More I think about it the Exxon's of the world should be buying the bigger shale cos, don't see where EOR would be top of their list. XOM should buy several cos. DNR did misstep in selling Bakken, they are now between the shales and the higher cost reserves, deep water and oil sands. Good but not great. Guess they could buy back into the shales but they don't have the balance sheet.
Blue, that's exactly what I thought. It does seem that is the about the right scenario. I don't know about DNR, seems they are in the higher $60 to $70 cost range of assets, so they would not do as well as the shales that are closer to $60. Do cost come down for DNR as well. Do know that Oxy is bullish about their EOR assets. Just don't know if there is as much growth at $75 vs $90 before. If DNR is making $15 per barrels vs maybe $35 for the lowest cost shales, still seems to me that the PXD's of the world are better bets. If oil goes back to $90, then DNR does well also, but everyone else does better. Still don't think DNR would be my first choice in a $75 environment. I don't think KMI wants more EOR and also APC. Would think Oxy would be the best chance, and could happen.
Jerry, go the Spectra Energy Yahoo pg, SE. And the article is accessible there, Game Change: Low-Cost Oil Is Here to Stay, released by Morningstar. I saw it first on the Schwab site under Morningstar research. One of the better summaries of the oil markets and the effect of the shales. And I really like it because it matches my own conclusions. Who knows how it shakes out exactly.
There are opps in the market to buy highly leveraged cos betting on a recovery in energy prices. Today, I don't see how gas gets out of the current range for years, used to think LNG would solve some of the problem but we could be awash LNG and the oil price collapse doesn't help. Atlas is 80% gassy, lower quality rocks at that, high debt and lousy management. I can't find anything to justify a buy over other high risk bets. And the other factor that other cos don't have to deal with, Cohen. I would bet he makes money for himself, no matter what his equity owners suffer. I used to listen to what Cooperman had to say but I've written him off that list. SD is at $1+ and not sure why Atlas doesn't get there either, just a matter of time before the dist is cut, suspended. Such is investing, you make mistakes, but you don't make the same ones again.
Just seems silly that hours are spent commenting on the word patient in the Fed speak. The 5 yr German bond now has a negative yield. Saw a comment that GS thinks the euro goes 80 cents. Unfortunately for oil the dollar is lowering the oil price, we've gone from $1.40 to $1.05 euro and going lower??? There is little inflation, jobs are increasing, even though not good ones, avg earnings is anemic, why does the Fed need to raise rates or if they feel they should start, not sure it does much to the markets. A German 10 yr at .25% and the US at 2% plus, seems like an easy choice to me. Could make the argument that rates are too high but when you are at zero, not much you can do. My forecast, the Fed never raises rates again, or at least until we get some currency related disaster years from now. Worrying about whether it's June of later just seems like wasted energy. Maybe it would be positive, find out we survived a rate increase. If we didn't have the Fed to talk about, what would be the big issue, any ideas? Seems everyone in investing learned, don't fight the Fed, I'm not sure that play book works anymore.
I don't short and problematic for a high dist co but unfortunately I don't think there is much to boost the ATLS price, OIl comes back to $75 end of next year and gas stays in the $3 range for a few years, not a good scenario. This could sink to $5 or below easily. At some point becomes an option on survival.
cbd, chump, a great piece by Morningstar, imo, about the low cost US supplies, can find it on SE yahoo page.
They see US supplying 40% of world needs, marginal barrel price at $75, US shales at $50, seems a good business for the top tier shales. Also good business for the midstream cos. The scenario is probably flawed somehow but seems as good a forecast as I have seen US shales are a good bet at $75, Permian, Bakken, EF and Niobrara, they don't mention it but the economics are better than the Bakken. Permian still seem the obvious bet for cost and depth of reserves. And would bet XOM is looking to buy cos now, but suspect they won't overpay, so the over levered cos are maybe first picks, WLL, OAS, LPI. And you have OXY, DVN, APA, PXD, CXO, CLR. EOG probably in the buy mode but same thing, think they won't overpay considering the positions they already have.
There is a Morningstar piece out, the future of low cost US oil is here to stay, can find it on the SE Yahoo page. Think it is about as good a forecast as I have seen, US supplies oil at $50, about 40% of global needs going forward, global marginal barrel price is $75, a great business for the top tier shale plays, as they say, midstream does very well. Most volumes by end of decade. My guess is cos like Williams, Plains, Targa, Spectra, KMI, OKE continue to do well and my bias is still the Permian producers PXD and CXO, but they mention LPI, seems undervalued. FANG should do well, VNOM. And XOM should come out of this cycle in good shape after they buy WLL, OXY, APA, DVN, CLR, OAS, PXD, CXO. EOG should be in the buy mode also. Seems Permian and Bakken should be the top targets. With PXD you get both Permian and Eagle Ford.
Last comment, $1.90 op expense guidance for this year, G and A is running $.75/mcfe and interest $.95/mcfe.
