america’s energy renaissance: top plays for income and growth
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America’s Energy Renaissance: Top Plays for
Income and GrowthElliott H. Gue
January 18, 2014Editor, Energy & Income Advisor
Editor, Capitalist Times
Back to July 1988
The World’s Largest Oil and Gas Producer
US Energy Liberty Day is Approaching
US Enjoys Cheap Gas and Electricity Prices
The US Manufacturing Renaissance
It’s Morning in America
Where’s the Crude Coming From?
Half of American Oil Production is Unconventional
Where’s Oil Trading?
10/7/2005
1/13/2006
4/21/2006
7/28/2006
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10/25/20130
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160 Oil Prices
LLS WTI Brent WTI Midland Bakken
Refining: As Easy as 3-2-1• Refiners are manufacturing firms:
convert oil to gasoline, diesel, jet fuel, other products.• 3 Barrels of oil ($93.82/bbl x 3) =
$281.46• 2 Barrels of Gasoline ($2.68/ gallon x 42
x 2) = $225.12• 1 Barrel of Diesel ($3.05/gallon x 42 x 1)
= $128.1• 3-2-1 Spread: $225.12 + $128.1 -
$281.46 = $70.76 divided by 3 = $23.58 per Barrel.
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NYMEX 3-2-1 Crack Spread
Crack Spread 1999 to 2013 AverageCr
ack
Spra
d ($
/bbl
)
Valero Energy (NYSE: VLO)
Valero Energy (NYSE: VLO)
Shale Development: Where’s the Money Coming From?
297; 55%
112; 21%
74; 14%
53; 10%
Major North American E&Ps Capital Raised Since 2007
Asset Sales Debt Equity JVs
Vanguard Natural Resources (NYSE: VNR)• Recently acquired 87,000 Gross
Acres in Pinedale and Jonah fields WY.• 80% NatGas, 16% NGLs• Historically Hedges 85% of Gas
production through 1H 2017 and 75% of Oil through 2015• Opportunity for more acquisitions
as producers need to fund shale. • Yields 8.4%, Paid Monthly 1/4
/2008
8/8/2008
3/13/2009
10/16/2009
5/21/2010
12/24/2010
7/29/2011
3/2/2012
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Upstream MLPs and the Alerian
California is . . . . .Different
Pacific Coast Oil Trust (ROYT)• Perpetual trust with an 11.7 percent
yield. • Produces 98 percent crude oil. • Southern California fields are mature
and have a low decline rate, often well under 5%. • 80% interest in developed properties.• 25% royalty interest in Diatomite
formation.• Active waterfloods and steamfloods
Going Horizontal
More Gas With Fewer Rigs
Drilling Efficiency Gas and Oil
Launch Pad for Growth
Patterson-UTI (NSDQ: PTEN)• 60% of revenues from contract
drilling, 40% from pressure pumping• 300 working rigs• 2009: 75% of rigs mechanical,
2013: more than 50% electric, 126 rigs APEX.• 6 New APEX Rigs (all “Walking”)
in 2H 2013, 12 in 1H 2014
The Denver-Julesburg Basin
Niobrara Offers Solid Economics
Noble Energy (NBL)• First wells in the DJ Basin in
2010, last year drilled 195 Wattenburg, 25 in CO• By 2016 plans 500 wells/yr. in DJ
Basin• Liquids rich portion of Marcellus• Eastern Med. Tamar 9 tcf and
Leviathan 17 tcf in Israel, Cyprus-A 5 to 8 tcf
Eni (NYSE: E)• 16.81% stake in Kashagan in Caspian
Sea first oil produced middle 2013• 100,000 boe/day in deepwater GOM• 700,000 in new projects over 4 years, 3
to 4% annualized• Mamba Complex Mozambique 30 tcf
gas• Barent’s Sea Norway and Russia• Disposing of non-core assets • PIIGS discount unwarranted.• Offers a 6.5% yield.
LyondellBasell Industries (NYSE: LYB)• 80 percent of Companies EBITDA
benefits from favorable US NGLs prices.• Ethane cracking capacity to
expand in 2014-2015, before competition.• Using NGLs imported from USA
to reduce EU costs• Near 3% yield and share
buybacks
Thank You.Elliott H. Gue
January 18, 2014Editor, Energy & Income Advisor
Editor, Capitalist Times1-888-960-2759
Service@CapitalistTimes.com
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