The distribution represent the sales of the production. The market deducts the value of the distribution every Xdate from the unit price. It is normal to do so, since there is less volume to be produced and sold. There are only two items that matter, the index price and the volume produced. The index price is not the previ of the producer, but the volume is. I do not participate in the latter years of a trust, too much speculation for me.
Good analysis, WHZ, I believe, is been pushed down by WHX. They are both Witting and they are believed to be in the same bag, which is far from the truth. The positive is that NG prices are up and will continue to be above average. Your forecast distribution is realist.
True water is a hot topic in the oil production and fracking in particular. Excelyte is the competition. It is in use in the middle west on many well contaminated with H2S. No ecological residues with Excelyte.
ALDW is a sole refinery, CVRR a several refineries. ALDW has its own retail outlet, not so with CVRR. CVRR is own by Icahn that is worth something. Probably less risks with CVRR.
Lots of truth in what you write. The price of WTI, LLS, ANS, WTS are controlled by not been able to export it. The prices of refined products are controlled by the output of all the US refineries. The constructions of new refineries are controlled by the EPA. I cannot see the export of crude oil until a new republican president is elected. Ultimately the viability of a new refinery must imply a 30 years economic benefit. I cannot see this as possible. Therefore we are locked in a catch 22, too much crude, not enough refineries equal too much storage and nice discount for the inland refineries.
I believe NG will be a viable competition to crude oil, because it can be exported.
You do not understand USRoyal Trust. The unit you buy is a portion of the crude in the hole. As the production takes place, the value of what is left is less and less. Over time the value of the unit will go to zero. The only 2 item that will keep up the price of the unit are: The increase production, more production sold equal more distribution and the crude, NG or condensate index price. WHZ price is good under these parameters. It is just that although the distribution is OK, the unit price goes down every Xdate the amount of the distribution. I do not keep my position more that 60 days and sell few days before the Xdate. WHZ is one of my best buy, on average. Nothing is perfect always.
The new policy has nothing to do with WTI crude. It brings the field condensate in line with plant condensate. Until now field condensate the crude lighter than WTI was considered crude WTI and not to be exported. The plant condensate, product of the refinery, the light stuff that was discarded, was good for export. So now both types the field and plant are considered the same type of crude, and can be exported. This is especially good foe Eagle Fort and Permian crude, which until now were used for dilbit and railbit. So good news, but with a caviat!
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.
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.
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 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.
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 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.
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.
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!
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.
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.
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.