Looking at SuezMax and Aframax rates at about $45,000 per day, and ships going on longer voyages. Two NAT Tankers just went on charter, each bringing in about 3.5 to 4.5 million for the voyage. While SuezMax rates have recently been trending flat, both the AfraMax aand VLCC rates have been increasing. SuezMax will not be far behind. Since crude stockpiles are building, soon the only play in town will be the Tankers. -or shut down the wells. For a lot of players, producing at prices above production and transportation costs - but less that fully allocated cost is the only game in town, and one theycan play for a few months.
Sentiment: Strong Buy
There are THREE likely reasons for this action, and all of them are positive for long-term holders of this stock: 1. Management sees potential liquidity problems in the net 24 months, if oil goes to $33/barrel as it did in 2008. THis money assures cash is available even if the bank line is cut.
2. Management sees that oil properties are available at extremely attractive prices. This money lets the company go hunting.
3. Management sees that the shares of BBEP are extremely attractively priced at about 1/3 book value and that re-purchase of units of BBEP will be accretive to earnings. Just look at the effect on per unit prices if BBEP used $600 million to purchase 10,000,000 units.
While other writers are correct in that the price of BBEP is likely to drop in the short term, this is an opportunity to print money in the long term (two years).
Sentiment: Strong Buy
The recent letter by the CEO of NAT (Mar 19) is very encouraging. The latest market intellignece (Mar 23) suggests that the Suezmax day rates have dropped from about $60,000 earlier in the month to about $45,000. Two NAT tankers recently went on charter, one to China and one to Africa.
That is so much above NAT's break even, NAT can probably out-bid any other shipper and still make a bundle..
I sold out NAT at a much llower price, for other investments, However I still feel it i a strong buy, with a potential price of $20.within the year.
There are several reasons for the Suadi's to pump at high rates. All of them apply:
1. Saudi Arabi was losing maret share due to US oil. They reduce future competition if US producers realize they are at risk on higher-priced wells.
2. The US government asked Saudi Arabia to assist in the Economic War Obama is trying to wage on Russia.
3.. Obama does not like oil and oil companies, this reduces the US oil company profits and makes them more pliable
4. The Keystone pipeline only makes sense if oil is about $80/ barrel or higher. The push to build the pipeline will disappear at these prices.
5. The Iranians, Venezuelans, and Ecuadorans are problems for the Obama administration. By getting Saudi assistance in tis matter, the US has placed pressure on these countries, and each of them know that the USA is in the best position to get the Saudis to change their position.
I do not currently hold SDRL, but have shares in BBEP,LINE,NTI, CLMT.
The downward potential on oil prices in the middle of 2014 was quite high, while the upward potential was very low. I cannot see CLMT signing high priced contracts at fixed prices at that time. However the new projects do offer a lot of additional potential cash flow I currently am long CLMT by a small position (2,000 units), and plan to keep fo a while
HI: The Suezmax day rates are holding near $60,000/day, suggesting that NAT will have HUGE profits - it their tankers are actually out on charter.You can hold, and get a good longer-term gain. or sell, take the short term gain and go elsewhere. I try to look at my return on investment. If NAT doubles in a year, that would be an annual 100% return. If I sell with a 2% return in a week, that gives a doubling time of 38 weeks, uisng the rule of 76, or an annual return of about 150%. So it is better for me to sell at 2% rather than wait a full year for a double.
Well - I plan to buy other things at are a very low prices. For example NAO - the sister company to NAT is at a good price. BBEP, an oil company is selling at 1/3 book value. My usual time horizon is a few months, and there are always other opportunities. Will not be chasing NAT. If Contango disappears, the price will drop like a rock., only to rise again if earnings reports are wowser. The best strategy is the Warren Buffet one of knowing a company and their business, and buying when the value is good, then keeping it forever. However I have a widowed mother that lives off the earnings from this trust, and the bills need to get paid every month.. My day job is managing my rental properties in NC and on Maui., I formerly invested inhigh yielding bonds and preferred stock, but these no longer provide required income. As you can see from this morning, NAT has continued to climb, and I am happy for the person that bought from me.
You wil see NAT has risen another 6 cents after my sale. Which is fine - that means that someone who bought from me HAS ALREADY EARNED A PROFIT. I am happy with that. I made money and they made money. a win-win. Don't want to be a pig.
THe Gantt trend lines for NAT runn between 10.27 and 10.44. NAT has retraced between those lines several times in the past week. There is a high probability that I will be able to buy it back at about 10.25 in the near future. In the mean time I have a realized gain of $2100 for a purchase made on March 12. I believe that NAT has the potential to reach $20/share, I will be slowly increasing my total investment, selling at local highs and buying at local lows.
My return on my total portfolio, from beginning of the year is 35%, so this is not a bad strategy.
Just because rates are up, does not mean that NAT's tankers are on charter. A prudent manager might hold out for higher rates during a period that rates are rising.
CLMT apparently needed to pay for huge inventory losses related to the 13+ million barrels of storage capacity the company owns. This may impose requirements for additional working capital of $250 million. On the other side of the inventory problem is the current Contango in Crude Oil, whee forward prices are so high, current day crude camn be put on carriers, held, and then delivered in a few months, for a built-in profit, net of shipping and storage. The major companies bemnefiting from this are the Cude Carriers, such as NAT and TKS. during this time of year, Suezmax tankers rent for $20,000/day. However the rate is $60,000 per day, as tankers fill with oil inventories. I am buying CLMT in the expectation that crude prices will raise to the future prices, and NAT will greatly increase profits, as rates triple. This is a bet on Contango in Oil Carriers,and Refinery oil storage values.
CLMT hasover 13,000,000 Barrels on crude, processing, and finished product storage. Depending on when they purchased, and what kind of hedging strategy they had in place, they could have losses due to work-in-process on the order of $20 to $50/barrel . That is a lot of money they are POTENTIALLY short, and selling common may be the fastest way to rais it. In addition they would need to pay interest if things got tight. They DO NOT need to make a cash distribution.
Not to worry. Plenty of oil priduction still around, and lots of it in tanks and tankers to meet shortfall. Price more likely to collapse when all the tanks and tankers are full, and there is no place to put the production.
Part of the story: Production is currently higher than demand for use. As a result, Short term price drops, and long term price is higher, this is Contango. The excess oil goes to storage on land, and then on the ocean. Tanks and then Tankers fill up, since traders can buy today , pay storage, and sell at the future price, pocketing the difference. Spot prices for tankers start to increase,as tankers fill. Finally, all tankers are full, no place to store the oil, and two things happen: Spot prices for current delivery collapse, and the higher price producers stop producing, since they have no place to put the oil. If you check the Suezmax, Afrimax and LR2 spot rates http://www.teekaytankers.com/files/Tanker%20Rates/2015/current_tanker_rates-Feb-27.pdf compared to last year, you will see they are now about $25,000- $35,000 per day, compared to a year ago, at $10,000 per day. If you want to take advantage of this, buy the stock of the Crude Oil Carriers, such as NAT - the lowest-cost carrier. In addition, refiners such as ALDW and NTI are able to buy crude cheaply, and sell the product at a good price. Their profits will nicely jump. Any questions?
Generally very good. Socking away about $0.55/ share in distributable funds into a Working Capital Reserve - good idea with volitile crude prices, and announcing an other capital improvement that pays for itslf in about 18 months, and will increase distributable cash by at least $0.05/ quarter.. Roughly estimated, future distributable income of $0.75/unit/quarter looks possible. Part of this is being created by Obama's opposition to the Keystone pipeline.