This is the only thing people are talking about at work today… I was going to buy some stuff on Friday but my internet was so laggy that IB wasn’t loading and I said screw it, I’ll do it next week. Glad I didn’t buy what I had planned to.
Yea man, look at this go
Wondering if I should increase some hedges. This is getting just too ugly. How many juniors can survive? I got a call from a recruiter today at a junior E&P. Hahaha, that was a short conversation.
Glad I’m not in any small/midcap right now. Thinking of getting some more of a major, more Total maybe… I dunno.
It hasn’t been brought up much, but Venezuela (very vulnerable to oil) is under some major pressure. Venezuela 6-month CDS is blowing out like crazy right now. I don’t know how to post bloomberg screenshots on this site but it’s a remarkable graph, from 600 bps to 6,700 bps in five months. Crazy. I think this is going to be an item in 2015.
Does anyone care if Venezuela eats it?
^ Apparently not b/c it doesn’t get much attention. The impact on PDVSA will be interesting – they’ve been marketing Citgo so it’ll be interesting to see who eventually buys that but again, people don’t seem to care about the refining industry either
I worry about the lack of aligned incentives within OPEC. What if Venezuela decides to increase production to stay afloat if the USA supply isn’t elastic enough. OPEC members breaking rank seems like it’d play havoc on the price. That could be a long term impact on oil.
I’ve been looking at DPM recently. Any thoughts Tommy?
^I know DCP Midstream through the two owners (PSX and SE), but not so much it directly. It’s well-respected. I don’t know the specifics of the MLP, which is likely mostly a financing vehicle for the parent (they have a major thirst for capital) but it’s a big company with attractive assets in good producing regions.
I don’t know your specifics, but if you do your taxes yourself you’re probably not going to like owning MLP’s. You can avoid tax problems and reduce your risk (diversify) by owning AMLP, a midstream index ETF, instead.
Yea I’m thinking of going long an ETF soon. I’m long TORTX, which is an infrastructure fund centered around nat gas. AMLP may be a good play, but I’d need to see what % is oil vs gas. I’ve been reading about the percent of proceeds contracts in midstream MLPs – news coverage seemed to suggest they didn’t have price exposure, which isn’t 100% true.
^ You’re right there is price risk. The long-haul pipelines tend to have very little direct commodity price risk (particularly natural gas) but the gathering and processing (G&P) is where the commodity risk comes in, and it’s a very large part of the industry. It’s a different price risk than what the E&P’s have, though. It’s basically the spread between natural gas and NGL’s which fluctuates a good deal throughout cycles but contract structure leaves some companies more vulnerable to the spread than others, but earnings won’t fluctuate near as wildly as in the E&P industry.
This industry is exposed to indirect commodity price risk, though. Lower hydrocarbon pricing will not incentivize new production, meaning there will be less need for infrastructure assets and therefore lower growth for the midstream industry. Lower distribution growth rates will lower valuations, but this industry is hanging in there pretty well.
still holding CQH…
I think the current regulatory environment combined with potential LNG facilities coming up will materially impact nat gas. Right now its largely influenced by how cold winter is, but the petrochemical and energy demand is looking bullish to me especially out a few years.
I think a good deal of these North America LNG projects are going to get shelved (the ones not already with commitments, excl. Cheniere). LNG pricing is based off crude oil – the economics were great when oil was $100/bbl but cut in half it makes a lot less sense. In terms of barrels of crude oil equivalent, I think the liquefaction and transport costs to Asia are around $35-$39/bbl and that’s not even including the cost of the nat gas. On quick back of the envelope math I think North American LNG needs Brent above $65/bbl at the least, unless I’m mistaken.
^ I agree with all of Tommy’s thoughts on LNG. I’ve never been terribly bullish on it. They are capex monsters, long lead times, cost inflation runs rampant due to limited people who can build them. Look at Australia, offshore BC, US, etc. There seem to be more companies looking to get out of their projects as opposed to getting into them, and there was a project in Texas that was recently shelved.
wow these guys are getting killed. I just saw GDP on bbg and they are down more than 80% last 6months. When the gas prices do start to go up will these companies go up to the moon?
Well, stock prices around the world are back to tracking the price of oil.
Yawn. It’s really boring, you’d think these idiots would just price in $30 oil and be done with it. Did anyone seriously think the decline was going to stop at $55? This further decline is surprising how? It seems like this market chaos goes on until oil bottoms, which could be six months for all we know, or until people get bored with selling stocks everytime oil drops.
Also interesting – nations that SAY it will be a net positive for them (US), and nations where it will actually be a net positive (JP), both see equities decline with the falling price of oil (exception CN, which says it will be a positive and stock prices agree). I guess this is the wonderfully irrational world of correllated markets.
You were short futures then, taking advantage of all these idiots, and are now set for retirement right?
^ No, I’m not smart enough to use derivatives. 
I’m long China A-shares, preferred stocks, plus a bunch of cash. ^^
Here’s a cool tool for real time oil (use the pop-out widget to make it big, and set it to chart in 1-minute increments). SPY is totally tracking WTI. And WTI just crashed. http://www.dailyfx.com/crude-oil
How exactly does this even happen? There are traders with loads of cash running programs that buy/sell ETFs with each 1 second move of oil? And they are powerful enough to control the entire market? How? Why? WTF?
its logical it would stop at 55. but oil markets are illogical. oil should be north of 70 prolly in the 90s.