+- Dividend Growth Forum (http://DividendGrowthForum.com)
+-- Forum: Dividend Growth Investing (http://DividendGrowthForum.com/forumdisplay.php?fid=15)
+--- Forum: Individual Dividend Growth Stocks (http://DividendGrowthForum.com/forumdisplay.php?fid=35)
+--- Thread: VBIN's oil stock thread. (/showthread.php?tid=1938)
VBIN's oil stock thread. - vbin - 04-05-2022
Bought more oxy today
VBIN's oil stock thread. - vbin - 04-12-2022
Added more oxy
RE: VBIN's oil stock thread. - EricL - 04-14-2022
Yet another small build for today's EIA natural gas report, sending nat gas prices to fresh 13-year highs of $7.20.
LINK
If EOG is basing their 60% direct after-tax rate of return on $40 oil and $2.50 gas prices, what do you think those returns are with $100 oil and $7.00 natural gas?
Have a feeling there will be some nice bonus dividends coming with next quarter's earnings release.
CHK and PXD are paying variable dividends on top of their base ones now too. Going to be epic returns to investors in 2022 after many, many years of heartache.
RE: VBIN's oil stock thread. - fenders53 - 04-14-2022
My sold oil puts are slowly expiring each week. About 15 since last Friday so it was a sizable bet. I got by with it. I have never had oil gains anything like this before. Not even close. Perhaps at some point soon there might be a small blip in oil stocks and I can invest a little more. If not I will have to dig in a lot harder and find something that hasn't run quite so much. All my remaining puts expire within a few weeks.
RE: VBIN's oil stock thread. - fenders53 - 04-19-2022
I broke down and sold a few new puts today on the oil dip, if you want to call it that. XLE and EOG. All expiring before Memorial Day. I am not loaded up like I was but it seems early to completely quit. Not even one of the contracts was even close to in trouble for literally six months. All my gasoline cost is covered for a year, even if the market crashes.
RE: VBIN's oil stock thread. - EricL - 04-20-2022
EIA confirmed another huge crude draw this morning.
US crude inventories fell by 12.721mb last week
(commercial -8.020mb, SPR -4.701mb)
Quote:Summary of Weekly Petroleum Data for the week ending April 15, 2022
U.S. crude oil refinery inputs averaged 15.7 million barrels per day during the week ending April 15, 2022 which was 194,000 barrels per day more than the previous week’s average. Refineries operated at 91.0% of their operable capacity last week. Gasoline production increased last week, averaging 9.8 million barrels per day. Distillate fuel production increased last week, averaging 4.8 million barrels per day.
U.S. crude oil imports averaged 5.8 million barrels per day last week, down by 159,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.1 million barrels per day, 3.1% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 597,000 barrels per day, and distillate fuel imports averaged 104,000 barrels per day.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 8.0 million barrels from the previous week. At 413.7 million barrels, U.S. crude oil inventories are about 15% below the five year average for this time of year. Total motor gasoline inventories decreased by 0.8 million barrels last week and are about 3% below the five year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 2.7 million barrels last week and are about 20% below the five year average for this time of year. Propane/propylene inventories increased by 1.6 million barrels last week and are about 16% below the five year average for this time of year. Total commercial petroleum inventories decreased by 8.1 million barrels last week.
Total products supplied over the last four-week period averaged 19.4 million barrels a day, down by 1.5% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.7 million barrels a day, down by 3.0% from the same period last year. Distillate fuel product supplied averaged 3.7 million barrels a day over the past four weeks, down by 6.4% from the same period last year. Jet fuel product supplied was up 15.7% compared with the same four-week period last year.
RE: VBIN's oil stock thread. - EricL - 04-29-2022
This is a good read. From today's NOV, Inc. conference call.
