thank you. That is right and I must admit, she had the absolute best presentation of the DUG East conference. This is my last post here for awhile but need to mention that I just sold my DVN on this big pop today. If anyone cares I posted reasons on the DVN board. Not a bad deal for a guy having his second set of twins tomorrow and no one ever got hurt taking a profit. I now own no energy except CVI, which I think will be a winner until supply and demand find equilibrium. Thanks. Ken
Big fan of DVN but sold this news because I can't make sense of it. It is being universally agreed at this point that the U.S. is literally awash in Oil, NG, and NGL's and the price will most likely go down, short of Mideast unrest, until demand drivers like LNG and strong economy kick in. Why buy GEO Now? DVN was cleaning up their balance sheet and focusing on growing production on existing properties. Free cash flow was on horizon and they still have to integrate the XTEX assets. This really seems to fly in the face of reason and muddies up all the progress I think they are making. Maybe Blackstone gave it away realizing that E and P's are dead money until 2017. Either way, they stole it or overpaid, I think this is a short term bounce that should be sold. I want details but I cannot come to any good reason why they did this now! Just my two cents and there is a high probability that because I sold this stock soars, just way it goes, but at least I am disciplined and in my view, this is a bad move. Ken
Thanks and good luck on hunt. Have a deer permit for Joliet Arsenal this weekend, a big deal and hard to get in Chicago area, but having twins tomorrow so scratch that. I will be busy and probably not posting for some time. Anyway, longer term I agree with everything you post but I do not think anyone, including Bentek et all, is really understanding the sheer productivity increases drillers are experiencing, with less rigs. DUG East convinced me of this and a very sharp female analyst from Baird, forget name, basically stated the rig count number is now an irrelevant data point. Think the only way to make money in energy space for next two years is picking deeply undervalued stocks, my choice DVN, or possibly upstream that will benefit. Al Walker, CEO of APC, stated in October Oil/Gas magazine, "It is hard for me to imaging gas doing better than 4.50 in the next couple years" mainly because of Marcellus. My opinion is that oil/gas stocks may be bad investments for 2 to 3 years and definitely stay away from overlevered or overvalued E and P's and midstream. That is why I sold WMB, SD, and COG. I acknowledge I could be dead wrong, but that is why I am keeping DVN and my CVI, for that matter. Thanks and good luck. Ken
There will be a new MLP and General Partner (GP) to the MLP. Us current shareholders will not receive shares in the new company (yet to be named) but DVN will own 70 percent of the GP and 54 percent of the MLP. XTXI and XTEX will no longer trade. This is an incredible development and really unlocks value of the midstream assets we have. DVN in the future can drop down other assets to the MLP. We will receive IDR's, incentive distr rights, for the GP stake as well as the dividend on MLP stake. It is a cash cow that will benefit us every quarter and maximizes the value of the midstream assets the market gives DVN absolutely no credit for. Once the earnings uplift this arrangement generates is recognized by wallstreet the stock should react very well. In my opinion, DVN is one of only a few energy stocks that is truly undervalued, even in a declining commodity price environment.
Always appreciate your posts but I have come to believe you are waiting for a moment that may not come. Just back from DUG East and every single production company there was predicting 30-50 percent YoY NG growth over next several years. All believe dry Utica is as economic as northeast PA in addition to tsunami of liquids. Additionally, there are over 1000 wells in PA alone that are awaiting hookup as infrastructure gets to them. The only real takeaway I have from conference is that we are absolutely inundated with NGL's, Oil, and NG for many years to come, even with demand drivers you cite often. The well performance even marginal drillers are realizing is truly breathtaking. The only thing that will change this is lower prices for a sustained period of time which will clear out weaker players with terrible balance sheets. We may then see higher NG prices in 2015 and beyond when LNG comes online. Take for instance DVN, the CEO has stopped the NG program awaiting $4 NG. The minute the price rises they can immediately bring on production. Guess I am at a loss and looking for your response. I believe in the energy revolution that is taking place but think the easy money may have been made. Upstreams are being sold off on good news (bad sign) as I believe the market is realizing we are in a state of domestic oversupply. The only energy doing really well lately is the downstream, again because they benefit from lower input prices. Last week I sold my COG, SD and WMB. I only kept DVN because I believe you get the midstream for free and recent XTXI hookup will unlock value. Appreciate your input. Ken
Big fan of DNR over long term but listening to presentations today it feels like the air is leaving the room. I understand not becoming an MLP but it just feels like they are giving up on aggressive growth in exchange for slow growth. Forecasting a 3.3% yield in 2015-16 is not very motivating and that is with stock staying at current levels, which it NOW probably will. There are still sizable risks here with incident this summer as well as new report that CO2 may cause earthquakes. Just don't feel like shareholders are being rewarded and I have to reconsider this whole investment. I sold this morning with a nice profit and initially thought I made a terrible mistake but after listening to conference I am not so sure. The cynic in me feels like the current management is stating, hey, we made our money and now are going to be overpaid while working less. A seven billion market cap for 70k Bopd? Think the market is going to re-evaluate this company sans the aggressive growth. Not a scientific metric but the market seems to value 20k bopd for a billion in market cap. That makes DNR a 4 billion dollar company, or about $12 per share. If it gets around there I will buy back and enjoy a proper dividend for the risk I am taking. Just my two cents and I will read, consider any intelligent response. I am not and will not short this stock! Ken
Very bullish signal after accumulation period. See $28-$30. Could break above on any good news from analyst conference (spin off/sale of assets). Open to discussion on this but my take is there are too many positives going forward to justify discount market has imposed.
Listening to call. Not doing us any favors. Endlessly saying people don't understand shut ins isn't a good strategy to win folks over. It's like reinforcing a negative and basically saying you cannot count on us. Just my two cents. Still think it is a pretty good quarter.
Waiting on call and will post. I agree that it does not make sense. Exiting at 11k boepd and forecasting 40% increases going forward. Cash flow from ops is great, unlike a lot of E&P's. The valuation here is reasonable. Stock does not seem to get respect. They are going into "manufacturing" phase and metrics should only get better going forward. My opinion is that a MLP will buy them at a premium. Think this reaction is insane!!!
Thanks for the great reply and I will take it on board. I agree that Enervest owns the IDR's but beyond the 2 percent, they own no additional shares. I will agree management is aligned with EVEP unitholders. I do like that IDR's cap at 25 percent. Most others are 50 percent which always makes the GP a better play, IMO. In this case you can't invest in the GP and 25 percent is low compared to ARP at 50. I agree EROC is a really bad example of why not to create a dual upstream/midstream MLP but if EVEP will monetize their stakes, which is 21 and 9 percent, I think they will be rewarded. I will keep tracking and see what they have to say next week. Think there would be more acreage sales announcements by now?
Been researching EVEP for awhile and considering investing. A couple questions jump out to me and coming to this board for opinions. 1. Why doesn't Enervest just own this? They operate 93 percent of EVEP wells and have more acreage than EVEP in every area they operate in. Just can't figure why EVEP exists at all. Enervest has only 2% interest and no additional ownership. 2. Why the massive investment in midstream? This is an upstream MLP? 3. Why are they selling the Utica acreage? On last conference call that is all they talked about. Any educated comments on this is appreciated. Thanks. Ken