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.
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.
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”?
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.
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.
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.
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.
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.
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.
Do not quiet get the comment. But if you question why the unit on Xdate goes down, the assumption is that the distribution is a cost that lower the value of the trust, in this case WHZ. So if the distribution is $0.75 the unit will automatically drop $0.75. On average many divest themselves just before Xdate. Why stay in if you know that the distribution is deducted, unless you are long. Then you speculate that the index price will increase the worth of the trust?? To each is own.
I am assuming that the Big Spring refinery has produced 70,000 BPD from July 14 2014 through October 13 2014 or 152 days. The average crack during this time is $13.22. The expenses and capital on hold is 30%. I calculated the potential distribution to be $1.51. I know that the refinery modifications has not been fully paid off.
My guess is that it will be above $1.00.
Having been in the drilling business Excelyte makes sense. This H2S is extremely potent. Our alarms in the mud pits would go off at 3 PPM. At 5 PPM you lose your sense of smell and soon after you lose consciousness. Mud bottom up depend on the bits depth. Assuming an average depths the mud going in bottom up withing 2 hours. Should Excelyte eat up the H2S in that time is a very big deal? The mud treatment in the mud pits takes longer depending on the pits volume. Treating in the pits with Excelyte is another very good deal.
That is the trust of my comment. On one hand the unit price which represent the value of the US Royal Trust. One has to quantify what is the value of the US Royal Trust; it is what is left to be produced multiplied by the index price.
The distribution is today production sales revenues less expenses. Has the value of the US Royal Trust goes down because the index price crash or the volume left is not enough to cancel the index price, the unit price is down. But the distribution is OK and represent today price.
In short, as the unit price goes down and the distribution says the same, the percentage will go up. So you made money, but your invested capital is in the gutter.
Buying at the IPO of a US royal Trust and keeping it until the end is gutsy, if not stupid. It may work but not worth the trouble. I buy on the low and sale before xdate. The certainty of xdate is that at minimum the unit price will lose the price of the distribution. If you keep it, you believe that the index price will increase more than the distribution. It happens but not my cup of tea. Many like me will sale before xdate. After Xdate many will realize that the price is further down and sale. It take some monitoring but one can buy back and make money more time than not.
TwelvePM, appreciate your comments because they are well taught of. Comparing equity with a US Royal Trust is really comparing oranges and apples. Comparing US Treasuries or Bond makes more senses. Both have an end date but with treasuries you do not lose the capital, if you do not sale before the end date.
The particularity of a US Royal Trust is that the capital dwindles to zero or the value declared in the IPO. US Treasuries never loses value, what drive the price of the treasury down is the interest rate rising. The opposite is also possible, as the interest rate goes down, the treasury will go up. Bonds are more risky because you are dealing with private concerns that have reputations you must investigate. Rating agencies do that for a living. But higher the interest rate, higher the risks. If the bond issuer goes bellies up, you lose your capital. Remember the GM bonds???
The risks associated with US Royal Trust are manageable, no guaranties but I can understand more times than not the risks that I am taking.
Equities are another deal that I stay away from. MLPs are somewhat understandable but are not US Royal Trust. O&G is in a transition today, but I understand what drives the business. I am trying to diversify but I am cautious.
It is not that difficult really:
Until the Big Spring refinery modifications the potential daily production was 70MBPD. The Crack Spread for the quarter averaged $13.34 between 5/14/2014 and 10/14/2014. I assume those dates are the quarter. It takes 30 days to close the books on the quarter expenses, production and publication.
Multiply the production by the crack and you get the total possible revenue. You can figure out the expenses and reserve amount from previous K8 filling.
Naturally, very difficult to forecast shut down of the refinery, which is the biggest possible problem with any refinery. CVRR and ALDW have had this problem this past 12 months. This quarter I believed ALDW had not totally paid off the refinery modifications, an added expense that I took as an increase to the expenses. I took total expenses and reserve at 30% of revenues.
I posted a $1.00 plus 2 week ago. I was in the ball park. Next quarter the max production will be 75KBPD because of the modifications.
The average is $0.74, in view of the index crushing, it would still be OK. The previous 2 years it was $0.65 this quarter. Still better than a T bill??
The meaning is simple, the US O&G is producing too much, and the US refineries throughput is too low. Building new refineries is not an option. So the remedy is simple but cannot be changed with this administration “Export”.
For the next two years what you see is what you will get, and it may even get lower. In 2017, January, Crude oil status will change and export will be allowed, assuming that a Republican is president. The chances of another democrat in the White House are not the norm after a 2 terms president, the party change.
Can the new Republican majority in congress force crude oil to be exported, 60 votes are needed, and the Republicans do not have it.
I invest in O&G, because I worked in this business for 40 years. I am not right all the time, but I understand why.
You are confusing WHX with WHZ. WHZ has a few years to go before zero, or as said in the IPO: 11,790,000 BOE. I calculate we have 7,205,495 BOE. We are not even halfway through.