Looks like the long term futures prices are fairly stable. Brent is $85 to $89 next year and $89 for the next few years. WTI is $79 or thereabouts and for the next few years. The long term price hasn't changed much. And Brent and WTI should trade about the same absent the transportation issues. Seems the $10 differential is still a big incentive to build out more infrastructure. Can't get a feel for whether this is the bottom, seems like it should be if the globe strengthens from here. ??? Seems the infrastructure cos are still a safer bet than the e and p s. A bounce back of $10 in oil and the higher leveraged cos should be up 50% or more.
Park, BCEI and PDCE are maybe my two favorite e and p s right now. Wattenberg Niobrara is among the top couple of plays. Utica may be the other and PDCE has it also. I think GDP will work but at $80 oil the play right now doesn't compete with others. Going to take some time but if oil comes back to $90 and they get the costs down to $10mm, it will compete. And GDP has 300k acres. HK is still intriguing, with the TMS and E TX, have always liked Wilson and he usually makes it work. GPOR should be a winner. I still like PDCE the best but if oil comes back to $90, almost anything will work, GDP will be back to $20 or more. Saw a comment that there is only 2mm bs of spare global capacity, SA, Libya.... The US shales should remain the supply and still kind of think it takes $90 to keep the growth coming. Demand from China and the emerges is important, that should improve I hope.
Unless KMI is interested, I don't think so. Not sure the majors are interested, they have a bunch of shale acreage to drill or would buy shale positions to fill in holes. Leveraged cos are at risk it would seem. Do think there will be mergers but more for cost savings. The m and a in midstream continues, Tesore bought QEP Midstream. Lesson from that is buy the GP.
Oil Collapse Gives Buyers Chance at Top Targets: Real M&A
Bloomberg article, mentioned Pioneer, OAS, SM, LPI. Also Kinder says slide in prices should motivate more m and a, assume he's talking about infrastructure. Wonder if KMI could make a run at DNR, they look cheap.
Permian players do make sense, OAS also. Some of the Utica cos. Still think BCEI and PDCE should merge, would be great combo in the Wattenberg.
Jerry, hadn't seen that, was curious why WPZ was down today, that might have been the reason, WMB would use the WPZ currency to do the deal. Have been looking at QEP, might be a good bet based on the spin or sale, was low $30s, now low $20s. Another likely partner might be CEQP, I know they would like to merge with an e and p co. Not sure how it would work.
Will look at Surge, never heard of them. Sold NDLS and didn't buy EXXI, couldn't get past the high debt, especially with more weakness in oil. I want to believe that the $80s will be the low but who knows, you start looking at what happened before when demand dried up and OPEC kept producing. Think it is different this time but hard to know for sure how this is resolved, China and the rest of the globe need to be stronger. Seems there needs to be more panic in the oil markets before we bottom.
Interesting graph, Business Insider, shows the oil price 6 countries need to balance their budgets. From $105 to $130 /b. SA and Russia are included, with other 4 maybe high 20s mmb/d. Problem now is that oil production can increase outside of OPEC. If your production is fixed/declining, why wouldn't you want to keep the price as high as possible. Cut production and extend production further into the future. Outside of SA, seems the rest of the group is not increasing production, there's a bunch in Iraq but who's going to help them develop it. And we need the China's of the world to keep growing.
Interesting graph on Yahoo, Business Insider. Shows the price that 6 cos need to balance their govt spending. SA and Russia around $105, that's 20+mm bo/d, Bahrain $130+, Nigeria $120+, Venezuela $120,
Oman $115. Total production for all of those is high 20s mmo/d. Doesn't mean that OPEC will do something.
Seems that production will settle out, where is still the question? So far the long term strip is still above $80.
Global Hunter upgrade a couple of days ago, comment, thought was interesting. Debt is still an issue.
Shares of Energy XXI are currently down an "outsized" 66% since the company reported its fiscal fourth quar
ter earnings, according to the firm, adding that the company is trading "below its PV10 value, not just at $95 oil but at $67 oil."
Don, I'm thinking of selling NDLS also to buy an e and p, mulling EXXI. The debt is a concern in a falling oil price scenario. The past few days have been bizarre, has to be the hedge funds. Lower oil prices, low interest rates, not a bad scenario for consumers. Think rates will be lower longer. Good for yield stocks, DNR...Don't think ebola will be severe because of the transmission if you believe what you hear. Came to the conclusion today that OPEC is probably irrelevant in the future. SA is not trying to punish anyone but they don't want to do what they did in the past, incur all of the pain. Maybe the other members would go ahead with something but I doubt that they will, Iraq, Iran, not sure they are functional. So the market is in control. And supplies will come from the US shale plays. Seems buying the most profitable is the strategy. Our government seems to be as incompetent as ever, maybe the worst. And we have an ebola czar, just what we need, a politician addressing ebola.
