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ryskey

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Everything posted by ryskey

  1. Investing right now, whether in securities or assets, is way more interesting and potentially lucrative than it was a few months ago. We are in the midst of violent, volatile price discovery and nobody really knows shit, and market participants generally don't have strong conviction about anything. With respect to shale- comps, conventional wisdom and "best practices" are out the window forever. Time to do ground-up analysis and and develop strategy on long-term fundamentals, then buy and be patient. Price WILL get back to $50+ per barrel, likely before anyone really thinks. We'll also get back to $100+/bbl at some point, thought not sure if that's 2021 or 2023 or even later. On the trading side, this time is also really interesting because there's so much dislocation from all the volatility. If you find a market contradiction, that's very fun to trade. I have never been more active in my personal trading account, and for once in my life, I'm actually doing pretty well (mostly in energy). There is so much fear that there's really good value all over the place, but it often collapses within a few days, so have to stay on top of it. In short, I have never been more entertained at work.
  2. Yes $10/bbl possible but not for 3-4 months. We are getting production cuts one way or another. Proration would have been more measured and steady, running out of storage is going to be violent and ugly. Anyway, shut-ins will inevitably overshoot what is necessary to balance the market, and price should recover pretty quickly.
  3. As long as his swap contracts are very much in the money, he can shut in his wells and unwind the hedges. That's what we're going to do if oil falls to $15. That leaves him with a bunch of cash, so he can shut in his wells and save reserves for higher prices. He keeps the puts (or sells them, depending on strike price), so if price spikes upward, he realizes all that upside. I get what you're saying though. It's dangerous to be substantially more than 100% hedged when the hedges are barely in the money and there's a ton of volatility.
  4. Are assets producing? If so, ya hedge with swaps, and if price goes to $15, shut in and save reserves. Liquidate hedges and buy something else distressed. Print money in the 2021-2022 structural supply deficit caused by this shit.
  5. Hell ya. That's actually a good strategy as long as it's your gambling money. I wouldn't do that as an E&P (depends on what the put strike price is) but as a hedge fund, yessir. Has the volatility tamed a bit? Last I checked last week, longer-dated puts were trading in bizarre places.
  6. $15. But back to $40 by Q4. Think we will get low enough to force shut ins of 10s of millions of bpd.
  7. Yes. That dude needs to be publicly embarrassed for fearmongering and generally being a dumbass. If oil price goes to zero, that means prices at the wellhead are way less than 0. At that point you have operating costs and negative revenue, and every well in the world that can be shut, is shut in.
  8. Yes. Either they cool it or something breaks really bad. Like MBS being overthrown, or Rosneft stock goes to 0, or Iran launches missiles that actually hurt. And I don't think anyone truly understands how detrimental even $20/bbl is for existing production. A lot will be generating negative margins. COVID is a one-time event. It's simply an offset in inventory, albeit a very big one. The fundamentals of supply and demand will still exist afterward. 2021 was already going to be a structural shortage due to lack of shale growth and lack of megaprojects. Guyana is not big enough to matter much. It's going to take a while to burn off that COVID inventory, but the ship was already headed a certain direction and it's impossible to turn around fast enough to prevent a price spike at some point. COVID just made that price spike more violent. Don't know if it happens in '21 or '22 but it's going to happen. You can't pull this much capital away from this industry and simultaneously expect oil prices to remain depressed. I think we're back in the $40s by Q3 or Q4.
  9. There are some rays of hope in there. Theoretically, yes Russia can withstand $25/bbl for several years the same way Saudi can. But they'd be left with nothing in the end. Russia would have to impose severe austerity to do that at a time when Russians' trust in Putin is pretty low. The Russian budget balances at $42/bbl because their tax was set at $23/bbl. So right now, either Rosneft et al are selling oil for negative prices, or Russia has already chopped their tax in half. Probably the latter. The world doesn't work at these prices for long. Economies and countries break. Wild, unpredictable stuff starts happening. E.g., this was probably the result of a suspected coup attempt: https://www.reuters.com/article/us-saudi-corruption/saudi-arabia-detains-298-public-officials-in-new-corruption-probes-idUSKBN21212I Right this second, the vast majority of Canadian oil production is not generating much margin. Operating expenses for oil sands is really high, and Western Canadian Select is trading at less than $15. Shit doesn't work. Lots of production around the rest of the world teetering on the edge of negative margins right now. And that's on existing production, much less new wells and projects that require additional capital. I think we go back to normal-ish by Q4 this year. Hopefully sooner.
  10. Long term, at least through the end of this year. Shale production will be sticky for a 1-2 more quarters. The decline won't be immediate. There will be some last gasps and death throes from a lot of companies using the last bit of their liquidity desperately trying to stay on the good side of their debt covenants. That'll exacerbate the problem. Don't buy any shale-focused penny stock E&Ps unless it comes out of your Vegas or sports betting budget. Stocks- if you think the bottom is in, then the majors can't be wrong. Chevron will be the last one standing in the Permian because they own the royalties. Exxon's Permian bonanza is weird and seems very forced though. Probably not a bad buy but I like CVX better. Independents, PXD has very low leverage and will survive just about anything. There are some Canadian E&Ps with very low leverage and whose stocks don't make sense unless you think we'll be at $30 oil forever (e.g. Crescent Point). Now isn't a bad time to jump in. But it'll probably get worse. Maybe dollar cost average a bit. Best value is in some of the HY debt that is still covered at these prices but trading at $0.50 because of panic selling. Have to be reeeeaaaalllly picky though. Get a big dividend for a year and the underlying should double in that time too.
