Politic has taken over all index prices, the WTI and the Brent. The Saudis do not want to lose market share and have let the Brent crude price go down. It appears that the Saudis can keep the Brent crude at the $80 level for some time. The Saudis keep the cost of their production very close the vest. My guess is that they make a profit at or below $60 per barrel.
The Saudis with a small population do not have the problem Iran has. Iran, Venezuela, Nigeria have large population and crude is their only earning to keep their population happy and none belligerent.
The US, so far, does not export crude oil as define by API. Plant condensate can be exported and recently field condensate can be exported as long as the light gas particles have been separated. But regular WTI cannot be exported. The US GOM refiners are exporting refined products, Diesel in particular. My view is that the Saudis and other OPEC members want to make available crude oil to none US refiners at a competitive price. The diesels demand in South America is big, lower Brent crude price, once refined, will make diesels competitive with GOM produced diesel.
I would not, necessarily believe that the WTI price will be back to the mid-90s soon. The game changer would be for the US to allow WTI export. If it happens it will not be before 2017. Obama is out to kill the O&G economy. The next couple of years are going to be very volatile and require good nerves.
Analyzing a US Royal Trust many confuse the distribution with the unit price. The two have to be treated differently. The unit prices are set at the IPO and represent the value of the expected production. As the production reduces the volume to be produced, the unit price will go down. What composes the value of what is left to be produced is the WTI index price, or the agreed leveraged price agreed by WHZ. The WTI index price may increase the unit price when the volume to be produced cancel the loses due to production.
In the situation we are in today, the WTI index price has corrected according the future demand versus the WTI market availability. In other words the volume of produced WTI will chase fewer buyers, so the price will become competitive and will go lower. This is why the unit price is down.
The distribution represents the amount paid by the buyer or the customers of WHZ. The distribution represent today price less expenses. The price paid by customers may be less or more than the WTI index price depending on the API quality and the production location, meaning the cost of pipeline.
When the earning percentage is shown, it is misleading. But as the unit price dump and the distribution do not follow the index price, the percentage may be high, but the dollar may be lower. It all depend on the unit price, in some cases in went down 40% since July 1, but the distribution is somewhat the same, so huge percentage. But you may have lost 3 times the distribution amount, the unit price got killed.
Bottom line today we have to bit on the future earning in this evolving economic situation.
No, Xdate is this Friday October 10th. The 14 is the owner date of record. It takes 3 days to sale a unit or stock to settle. So to be the owner on the 14 October, you must buy it no latter than the Friday the 10th or the Xdate. The distribution will be subtracted from the unit price on Monday at the opening. I expect MVO to drop $1.50 Monday, the distribution plus another $0.60.
Am I wrong in thinking that the energy sector is in a market correction? I follow about 70 US Royal Trust, MLP and regular equities. Looking at the unit’s prices directions since 1 July 2014 some, not all have gone down 30% others 20%:
SDT: -37%, SDR:-22%, PER: -24%, NKA: -22%, EROC: -30%, NDRO: -17%, BHP: -15%. Many are down 10% or less. I can understand the some such as SDT, SDR, PER. Their production is down because of water content principally. The drilling equities are having a hard time to swallow the new rigs coming out of shipyard. On land drilling is getting down because of the over production.
Sound to me that we are in a market correction, none the less. Does this mean the calm before the storm?? I am hoping the storm will be up prices.
The 2013 Oct distribution was $.98. Your assertion appears to be on target. We are approximately 20 days from Xdate. The unit price is down from the last the last 2 quarters but equal to 2013 October distribution. My guess the unit will go up $1.00 by October 2014 Xdate, if not more. MVO will see some action within the next 2 weeks.
From an O&G point of view, we need lots of rain so the corn as to be dried with propane gas, like last year. Then we have a good gas price. Otherwise corn is not a concern for this O&G MB.
Wishful thinking! Unless US crude is allowed to be exported, US crude will be below $100. The offshore production in the GOM is going to suffer; the insurance premium is going to be raised. It is a fact that BP had a bad reputation prior the blow out. Been an old drilling crew member of SEDCO, I was flabbergasted by the cavaliered decision of Transocean. In the old SEDCO days the rig manager had total control of the rig. There was no derogation on safety such as weekly hydro test of the BOP etc.
The corporate atmosphere of BP was to save money and drill! BP got cut???!!!! Transocean fell for the “in your face” of the company man that must have said, “you do not do as I say; the rig day rate goes to stand by”?
So now BLGO is the same technology as Excelyte (IEVM) You say that it is an electro-chemical reactor filter. Excelyte process clean water that once mixed with the drilling mud, adsorb and disposes of the bacteria found in the drilling mud returned to the surface. The drilling mud is processed as usual and re-injected as drilling mud free of environmental objectionable bacteria, such as H2S. Since Excelyte does not filter once used the drilling water is clean, it does not need to be filtered. The drilling mud is disposed as clean mud, and the water after 30 days is as environmentally friendly as any clean water prior been processed with Excelyte. On this bases Excelyte is a superior product.
I believe you do not understand what #$%$ Royal Trust is or how it works. MVO is one of the better USRT around. But over time its price will go down. I am not long on any USRT because the unit value is going down. When it will lose a more visible amount is when the traders consensus will decide that what left to produce does not match the value as set by the index price. I rarely keep any position in a USRT for more then 30 days. I just track the moves and buy or sale accordingly.