For reasons I'll go into in just a moment I believe this up cycle will last a while. First, however, I'd like to take a minute and speak to some oilfield fundamentals. Construction in oil or gas well takes much more than good reservoir rocks in a drilling rig. Oil and gas companies rely on highly-specialized geotechnical talent to identify and delineate drilling locations and on petroleum and processing engineers who design wells, production systems and processing and transportation facilities. The business requires investments in expensive leaseholds, wells and fabrication of platforms, processing plants, gathering systems and refineries that make oil and gas production one of the most capital-intensive industrial undertakings.
The actual well construction is performed by oilfield service companies that, in turn, operate very expensive, highly-engineered fit-for-purpose equipment fleets, which probably make it the second most capital-intensive industrial undertaking around. All this plant equipment and well construction process utilizes a lot of steel as well as exotic metallurgies, polymers, resins, computer chips, electric motors and electronics. The work is performed by hard scrabble men and women from roughnecks to drillers to truck drivers, working long hours in remote locations for usually above average pay in tandem with talented geoscientists and engineers supporting these complex operations.
One way to think about our industry is a finely tuned and optimized machine into which goes capital, a lot of capital, highly skilled engineering talent, hard work by experienced oilfield hands, fertile acreage identified by geoscientists that holds the promise of profitable production and a lot of highly spec-ed pipe, plastics, engines, resins and computer chips. Out of this oil and gas machine comes your high standard of living. The high standard of living that your family and my family and millions of others enjoy along with the hope of a better standard of living for literally billions of people in lesser developed economies around the world.
Out of this machine comes the food that we eat and the fertilizer made from natural gas that the farmer uses to achieve amazing agricultural productivity from fields ploughed and harvested using diesel powered equipment. All air travel. Most transportation on-demand plus all oceangoing freight and rail that brings food and products into our lives, the plastics that doctors use to deliver our medical care and a thousand other things that make our lives better.
From construction to transportation to petrochemicals to pharmaceuticals to consumer goods to you name it, the oil and gas industry connects with and supports a 100 industries that form the foundation of our modern lives. This leads me to our current predicament.
2 years ago, remarkably, we faced negative oil prices. Today, the world is confronting triple-digit crude prices in all-time high global natural gas prices. While this rapid shift is drawing and damaging the global economies, frankly, it should not have been entirely unexpected. For the past few years, governments and capital allocators have been playing a dangerous game with respect to energy and the global economy.
While, transition to lower carbon renewable sources of energy for the world is required for the long-term good of the planet, it seems we've gotten ahead of ourselves as we've attempted to pivot away from fossil fuels, which are inherently reliable and energy-dense sources of power to lower density forms of energy with intermittency issues and inferior economic profiles. Prior pivots to new energy sources were accomplished over decades. Think about the shift from firewood to coal through the 18th and 19th centuries, the shift from coal to oil through the 20th century, the emerging shift to natural gas over the past 25 years.
These were driven by economics, superior energy density and value for lower cost to supply rising per capita energy demand. Unfortunately, the lower carbon energy transition today lacks a robust economic engine driving it forward. While LCOEs have fallen for solar, wind and other forms of renewable energy, I believe LCOEs will continue to fall through technical advancements that NOG and others are making, renewables are still expensive and suffer from intermittency challenges that require storage solutions that add to their all-in cost frequently not accounted for LCOE calculations.
To accelerate this transition in the absence of a compelling economic driver, governments, regulatory agencies and media decided it would be a good idea to demonize the oil and gas industry. And let's be honest, you know what I'm talking about. I think the motives behind this are pretty evident to bring about the acceleration of a desired energy transition outcome namely a more rapid pivot to renewables.
Specifically, the oil and gas industry has been under attack by political bureaucratic and media leadership that have been very effective in choking off the inputs into the oil and gas machine I described earlier.
