Looked briefly at COP, Shell, CVX, 7 million b/d prod, flat from last year. Not sure the majors, with less captial, and the rest of the world will add much to supply outside of the US.
Shake Shack, $1.2 billion market cap, 60 restaurants, $20 million per store. Not bad for a burger purveyor. Manhattan acts like it is on a different planet, indicator of a top? It's a burger, give me a break.
Missed on GDP but seems to me the bigger issue may be deflation. Also, Chevron 2.6mm b/d prod, flat y/y. that's almost 30% of US production.
Those gains are helping worker pay grow. After-tax personal income adjusted for inflation climbed at a 3.8 percent annualized rate in the fourth quarter, the most since mid 2013.
One reason earnings are growing more quickly is that inflation is tame. The price index tied to consumer spending dropped at a 0.5 percent rate in the fourth quarter, the most in almost six years. Excluding food and
fuel, it rose 1.1 percent, the smallest gain since the second quarter of 2013.
I do think SEMG is undervalued but seems they are doing what needs to be done, drop down of assets, organic growth. The sector will be consolidated but not sure now is the right time for SEMG, depends on the price obviously. Interesting that Sandell only owns
Most of it is the merger, my guess, could be sell TRGP and buy ATLS, the ATLS spin co is almost no value, said it would have $1.25 cash available and the value today is $3. I suspect TRGP will behave like KMI, probably appreciate after the deal is closed, end of Feb. Obviously the other is the NGL pricing currently, weakness with oil. They confirmed the div but guess there may be doubts. $3.60 this year, $4.40 next, at that level and 2% yield, $176 , not unreasonable for a 20% plus grower. At 4%, $110. Seems undervalued. Almost bought some this morning. WMB, OKE, TRGP. Also, SEMG, activist says it's worth $100+. They should do drop downs soon, increase div 40% annually. Hard to step in unless you think oil has bottomed.
I thought the Saudis would cut 500k/d, had they done that, oil might be at $75 or whatever instead of $45, their revenue would have been $260 billion vs $160 billion at $45 oil. Still doesn't seem a rational decision to me unless their were political issues. And most don't think the Saudis can increase their prod by much, a declining resource, really doesn't make sense.
EPD has a pres couple of days ago, they are probably the best midsream co in the sector, 150% distribution coverage. They show returns by basin, and assuming high grading prospects and cost reductions, best is the EF oil at $30, next is Niobrara at high $30s, EF condensate is next at low $40s, Midland Basin at mid $40s, and then you have Deepwater Subsalt, Bakken, Scoop, Utica condensate, Delaware Basin at around $50. They also see US production increasing 4% a year at $65 WTI, that's still leaves maybe a 1.5m bs to supply demand. They mentioned that each 10% drop in price increases demand by 300k b/d globally, that would maybe be a million b/d increase in demand. Not sure global demand is met at $65. And the Niobrara is still a top tier play. Also, PXD is the pick for the Midland Basin and they have a substantial EF asset.
EPD reported earnings today, 150% coverage of dist. They show a chart a pres a few days ago, if oil stays at $65 WTI, US oil volumes will grow 3.4%to 5.4% annually vs 6.4% before the collapse, NGLs, 5.6% to 7.1% vs 8.4%. Both were growing double digits plus the past couple of years. Seems the midstreams will continue to do well. The show that net backs to Canada production is $30 and say the oil sands are even less. If US oil grows at 4%, 400k b/d, still going to need another maybe 1.5 mb/d of global increased supply plus replacement of 4 mb/d.
Gov, that's all I found, seems a reasonable number.
Baird came out with a report today lowered target to $9 from $15, but called it a good value. Dist for CMLP starts to increase this year, but called for flat dist for CEQP to 17, building coverage. Drop down of NGL business in 16, two drops at $500mm a piece, that seems a good value. If they can get growth of 5% at LP, the yield at CEQP should be 5% min, $11 value. The reason for less growth is the Antero activity could ding LP 20% with less drilling. But they talked about a deal and see that as a good reason to own CEQP, they think it is a good possibility. They do think at $7, everything is priced in, but going to take a couple of years to play out. A deal would change everything. Seems the biggest issue now is what everyone faces, a rebound in commodity price, not sure $40 will see much growth. Even a new oil price at $70 would keep the infrastructure needs going.
Spooking the market plus inventory no. They see $40 for first half, rising to $65 next year. Does seem it's going to take a while of low prices to lay rigs down. This is not going to snap back quickly, if it does, not enough retrenchment. Does seem that $65 could be a long term price for activity in the US but then what is the global supply price, if it's $80 and we are still making money at $65, still a good business, just not the margin we had at $100 plus, but then you got marginal plays being drilled. Still seems the strategy is to stay with the core of the core companies with low debt. Looked at OKE pres, their mentions of profitable prices for their basins, Bakken, Permian and Scoop, all in the $50 to $70 range. EF should be there also.