Filtering is not a new technology, it is expensive and does not remove H2S for example. Excelyte doe remove all bacteria pollutant and is ecology friendly. Excelyte once used in drilling water render water totally free of pollutant. Water can be reused or discharged in common water stream without further treatment. The symbol for Excelyte is IEVM, it is a pennies stock, just like BLGO.
Correction is normal for MVO. Looking at the float between the day after Xdate drop and the day before Xdate price, “the quarterly float” one can see:
July 12, 2012 Xdate: Float up $11.18, lowest price for the quarter, $22.72, Xdate price $34.82.
October 12, 2012: Float down $6.53, lowest price for the quarter, $22.65, Xdate price $27.26
January 11, 2013: Float up $3.37. Lowest price for quarter, $25.97, Xdate price $29.55.
April 11, 2013: Float $3.70. Lowest price for quarter, $26.95, Xdate price $31.82.
July 11, 2013: Float minus ($0.40). Lowest price for quarter, $23.56, Xdate price $29.74.
October, 10, 2013: Float minus ($3.23). Lowest price for quarter, $23.46, Xdate price $25.46.
January, 13, 2014: Float up $2.22. Lowest price for quarter, $23.22, Xdate price $26.26.
April 14, 2014: Float up $3.80. Lowest price for quarter, $24.09, Xdate price $28.98.
MVO loses value according to the number of quarters. The float is good, although not always consistent. The float is appreciated, but MVO is getting older therefore will lose value. This lose is proportional with the index price. Older MVO gets, the index price can no longer popup the value. This lose will get more drastic as the volume of reserve get down. The loss of value has little to do with the distribution which should stay close to the same. The number of distribution left is where MVO value is felt.
The rumor, presently, is that the FED will allow WTI export. So far it only pertains to the light WTI or field condensate. The FED does not have an API threshold to qualify condensate. The deference between Field Condensate and Plant Condensate is the process used to remove the light particles which permit the transport by pipeline. Obviously the refinery process does that, this is where the Field versus Plant terminology comes in. There is an export market for condensate Field or Plant; it is just that the FED is behind the ball, as usual.
It is a given that WTI is permitted to be exported to Canada. The Canadians export their light crude at world price and import US WTI at discount price to be used in their refineries, for local needs. Now another export market for WTI is about to open up to US producer of WTI, Mexico. Mexico cannot produce enough crude to feed their refineries. PEMEX has not allowed import of crude, but permitted the import of refined products. The new Mexican petroleum law, passed recently, will facilitate the import of US WTI. This is OK as part of the NAFTA. The Eagle Fort WTI crude will probably be the beneficiary.
Any export will be the controlling factor of the level of WTI discount. WTI price may not crash as much.
I am afraid you do not understand what a US Royal Trust (USRT) is. At best it is a US Bond that yields a 9% or 10%. But over time you lose the equivalence of the distribution of this USRT. At some point the index price of the oil, gas or NGL can no longer keep up with the lost value caused by the distribution. If you are long with a USRT you have to subtract from the unit purchase the distribution. What is left is your profit. If you keep it until the end, the unit price will be zero, what are left are the distributions.
I trade all USRT and I play the Xdate bump and rarely take the distribution. The attraction by most traders is the level of the quarter distribution. WHZ price varies up to 2 dollars between the day after Xdate and the day before Xdate. I make my money by timing my buys and sell. So far I am doing OK, but it takes research and spreadsheets to keep up with the daily price fluctuation.
Yes, steam has a different use than fracking water or gel. As for the earthquake, regardless it is not compatible with production casings or stems which may be thousands of feet deep. Since earthquake is the release of geological pressure between 2 formations, fracking may release this pressure. Can fracking control this release is an open question. I do not have the answer.
I do not believe that Fracking is going on in California. The difference with Fracking is that you must keep on drilling to produce crude. In the standard reservoir you drill x number of wells and you produce from them for years. Not the case in shale play. One the fracking is complete you can produce what is freed from the rocks. But for a limited period of time, 5 years is a good producing well, but will have lost 80% of the IP or more. Than it is a question of the cost of maintaining the well so it can produce. That cost may be more than the production profit.
On paper reinvesting the distribution make sense. In reality USRT as a depleting asset the unit price will not match the distribution, if you keep your units for the expected life of the USRT. Personally I do not, I don't even take the distribution. I sale a few days before the Xdate and track the dip of the unit price passed the Xdate. When the percent drop match the average of the USRT, I buy back. Does not work every time but works for me. I keep track of all news and MB, tracking the unit price between quarter is a good indicator. USRT will always go to zero, you have to expect 15% or so drop every so often, the SA article was one way that traders reacted. Other drops are correlated with reserve percent left to be produced and sold. The index WTI price has to be taken in calculating the value left to be produced.
Any and all IRA or 401K distribution will be reported by the broker. You will receive a 1099R. You will have to report it on your 1040, no choice. Depending on your taxable rate you may or may not pay taxes on this distribution. The twist is with MLPs, the Earning Before Interest Taxes Decompression Amortization or EBITDA may have to be declared. Above $1000 you should see an accountant.