Birdog, I'm thinking about buying some EXXI, maybe on margin, that 8% yield looks attractive. Need to look again at cash flow but recollection from last look is good ebitda even with the high debt. They want to sell some assets which could be an issue at lower oil price. What do you think? Could sit on an 8% div for a while waiting for a turn up in price.
cbd, that is a Credit Suisse graph, do think it is important. They show the Utica as no 1 which probably will prove to be right, along with the Marcellus in certain areas. The thing about the Wattenberg that impresses me is that you have Anadarko and Noble leading the development and they are two of the best in the industry. And it seems the infrastructure may be further ahead in the Wattenberg compared to Appalachia. The lower quality names at $80 oil won't see much growth, it $80 is the new number. Seems BCEI is an easy choice and I think PDCE is a touch better because of their Utica position, exposure to the two best plays imo.
SWN just paid almost $10k/ acre for Utica/Marcellus, PDCE has 67k acres. That's almost $700mm value for a $2.1 billion EV co. Today, I think they are the two best values in the sector.
Bottoms are easy to call past the point. Interesting article on Reuters a couple of days ago about SA and the past oil gyrations. They won't cut production this time but will let the market decide the equilibrium price. So figure out which projects aren't profitable. Not sure the US shale plays are the first to go, deep water and oil sands first. But if SA, OPEC won't modify production then why do you need a cartel, OPEC may be history. Then have to think about those implications. A peg at $100 because SA wants it doesn't work anymore. The market is now saying $80 oil is the long term price. Would be interesting to see another analysis of the cost structure for various plays, a comment that the US shales are profitable at $75, not that simple, just as nat gas plays are profitable from $2 in the Marcellus to $4 and more in the Haynesville. Still think maybe the infrastructure cos are a safer bet at the moment, but selective e and p s are also good bets, the best geology first, lowest cost, and lower debt. BCEI fits that bill.
If you wanted to make a gas bet, SWN would be a good choice. Plus they seem to be actually trying to be an exploration company as well, they haven't given up on the Brown Dense, the Rockies and over 2 million acres in New Brunswick, there's a bunch of gas up there as well. There is an article on Reuters about SA and the past crash of oil, couple of days ago, that SA is not going to cut production like they did in the past, from 10mm to 2.5mm, but let the market find it's equilibrium. Trying to think through that and why would you need a cartel if you are just going to let the market control supply and demand. This could signal the end of OPEC, trying to figure out whether this is good or bad. At $80 oil, what projects will be cancelled, would think most of the deep water stuff would be eliminated and the Canada oil sands, guess you can't stop some of those projects that aren't complete. Would think Iraq and the US shale plays are the marginal supply sources. Iraq is in disarray, not much growth there without stability. So it gets to the US, saw a headline that $75 oil makes the shales profitable, but not all are profitable at that price, TMS. Seems the way to think about SA and OPEC and oil price is changing. Interesting times. US becomes the swing producer?
Just my opinion, but hold everything until the deal is done. ARP should appreciate some. ARP GP, not sure the market recognizes the value. And the TRGP piece, I think it will appreciate. Think it is at least a $50 value at closing. If it gets to $45+, might make sense to buy. However selling it all and buying TRGP might be a better long term move. I'm not going to sell and incur the tax liability until I know the deal is done, something could happen. Bottom line, don't think there is much downside unless oil craters, which is a possibility.
SWN, looked quickly at their metrics. $13 billion EV before the CHK deal, $2.4 billion ebitda, 5.4x this year, cheap. And they have midstream assets that could do $385mm ebitda this year, at 12x in an MLP form that's
$4.6 billion. If you back out the midstream, $2 billion of ebitda, on $8.6 billion ev, 4.3x, even cheaper. Seems they are going to have to sell shares but this acreage could be some of the most prolific in the industry, MHR just had a 48mmcf/d well in the area. Plus SWN has a great management team, disciplined.
They bought some of the most prolific acreage in the industry. Suspect it will turn out to be a great move. MHR had a 48mmc/d well in the area. SWN is well managed. And when/if gas comes back in the next half decade, they will be swimming in cash.