That's $3.60, know there are some fees to add but look at the nat gas strip, $3.50 ish for the next few years. Again not that precise but unless gas gets some strength which seems doubtful with Marcellus breaking even all in costs about what ARP's op costs are, don't see how this is much more than a survival investment for the next few years. Blind hope usually isn't a good investment premise, but then again Cohen could step in something again, but not betting on it.
ARP, they are assuming around $3.60 for gas this year and $74 with hedges. Assume it's $3/mcfe rev and $1.90. At 105 bcfe this year with a $1.10 margin, that's $115mm to cover a $130 dist and maint cap of $60 mm. Rough numbers but it doesn't take a precise calc to see this is not going to work. And growth cap on top of that. Oil may be back to $75 by the end of next year but I would bet gas doesn't move bunch, in the $2s for most of the rest of the year. You can't even grow much with a zero distribution.
Total net production costs of approximately $1.90 per thousand cubic feet equivalent
Haven't looked at SD in a while. Assume $50 WTI, $15 NGL and $3 gas, may be generous on gas. They will net back $28 per barrel equivalent. Production, G and A and Sev tax, $18 per barrel, plus interest of $10 per barrel. And they are spending $700mm, $23 per barrel produced. Cash costs of $28/b and rev of $28, rough numbers but it doesn't work unless prices recover quickly and substantially. Gassy cos with a bunch of debt are going to feel more pain before this cycle is over.
He drank the Koolaid as well. I really don't think Cooperman understood e an p any better than Cohen. Look at his SD bet. That one did look attractive for a while as Ward promoted the 2 million acre Miss Lime play or whatever it was, and it's at $1+ now. And now their salt water disposal asset is the most valuable, their reserves don't have any value at $60 oil, $3 gas. Buy the best rocks, great technical management and low debt. ATLS/ARP doesn't meet any of those.
A cursory look, I'd say $50+. Funny, about mid day, I thought at $35, it might be a good speculation on a buyout. They do have good Bakken position. And Niobrara, not as good but good and some Permian. Exxon should buy two or three cos now. It is unfortunate that they bought Kodiak, bad timing, about like EXXI and their purchase. Now is the time for the majors to step up, which should put a floor under the sector. WLL indicated they can make 50% in the Bakken at $60 oil, that's probably better than most of the big projects XOM is looking at globally.
ARP will never be attractive to a larger company, 80% gas. Nat gas could stay at $3 for a long time. And the Marcellus is profitable at $2. The majors and anyone else will be looking for oil assets, the Permian, Bakken, EF, Niobrara. The Miss Lime is second tier. I would never invest with the Cohens again but it you were, it would be after they suspend the distribution. There are much better prospects in e and p, LINE for one, an LLC and no IDRs, but I think the MLP form for e and p doesn't work except for a yield with no growth. Still think the dist is cut again before we get through this cycle. The current yield will look good for a while.
Bloomberg reports XOM, CLR are looking at WLL, seems a deal if good would help the sector. At least give confidence that values look attractive if you have a long term view.
A Bloomberg article a few minutes ago,
Whiting Petroleum Corp., the North Dakota oil explorer, has attracted interest from Exxon Mobil Corp. and Continental Resources Inc. as it explores a sale of the entire company, people with knowledge of the situation said.
This should help the whole sector if it happens.
My guess before this cycle is over, they will suspend the distribution. This will get worse before it gets better, just glad I don't have to watch it. They don't have a clue about running an e and p company.
Comparing ATLS to GPs, where is there an e and p GP to compare with. ATLS is a flawed vehicle. The IDRs are worthless because ARP will be hard pressed to show increases in the dist. Nat gas could be stuck at $3 for years, guess oil gets back to $75 in a couple of years. The market cap is 26mm shs at $7.30, $190 mm, that's not a lot of capital to work with. Throw in the Cohens and you have to discount the prospects even more. 70 cents at 15%, ARP's current yield, $4.70 stock price. I'm just glad to be out of the Cohen companies, what a travesty. Maybe look at his change of control severance package and see how he did compared to his shareholders.
Just saw comments on global supply, demand. Demand is up from q2 14 275mb/d growth to over a million barrels/d growth projected, looks like price is creating demand, US and Europe had increases in demand last couple of mos. There are two opposing positions EOG vs XOM. EOG sees higher price elasticity and lower production resilience while XOM sees lower and higher. Down to 866 rigs and increasing demand in developed countries emerging, I would be in the EOG camp. Another month of 50 rigs down a week should put a big dent in production. OAS said that their natural decline rate is 30% this year and 25% next year. This is going to take some time but seems inevitable. And at some point, something will ring the bell and the financial players will move prices up $10 or whatever. That call is more challenging.
Based on what, the whole sector is going down, there are e and ps that will not survive but BCEI will be around for the long term. Look at the balance sheet. Try HK, GDP, MPO, EXXI, PWE.... if you want a bk opp.