Now let's turn back to those, starting with capital. Unrealistic near-term peak oil demand narratives built on the promise of rapid substitution of renewable energy have significantly dampened equity investor interest in oil and gas stocks both in public markets, where energy weighting in the S&P 500 bottomed recently at less than 2% compared to 14% in 2008 and more than 20% in the 1970s. And in private equity, with little or no terminal value expectation due to a broadly accepted narrative that oil and gas goes away soon, it's easy to understand why equity investors have been reticent to investor and with a relentlessly negative PR the industry receives, we understand why it's been fashionable for college endowments and other institutions to trump their divestitures out of the space.
Meanwhile, commercial banks are being pressured by both their shareholders and regulators to trim lending to the sector. In short, capital in all forms has become way more expensive to oil and gas. Next, the industry needs engineering talent. Again, unrealistic peak demand scenarios and negative PR have frustrated efforts by the oil and gas industry to recruit young talented engineers who worry about investing their careers in a sunset industry.
And this recruiting effort is becoming more urgent as the industry needs to replace its experienced but aging baby boomer workforce soon, referred to by industry insiders as the great crew change. Oilfield work has provided high wages and high standards of living in small towns in remote areas for generations of blue-collar workers, but it's not for the faint of heart. Deep cyclicality requires painful significant cuts during oilfield downturns, which can be brutal.
As the U.S. rig count dropped to record low levels in the summer of 2020 following the global government decisions to shut down economies, the oilfield did the difficult task that we are unfortunately called to do from time to time. We laid off a lot of good employees. This was very, very tough on many good people and families, and they remember it. When we fast forward to today, when the broad economy is growing, unemployment is low, attractive job opportunities are available outside the oil patch and family balance sheets are in much better shape owing to the pandemic stimulus checks, it is extremely difficult to track direct labor back to the oil patch and frankly, it requires much higher wages.
Oilfield services also cut investments in its hard assets. The downturn saw companies cannibalize underutilized oilfield equipment for spare parts rather than spend precious cash needed to survive on properly maintaining fleets required for more normal levels of activity. As industry activity ramps, oilfield service companies are swimming upstream against the congested supply chains as they scramble to put incremental equipment back in shape to work. The physical inputs required for these equipment overhauls, bearings and hoses, engines and transmissions, polymers and resins, chips and circuit boards are incredibly tight.
While the U.S. is back to growing production off of 2020 lows by drawing down DUC inventories, we are the only such country that's growing. Global crude inventories are well below average and still trending in the wrong direction because we are no longer the just-in-time industry we were in the prior decade. The oil and gas machine needs promising acreage as well. Our E&P customers tell us that the current regulatory environment continues to get more expensive and challenging orchestrated in their view by agencies that are all trying to effect a more rapid energy transition, while in other developed countries they faced outright bans on the oilfield activity.
By the way, geoscientists need years to find and delineate fertile acreage to exploration. Unfortunately, global exploration was severely cut following the downturn of 2015, meaning the pipeline of prospects to develop is very limited after 7 years of under exploring.
To summarize, when we survey the inputs required to construct oil and gas wells from capital to labor to workable regulations to prospect development pipelines to engineering talent to consumables and equipment, all face significant hurdles put in place by politicians, regulators and media.
My question is this. Has this been a good idea? Has it been a good policy to demonize the industry that quite literally powers all other industries? Political leaders across the globe have not been honest with voters and consumers about the cost, feasibility, difficulty, inconvenience and time required to fully pivot to renewable sources of energy in my view. I'm not questioning the need to make the pivot, but rather the plan to get there. The de facto policy of choking off inputs of a critical industry, not just years, but decades before we have a good alternative is a very bad policy. Many will suffer as a result.
To make matters worse, the enormous economic stimulus that a company before shutdown of the global economy during the pandemic massively increased money supply across developed economies. Those governments printed money at a breathtaking rate. The U.S. M2 money supply is up over 40%, for example. Historically, inflation rolls directly into commodity markets like oil and gas. This time, I believe it will be amplified by input constraints that I catalogued earlier. Add to this productivity gains from workforce demographics and globalization that offset many supply growth in power generation that today are going in the other direction, and it's no surprise that dollar inflation is at 40-year highs and rising. In summary, I could not have scripted a more compelling setup for an energy crisis.
