I strongly believe that Walrath enjoy being obnoxious?? Being obnoxious does not mean to be stupid, just to search controversy for the thrill of it. The search of the objectionable for the pleasure to be disgusting.
It appears to me that many traders look at the distribution as a percent and get turned on and buy. Many do not know what an USRoyal Trust is; none the less the distribution is great so buying is it. USRoyal Trust is a very specific investment, your investment is the commodity not produced and not sold. Ultimately the understanding is that the value of the investment, representing the oil, gas and/or NGL will dingle to zero. The distribution is the profits from the sales, the unit price represent what is not sold. None the less there are unknown, and this is where one as to understand what is the implications. Professionally I worked in O&G drilling and oil field production. Although I never worked directly in reservoir engineering, I somewhat understand what happening, in time, in O&G production. This SA article was an argument that did not hold and was deceiving.
I read as much as possible on Yahoo and RBN and RigZone. Than I make up my mind. I made a comment on this MS about the article. It was well conceived and written, but in depth it was flowed. It was decidedly self serving. I did OK, I bought on the dept. The surge is not quiet finish, probably $0.50 more max.
You are confusing USRoyal Trust and MLP. The assets of a USRT cannot be modified. Not so with a MLP. There will be no change on WHZ.
If Chevron has a 5-3-2 crack spread it is a different spread. The standard Crack Spread is 3-2-1, 3 barrels of crude produces 2 barrels of gasoline and 1 barrel of diesel. Having worked for Chevron, I am not surprise, Chevron is very different, management is questionable. Why I say that, management is done by accountants, not engineers.
I see a potential run up of $1.06. Just not sure if the last distribution will have to be included in my calculation. So at best $1.06 and worst another $.26, somewhere in the middle is the answer.
The attractiveness of the “Inland” refineries has been the Crack Spread. By enlarge the Crack Spread is the function of lack of pipeline throughput to the GOM.
My view is that the inland refineries are not in control of the discount crude price which is the bases of the crack spread. This government is, on one side impeding the transportation of crude by refusing to give the go ahead to the Keystone pipeline, it is further impeding the R&R transport by the new rail cars regulations, and finally by, possibly, allowing light crude, API 50, or field condensate exports.
Where inland refineries stands, many have invested in hydrocrackers to be able to use light crude, because field condensate could not be exported. Are these investments going to pay off if light crude is no longer causing the bottle neck? I am cautious until, at least, the end of the year, too many unknowns.
Since NTI is part of Western, the business profile is changing. MLPs can modify assets at will. It will take sometimes for us to see what Western has in mind. I do not own NTI but is on my daily watch list!
CWN is right! The Xdate is the date you must own the units. The SEC regulation requires the brokers to take no more than 3 business days to process the buy or sale.
The pay day is up to the USRoyal trust, can be 8 days to 30 days varies. Arbitrarily the brokers will subtract the amount of the distribution to the units price the day of the Xdate. The idea is that the value of the distribution lower the worth or value of the USRoyal Trust. Many traders sale after Xdate so expect the unit to be lower than the distribution plus speculation.
The FEDs are testing the effect of allowing field condensate the same export privileged than plant condensate. API has set the norm for WTI at API 43/45. Anything above or lighter crude is out of spec for API but not for the Feds. Many if not all GOM refineries are set up for Brent which is API 40/43. This goes back to the days, 20 years ago, where the majority of the crude processed in the US was Brent. US GOM refineries by processing API 40/45 get a crack with good diesel payout. Lighter the crude more gasoline and fewer diesel. For these reasons VLO, and ALDW have installed expensive hydrocracker to get more diesel with lighter crude. VLO spent 3 billion in the refineries modifications.
By processing the lighter crude, the lighter component of the crude is called by the FEDs plant condensate and therefore exportable. By changing the export rule the FEDs are changing the value of light crude API 50, which was discounted and bought by the inland refineries, such as ALDW, NTI, CVRR and others. A consensus seams to take place; the export of field condensate will free storage volumes for the WTI and LLS to supply the GOM refineries. The inland refineries would not see the advantageous discount any longer that can be $20 per barrel.
By no means the FEDs are allowing US crude oil to be exported. The rule affects only condensate that comes from the production wells or field condensate. The only process this crude sees is the standard separation process with 3 stages ( water, crude, gas) separator at the well.
Comparing an USRoyal Trust and a MLP is comparing oranges and apples. MLP assets can change at the will of the MLP administrator. What makes up the MLP such as pipelines and refineries can be sold or purchased which changes the value of the assets, therefore earning, of the MLP. Because MLPs own the assets, they can depreciate. The case of NTI, CVRR and ALDW shows my case. NTI changed ownership, what will western do with NTI is up for discussion. All these MLPs are refineries, refineries are well known for outage due to process equipment breakdown. When this happen the distribution take a dive. I found these MLP more difficult to track, because of the incertitude’s in their assets and stoppage.
On the other hand USRoyal Trusts are much easier to track. The production does not vary much from quarter to quarter. The index price is what to keep up with, this does not means that they are perfect.
I have invested in these MLPs but I watch them every days, USRoyal Trust are more forgettable, not as volatile on average. I did quite well with ALDW, NTI and CVRR are a mixed bag.
The US is buying less and less Brent, so the crude price is not as dependent on the Brent index price. The quality of the crude available in the US is where the discount is. On average US refiners like API 40/45 crude. The US WTI can be higher API 50, this is why LLS has a higher price. This light crude in the condensate appellation can be discounted $20 per barrel. Depends on the refiners location.
No Xdate is not the payment date. Xdate is the last day you must own the units to qualify for payment. The qualification date is Xdate plus 3 days. This 3 days is the standard time SEC gives brokers to process the buy or sale. The payment vary with the USRoyal trust or MLP.
The value of oil, gas or NGL has to do with the geology. The problem associated with SD is with the amount of water versus crude and gas. The problems with Eagle Fort play are that the crude is API 50 and above not standard WTI API 40/45. Look at it this way: Why LLS is worth more than WTI, API gravity, and that as to do with the GOM refineries process equipment in place. GOM rafineries are set up for slightly heavier crude that API 40, LLS fall in that category. What is the benefits, API 35/40 crude produces more diesel, diesel for export to South America.
The returns on investment will vary greatly from one USRoyal Trust to another. Not too complicated, I trade with VOC as well, it is one of the better one. WHZ is a descent USRT looking at the returns is only one side of the potential, geology location, management and market conditions are part of the puzzle.
I refer you to RBN Energy LLC articles a field versus plant condensate. The crude classification arises from the shale fracking new crude. Field condensate is heavily discounted because the GOM refineries are not set up to use light API grade crude.
Should all US grade crude be permitted to export, all US grade crude would no longer be discounted versus Brent. This is not the case so far; only light grade crude can be exported.
I stand firm on my position; WTI will be discounted until the export band is totally eliminated. RBN has an article on the 2 possible outcome of the export lifting, quiet interesting.