Interesting analysis from CS, they revised oil prices down, kept lt price at $80, no change, $84.50 next year, $85 in 16 and $81 in 17, $6 or $7 discount to Brent. It reduced the NAVs by 8%. The group now is at a 52% upside to revised NAVs. Only three above 100%, PVA, PDCE and MHR. Still think PDCE is a great bet, will see.
My second best day in the market ever, the day Williams did the ACMP deal was first, yesterday was the third best day. And in the past week, the two worst days ever. Volatility is unbelievable, has to be hedge funds moving back and forth.
Up another 5%, better than down 5%. Not sure this is over but today it feels like the panic selling is over. QEP, saw a report that put NAV at $37, current price $21, couple of billion dollars of midstream.
The dist for TRGP projected at $5.30 in '17, and think that is conservative, and a 2.5% yield, $212. TRGP will do well, and with the 10 yr T note staying in the 2s, a 2.5% yield for a pure GP is not too far fetched. Also, good chance TRGP is acquired as the sector consolidates. The ARP piece is questionable with Cohen running the show, I may sell the ARP and put it in TRGP. Seems ATLS is a $50 value at least $21 plus $9 plus $20. TRGP could be some more and ARP some less, still get to $50. Rebound in oil prices gets the value closer. Too bad Cohen was focused on ARP and not the APL potential. Don't think I would every invest with him again, although I bought in the mid single digits, can't whine too much.
KMI was a buy today. CS says the cos in the best plays, Midland Basin, Wattenberg, Delaware and Utica are priced assuming $70 oil. I do think this slide is about over. Might take a few months to move the oil price back up again. I don't think this was a paradigm shift for the shale plays. OPEC needs higher prices.
A comment from Credit Suisse that the companies in the best plays are a good value, those in Midland Basin, Wattenberg, Delaware and Utica. I do think BCEI is overdone now if you assume oil doesn't drop much further, CS says the best are reflecting $70 oil. I can't forecast the short term, but I do think BCEI is a buy now vs a sell. A good co with great geology. And relatively low debt.
While the bulk of the conversations have been centered on the crude market and where prices ultimately shake out, we estimate that the oil-levered E&Ps are already pricing in LT prices below $70/bbl.
I agree, an oil collapse is minor compared to the fear of ebola epidemic, could paralyze US and other economies. I was up 5% today. Some relief, but not sure the bottom is in, I hope it is. I don't think OPEC can afford $70 oil. $30 per b for SA is $110 billion annually and their GDP was a little over $900 billion last year.
Haven't looked at the math in a while but at 80mm shs at ARP and 52mm at ARP GP, 1.54 ratio. 10 cents increase at ARP, 5% roughly, gets you 15 cents at ARP GP, 12% increase. Can they increase ARP 5% annually, maybe. ARP GP at $1.40 year 1, $1.65 in 2 and $1.80 in yr 3. 12% increases should get a 4% yield, so $1.80/4%, $45. TRGP $210 in 16. $45 plus $38 plus $9= $92. That's not a bad result. Assumes they can grow ARP.
How about his tee time? If we get a reported case outside of the the health care providers, panic could set in.
Hope it doesn't happen and not because of the market. Not sure I'm ready to go back to Texas any time soon.
Times like this remind us that we need to be humble to survive and hopefully be successful longer term. This ebola thing could bring down the market further, forget about oil supply, demand will weaken. Who wants to be on an airplane now unless you have to. Could be tragic.
A big deal, Fed budget deficit, $483 billion, 2.8% of GDP, if I heard correctly. That's significant, it's felt that we can stand 3% per year, the expected growth in GDP. Seems the debt black swan is turning grey. If we can continue to show growth in the economy and moderate spending, that fear goes away. And the 10 yr T note below 2% today, don't think this bull market is over yet. We do need oil to get back to the $90s for the ecnonmy growth and jobs.
Still think WMB is a great yield bet, $3.25 div in 17, 6.8% yield on today's price. At 3% yield, not unreasonable for a pure GP, the stock would be $108 per share, 125% upside plus yield. Both are oil price dependent but DNR is more so. 75% of WMB revenues are fee based. Still a WMB bull even with the oil price drop.
Looked at CS projection of DNR cash flow, there's not that much free cash. But they show the div increasing to 55c next year, 61c in 16 and 71c in 17. At $12 share price, that's almost 6% yield in 17. They would be generating $1.3 billion in cash and spending $1 billion in capex. And growing prod mid single digits down to low single digits by 17. They were assuming $85 oil so not a bad yield play. And possible upside for oil, today that doesn't seems likely but who knows. If you assume 4% yield in 17, stock would be $18, so you make 50% plus yield. Looks like a good by not great bet.
Just looked at Saudi Arabia's GDP $900 billion, heavily oil, a $30 /b drop, $100 to $70, $110 billion less in revenues. My guess is that SA can't afford to dry up US shale production. This could last for a short term but they will blink soon is my guess. They need $100 much more than we do, although energy investors need it also.
Good stuff. One factor it seems is what is SA trying to do in the market, are they trying to drive out a bunch of US production. If you believe SA has a couple of million barrels of surplus and they are serious, this could last a long time, but then how much can they endure at $70 oil, pundits have assumed that they need $100. At 10mm b/d, that's $300mm/d, that's $110 billion annually if I did my math right. The GDP of SA is around $900 billion plus. Not sure they can afford $70 oil. This fear that the Saudis will drive out our shale growth is not a reasonable argument. I would bet that they blink soon.
Saudi Arabia has an oil-based economy with strong government controls over major economic activities. It possesses about 16% of the world's proven petroleum reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC. The petroleum sector accounts for roughly 80% of budget revenues, 45% of GDP, and 90% of export earnings.