While this points to rising demand for equipment and services NOV brings to the oil patch over the coming quarters and years, it also points to a pretty dark view of economic challenges we face as we undo the mess created. The world now finds itself in critical need of an industry that it had written off as a sunset industry, and reconstructing this industry will not be easy.
7 years of E&P underinvestment of oilfield services effectively dismantling much of its capacity and drastically shrinking its workforce in order to survive together with the additional hurdles created by the vilification of oil and gas, make what is required of as a very heavy lift. According to a recent research report, the industry have its resource life since 2014 and fewer FIDs in recent years will potentially lead to approximately 10 million barrels of lost production by 2024. The prospect pipeline continues to shrink, while ESG measures drive operating and financing costs higher, skilled labor markets are tightening, inflation and supply chain disruptions are pushing large project cost curve significantly above the levels seen in the prior decade. And accelerating global decline rates adds further risk of global production shortfalls.
In order for the world to avoid an energy crisis, the likes of which we haven't seen since the 1970s, we need a synchronized global oil and gas super cycle of some duration and we need it to start yesterday. We need, and thankfully, we are starting to see both short-cycle shale oil and longer-cycle offshore development of petroleum resources. The low rates charged by oilfield service participants over the past several years did not reflect the physical consumption of capital equipment used in operations, much less earn a decent return for oilfield service shareholders.
However, that overhang is diminishing rapidly and has been replaced with tightening schedules and lean, if not bare shelves. Pricing is beginning to move across the oilfield after years of services industry subsidizing its customers by cannibalizing its own capital base. While the moves thus far have been small mainly to keep pace with inflation, our oilfield service customers report net pricing momentum is beginning to grow.
Nevertheless, while all the foregoing is worrisome for the global economy, I am confident our company, our industry and the producers we serve are up to the extraordinary task of growing production to provide energy security and better standards of living for humanity just as we have done for 163 years. The oilfield is nothing, if not resourceful and resilient.
Since 2014, our organization has shrunk dramatically to make it to the other side of this 7-year down cycle, but we never took our eye off the ball in technology development initiatives. NOV continues to invest in and lead in both oil and gas technologies along with the emerging renewable technologies that we've spoken of through the downturn. While an energy transition to a lower carbon future is required, the world is finally waking up to the fact that oil and gas is still absolutely essential to our modern way of life. And the oil and gas industry is quickly becoming aware that it can't continue to meet the world's demand for its products without significant further investment.
NOV is the enabler of what still is the most important industry in the world, and we stand ready to meet the challenges of the coming up cycle. To the employees of NOV, who are listening today, thank you for all that you've accomplished through this tough historic downturn. Your hard work and perseverance got us here. We have a lot more hard work ahead and now it’s showtime. The world will be counting on us.
With that, I'll turn it over to Jose.
RE: VBIN's oil stock thread. - fenders53 - 04-30-2022
Interesting read. It's such a tough business.
VBIN's oil stock thread. - vbin - 05-01-2022
Buffet loaded up on Chevron along with oxy. He is betting on oil.
RE: VBIN's oil stock thread. - EricL - 05-03-2022
API with an insane draw number. We are supposed to be in the shoulder season when we build products before summer demand.
Crude -3.479MM
Gasoline -4.50MM
Distillates -4.457MM
12.436 million barrels down, plus another 3 or so likely drawn from the SPR.
RE: VBIN's oil stock thread. - fenders53 - 05-03-2022
On every dip I sell more puts, worry I am getting in a little too deep, then wish I went in deeper three days later. I guess that is greed talking.
VBIN's oil stock thread. - vbin - 05-16-2022
Oxy running towards $70. Wow who would have guessed a year ago. Wondering if buffet would buy it.