All of the gurus are arguing the Fed's rate increases. They've been obsessing about this for a couple of years. The Fed is supposed to provide for monetary stability. If their goal is 2% inflation, not sure exactly why that is the ideal goal, we aren't there and probably headed in the opposite direction. The Fed kind of reminds me of OPEC, they stand on the verge of losing control of rates, that is what they are afraid of, if you are at zero, how can you loosen. At some point, we get massive debt, doesn't cost anything, asset inflation and a crash, but when. The market could have a multiple of 30x, Dow at 35,000. We are going to learn more about deflation in the next couple of years. The Great Depression again with the twist of central bankers flooding markets with money. I guess you maybe sit on your cash, companies will earn less each year. The banks charge you something and prices fall even more each year, I guess that works. The reason I started investing was to keep ahead of inflation, not an issue in the new normal.
CVX and XOM have so many projects worldwide, but then again, they have along with OXY over a million acres each in the Permian, held by production acreage, that they can develop whenever. OXY is probably the most concentrated e and p and little debt. Talked to an XOM guy who said they can make money at $40 in the shales. And they also have global projects which take years to develop, gas in Australia, W Africa, Siberia. I think I remember XOM using $80 for economics. I don't think the majors will be affected, they will cut capex, maintain the div and then they have chemicals and refining which gives them a hedge. XOM the biggest chemical producer int he world. Remember that XOM bought XTO and it's a long term bet. Everyone is exposed but the lowest cost reserves are still the shale plays, $40 to $50 breakevens while the rest of the globe still at $90 /b. A lot of the shales that needed $90, the TMS, won't come back, but the Permian, EF, Bakken.. will continue for the core assets. The question for me now is if the shales can't supply marginal demand at $50, I don't think they can, then what is the equilibrium price, $100 is probably too much, $80, $70???
I think if I was buying one co today for the long run, would be PXD, more correlated with oil price, massive potential and will have no debt after they sell EF assets.
Some are interpreting the SA comments as a softening of their position to not try to prop up price, could be, but seems we haven't had a long enough period of low prices yet. Or price has gone down faster, further than they expected. Consumer confidence highest since 07, home sales up. MS thinks Fed is on hold until 16. Low commodity prices, strong dollar, no inflation in sight, low interest rates for a long time. 10 yr T note
Agree with that, still would like to own Kansas City Southern and farm land, the price of Birdog's beef hasn't come down yet. And energy. The CEO of Aramco comment below, this is a game changer. Still think this could be a good opp to buy. PXD is an easy choice, they have decades of prospects to drill and will most likely have no debt after they sell the EF midstream. Or buy midstream, which should do well at $60 or $100.
“Supply and demand and the rules of economics will govern. It will take time for the current glut to be removed,” Chief Executive Officer Khalid Al-Falih said at a conference in Riyadh. “Saudi Arabia will not singlehandedly balance the market in a downturn,” he said, reiterating government policy.
ML rec below. PXD might be the easiest bet in the sector now, probably no debt after they sell the EF midstream asset, which is probably in big demand, the SEMG move today, also the ETP combo with RGY. PXD could also be a target for a major, BP, Shell... Not sure oil turns around quickly but felt like more stability today. No debt gives you lots of time to ride it out.
Pioneer Natural Resources Co. (NYSE: PXD) was the ultimate shale-oil growth story for the past five years, and it has been eviscerated in the sell-off. Pioneer is a huge player in the Permian basin and the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s second largest oil reservoir in the Midland Basin. In addition, Pioneer owns its own frac fleets, allowing it to be a low-cost, high-margin producer, which could prove to be huge with prices lower for a protracted period. Pioneer was also one of the firms named by the Commerce Department to produce and export condensate. With a big secondary in November and more asset sales on tap, the company could have balance sheet debt close to zero by the end of 2015.
Investors are paid a tiny 0.1% dividend. The Merrill Lynch price target is $200, and the consensus target is $174.76. Pioneer closed trading on Friday at $152.86.
Would think this would apply to CEQP, seems the decline is overdone. They need to show a growth profile with q1 release in a couple of weeks.
Mr. Sandell continued, “Our analysis has led us to conclude that this market environment, driven by extreme
energy price volatility, has disproportionately affected SEMG’s share price due to its smaller equity market capitalization, lower liquidity profile and unwieldy mix of assets. As an example, from recent highs SEMG share price has declined almost 2X the average share price decline of a basket of potential acquirers.1 Of note, this basket has an average equity market capitalization of approximately $38bn versus SEMG’s current equity market capitalization of approximately $3bn, with average trading volumes 8X-9X greater than those of SEMG, demonstrating what appears to be amplified selling pressure investors are placing on smaller, less liquid public companies in the energy infrastructure industry. We believe that this adverse dynamic will persist for longer than most expect given the seismic changes occurring in global energy markets.”
ETP, Regency combining, no surprise there. Acitivist wansts SEMG to sell, they are worth a lot more than the current $60s.
Sandell Asset management Corp, a small New York-based activist hedge fund, asked pipeline operator SemGroup Corp to explore strategic alternatives including a sale.
Sandell, in a letter sent to the board of SemGroup on Monday, said it believed the company is worth $104 per share.