To find the value of an USRT is as follow:
Find the IPO declared maximum production or date, In the case of WHZ the max production is 11 790 000 BOE. Find the total amount of production so far: 4 585 505 BOE. What is left to be produced is 7 204 495 BOE. There are 18 400 000 units outstanding.
You have to understand that the value of an USRT is the amount of crude, NG or NGL left to be produced. This amount will be depleted every quarter by the amount produced.
The value of WHZ is the amount to be produced multiplied by the index price or the leverage price.
7 204 495 X $40 per BOE divided 18 400 000 = $6.98 per unit.
7 204 495 X $45 per BOE divided by 18 400 000 = $7.85 per units
You can change the index price at will; you get the value of what is left to be produced.
You can figure out the projected distribution by multiplying the future production by the index price minus the expenses and taxes. This is really where the discussion is, add the discussion the speculation and you have an answer. Today WHZ price reflect a $34.00 or $5.93. Therefore I believe WHZ to be undervalued.
Using BOE and substracting the amount produced from the total stated production, WHZ has 4.585.500 BOE left to be produced. Multiplying this by the index price of $50 per BOE I get $8.72 per unit net (I took a 30% expenses and taxes etc..) With an index price of $80.00 per BOE I get $13.96. This is a ball park as there are too many unknown. These prices are not the distribution, just the estimated value left to be produced.
No the Obama is happy of sort, but has nothing to do with the price cut. The Saudis have 2 goals: 1. weaken Russia and Iran that are on the wrong side of the Islamic world. The Saudis are the guarantors of the Muslim world, the Sunni Muslim world. 2. The Saudis do not mind giving a hard time to the US.
Should Iran win the nuclear battle, the Saudis have lost all leverage within OPEC. The Russians want to keep that naval base in Syria, if not the Russian navy can only be in the Black sea, and in the North Pacific, Vladivostok. The Arctic sea naval bases are locked in by ice 5 months a year.
Using the last K8 numbers but a $60 average BOE price, I came up with $0.59 per unit. I expect distribution from $0.50 to $0.59. That what we can expect of all USRT.
The Saudis have the upper hand in this “in your face” price war. The Saudis have two goals. First they want to find out the bottom oil price for their Brent. Second they are out to keep control on the Shia Islamic world.
To give an idea of the pricing control the Saudis have? tHEY need only to quote their bottom production price, $10 per barrel. The Saudis have complete control of the world price. Many O&G economies will be hurt quickly, 6 month to a year, such as: Iran, Nigeria, and Venezuela are the most vulnerable. Of the none OPEC: Russia, Brazil, Mexico, are vulnerable.
The majority of these economies need oil price between $80 and $100 to fund their budgets. For the US we are going into and M&A situation. The most indebted will not survive. Interesting times to keep your eyes open. Continental Resources is a very interesting case that could be a winner on the rebound or as a M&A possibility. I remember when Mobile was over extended and Exxon bought it. Every one believe that Exxon was crazy, Exxon is sitting putty today with NG market doing very well.
XOM is a very well managed corporation. Looking at the O&G sector crude oil is the leader because history says it has to be. XOM took the view that NG was a good second. Until XOM merged with Mobil, XOM had no NG assets to speak of.
It is interesting to analyses the reserve replacement of XOM, NG constitutes the majority replacement, and crude oil is second. XOM is more and more involved in NG than ever. Looking at the O&G world market, crude oil is controlled by nationalized companies politically motivated. Most players in the crude oil side must JV to get access. On the other hand, NG can be accessed with better terms, with more freedom. The NG market requires huge capital to bring it to market in the form of LNG, CNG or LPG, XOM has this capital.
The O&G private sector is slowly moving toward NG. Several reasons are in the works: Pollution is big, price is another and availability in your face. The down side, so far, is the NG infrastructures and applications, it is in the works. It took 7 years for trucking to go from gasoline to diesel; we are within these 7 years. XOM does not own the majority of the XOM service stations. It produces and is the wholesaler. XOM has managed to be polyvalent without fanfare. XOM is the best managed major hand down, and may surprise everyone. Crude oil may not be what XOM is looking at!
It appears to me that MVO traders are reacting to the general view that the index price is going bobo. Looking at MVO rationally MVO is a descent Trust:
MVO has 11 500 000 units, at IPO it declared a reserve of 18 500 000 BOE. The date of the IPO was 13 February 2007 or 31.4 quarters ago. The average quarterly production is 210 000 BOE. MVO has produced 6 603 000 BOE out of the declared 18 500 00 BOE. This means we are not at 50% of the projected production. The expenses shown on the K8 report are 41% of the gross earnings from the sales. My unit value of MVO is (this value is for this quarter, as next quarter the reserve will have been depleted by another 210 000 BOE):
Index price of $40.00 = $25.67, or $60.00 = $38.50.
It appears to me that the speculators are off by $10.00. Another observation is that MVO uses production sales 30 days prior Xdate. The 30 days are used to close the books on this quarter. On September 10 the WTI was at $92.73, the Brent at $98.23. On December 10 the WTI was at $63.74, the Brent $66.11. These prices should fetch a descent distribution, for this quarter Xdate 10 January 2015.
I believe the crash in oil prices we see today is primarily a religious war. Should Iran get the bomb, the Saudis will lose any leverage within OPEC to Iran and the Shea side of the Islamic world. The Saudis believe themselves to be the guarantor of the Muslim faith. So for the Saudis it is a big deal. The Russians are on the wrong side, what they want is to keep this naval base on the Mediterranean sea, their only one outside the Black Sea, the others are in the North Pacific and the Arctic see. The US shale producer price lose is a collateral event. Several members of OPEC will not be able to follow for long: Iran, Nigeria and Venezuela the most vulnerable. Several none OPEC are all ready hurt: Russia first, Mexico and Brazil are not far behind. For us watch for lots of M&A.
Obama is causing a profound change in the American presidential function as it interacts with the American institutions.
It is fair to say that until Obama, more times than not, the US presidents showed restraint in governing by staying within the constitutional framework established by the majority of past presidents. Obama has and is pushing his authority as no other president has done.
The legislative functions of the congress is losing its ability to produce an effect by been to general. The regulators, not elected officials, produce the regulations that fit the executive policies. The presidential executive order is used to stretch the president ability to circumvent the legislative branch majority rule.
This style of governing is out of the box, this will render the American institution erratic with every election. The future of the American institution can be seen by studying the French institutions. With the election of a president of the opposite party, first the goal is to destroy what the previous president did. The majority govern absolutely.
The American ideal that was the norm is no longer the goal.
I understand the meaning of Xdate as the last day you have to buy to make the 3 open days. I count the days and sale 2 or 3 days before Xdate. I seldom take the distribution, I am interested in the pre Xdate bump. Take too long to recover the Xdate distribution loss. It takes me 3 days to clear the sale and buy something else.
All US Royal Trust run on auto pilot. The decision are made by the owner/operator which transfer the agreed portion of the profits to the trusties for distribution.
Obama is not working in “concert” with the Saudis. Obama is very happy to do what he does well, be on vacation and blowing hot air. Yes the Saudis are after Iran, the Saudis do not want to lose any leverage over OPEC. The threat of an atomic bomb would be the end of the Saudis controlling OPEC. The Saudis have been somewhat responsible in pricing the crude. Iran has a totally different point of view, Iran wanted all, stock and barrels.
Russia is on the wrong side of the politic, Putin want “absolutely” a naval base outside the Blank Sea, he has it in Syria. Putin wants to control the Russian interest with his naval power. That is what he believes, he is paranoiac.
Venezuela etc. will default or will devalue their currency at will. Be prepared for a very strong dollar! The Saudis have coupled the ounce of gold to 15 barrels of crude, since Nixon decouples the dollar with the gold. This last Friday, 1 ounce of gold fetched 24 barrels of crude. We have to view gold has the refuge currency again, even though no one wants to admitted it.
ALDW distribution is totally dependent on the crack. I follow the crack on a Q average. Last Q is was $13.34, so far this Q it is $6.20. Therefore I would not expect, best production etc.. $0.50 if $6.00 crack is the full Q average. Do not be confuse by ALDW percentage return. The percentage will relatively stay the same, but the dollar value will shut?? The crack is the forecast profits based on 3 barrels of crude versus 2 barrels of gasoline and 1 barrel of diesel. I use WTI and gasoline / diesel prices as shown by EIA.
It does take time to dispose of 56 million shares. I guess the market is saturated with XOM shares. None the less it is only 1.2% of the outstanding shares. Compare XOM volatility with CVX and APA, the outstanding shares of CVX is half that of XOM and APA 1/3 that of XOM. This is the reason XOM does not have nearly the volatility of CVX and APA. OXM will do well; they may be buying back their own share for that matter. Look at it this way; should XOM buy back the 56 million shares, XOM would save $38,640,000.00 of dividend in Q3 so it would really cost XOM $17,360,000 to buy them. I am not worry!
Having worked in the O&G drilling business for 30 years, at SEDCO now Transocean and ESV, Noble I can attest that H2S is a prime concern. OSHA safety requirements are extremely costly. When I read an article on RigZone 9 month ago I figure out that it was a no brainer. Naturally to put your foot in the door requires time and successful treatments.
When IEVM will become established in the O&G sector they IEVM Excelyte will be the insider that is called to SOLVE the problem. That takes time, but then cost is immaterial, result is what count. My guess is that on the company drilling team, there is already a mud engineer that usually works for the mud additives sub-contractor. Just to make sure H2S is under control, an Excelyte representative will be added. The oil company that contract drilling does not want any disruption in the drilling. The cost of having to stop drilling to fix a problem is very expensive, so $1000 per day for a H2S expect is nothing. In the offshore side of drilling, been idle cost 100s of thousands of dollar. He will probably seat on his duff all day for days, but should any H2S appears, he will work 24 hours a day until the problem is resolved. That is what drilling is about, great business to be in. It has been good to me. I am retired and enjoy that too.
I had the same problem trying to figure out the Xdate for ALDW. The definition of the Xdate is 3 business days before the “stockholders of record”. It takes 3 days business days for a trade to be finalized. In order for the trader to qualify for the distribution the last day he must buy ALDW is 3 days before the stockholders of record. In this case the stockholders of record on February 17, 2015. So February 12, 2015 is the Xdate. Weekends and holidays do not count as business days. So next Thursday 12 at the closing you must buy ALDW to be the owner on the Tuesday 17 February. You will find out that on Xdate the amount of the distribution will be deducted from the posted unit value.
You can make a profit with contango. The forward crude price for February 2016 is $60. Storage fees and pipeline fees paid the profit per barrel can be $1.25/$1.50. This why the storage in Cushing OK is up 2MMbarrel since January 1 2015.
When the value of crude oil ditch as is the case, the profit will follow. The Crack Spread is down therefore the total value of profit is down as well. The profit as percent is approximately the same, the dollar value is down. Psychologically dollar down you sale, it is a natural reaction. I look at the alternative, Refiners are better placed to make a profit then the producers. The refiners cost to produce refined product does not change, it is just that they buy crude at a lower price and sale the refined product lower as well. I mainly deal with O&G so the whole sector has the same problem. As such ALDW is a good MLP as compared with the competition. So far I am doing OK!
It is tru in that the 1 for 2 happen before the merger of ARP by TRGP. This merger is a complicated deal that has many tentacles. The bottom line is that ATLS will continue to be listed and ARP should disappear, so I believe but than who know!!!??