  11. The primary shouldn't be about who you actually like, but about being against who pisses you off the most. That's a much better way to vote. On the ballot, enter the 3 candidates you hate the most. At the end, the candidate with the lowest vote count wins.
  12. In a parallel universe, where the US is a a Parliamentary Republic, the Labour Party with Bernie Sanders as its leader got a solid 14% of the vote in 2016. With a ground-swelling of support with grassroots campaigning from his legions of Bernie Bros, along with a growing number of disaffected Center-Left Liberal Democrat voters, they are optimistic about their chances to get as much as 18% in 2020.
  13. Noted. So the question "how in the hell did David Pierce lose with Ty f'n Cobb?" needs to be asked there.
  14. Coincidence? I think not. (likely horribly unoriginal)
  15. Agreed that the a stick (tax) approach won't work. Rich Americans need a carrot, even if it's not very tasty. This is where all the infrastructure and renewables buildout come in to play. If, as a matter of policy, the US provided liquidity (a la Fannie/Freddie) by buying infrastructure and renewables debt, that would really lower the cost of capital for those projects and let the private sector do what it does best with capital allocation. It would also provide a backstop to asset values, as Fannie and Freddie are for home ownership. The yield for the equity side of the investment would flatten, as risk is lower, but it can't go any lower than the debt. That creates a very natural rev limiter on asset values and prevents too much speculation (so no terrible bubbles). There would be a ridiculously high volume of very low-interest debt in the market. Wealthy people are then faced with the choice of continuing to inflate asset prices in the stock market, which carries a ton of risk, or funnel money to into a safe haven, which just so happens to accomplish another policy goal for Ds.
  16. This was his response after being asked "how much do you like chicken fingers?" in his last interview.
  17. The area that the DU rounds were shot in Syria is uninhabitable. There is no human exposure because there aren't any humans there. So no chance of cancer. Kosovo and Bosnia are both very mountainous, and wherever there's a flat spot or valley, there are a lot of people. The reason there hasn't been a lot of international outrage on this Syria thing is because there is very little chance of human exposure. That doesn't absolve the commanding officer for his decision to use DU rounds in Syria, but the consequences are tiny compared to Bosnia and Kosovo.
  18. You're a drama queen. https://www.un.org/disarmament/convarms/more-on-depleted-uranium/ The United Nations Scientific Committee on the Effects of Atomic Radiation (UNSCEAR) continues to review the latest information in scientific literature on the effects on humans of internal exposure due to inhalation or ingestion of uranium, including DU. UNSCEAR has concluded that no clinically significant pathology related to radiation exposure to depleted uranium was found (See A/71/139). In studies in which the International Atomic Energy Agency (IAEA) was involved, the resulting radiological risk to the public and the environment was not significant in situations where depleted uranium is observed in the form of localized contamination of the environment by small particles resulting from the impacts. However, in the situations where fragments of, or complete, depleted uranium ammunitions were found, there is a potential risk of radiation effects for individuals who come into direct contact with such fragments or ammunitions. This risk can be mitigated by national authorities through conducting such simple countermeasures as the collection, storage and disposal of such fragments. Nevertheless, in a post-conflict environment, the presence of depleted uranium residues can further increase the anxiety of local populations. The results of the radiological assessments conducted by IAEA in cooperation with UNEP and WHO provide the basis for public reassurance. No one lives where those rounds were used. Should they have been used? Probably not. Egregious military and foreign policy blunder as bad as a complete misunderstanding of the Post-WWII military-economic order? Probably not. https://foreignpolicy.com/2017/02/14/the-united-states-used-depleted-uranium-in-syria/
  19. What the hell is he always wearing? He looks like a dentist who's been out of work for a year eating hot pockets and passing the time playing World of Warcraft.
  20. All that is fine, as long as the increased spending grows the economy by the same amount. Or rather, all things being equal, it increases spending, net of interest, in a way that keeps the money spent and taxed in roughly the same ratios as before. The increased debt still has to be mildly productive, or the equity in the system starts to actually decrease. Even though we've been growing our debt, the economy has been growing by roughly the same amount. We're in deep shit only when we keep adding debt to the balance sheet and the economy consistently grows slower than the debt.
  21. Most of the big oil company debt is owned by big institutional investors and is termed out for several years. Some of smaller companies rely on revolving credit facilities from commercial banks (Wells Fargo et al) to lend out people's deposits. Those facilities are subject to a lot of market volatility though, and can grow or shrink in any given year by quite a bit. Then there's a huge mountain of private debt/mezzanine capital to tap as well. I don't think optics will hurt much. Goldman holds a ton of energy company debt. They will go where the return is. Any amount associated with the Arctic is going to be very small. It doesn't take a lot to force a huge rotation of capital back into energy. If some endowments or even Goldman exit the space, returns will grow and more capital will come to fill the void.
  22. Capital markets and the way energy companies are structured will likely play a big part. Oil companies should have never been able to borrow money at L+2.5% with such loose standards. This period of austerity in the oilpatch, at least with respect to debt, is probably going to last. No more credit facilities that allow greater than 3x debt/cash flow. This will generally only affect the smaller guys, as the bigger E&Ps already have excellent balance sheets. Pioneer at 1x should debt finance a bunch of acquisitions as soon as sentiment improves a little bit. Wind/solar can put a lot more debt on their assets and still be considered "healthy." That will probably contract at some point, but 5-7x is pretty common. One way to subsidize renewable energy would be to create a Fannie/Freddie for them. That's a good possibility if/when another D is elected president. Injecting a ton of liquidity will keep rates low and damp the cycles. I'm not saying that should happen. Just what likely will happen. In terms of unlevered returns, oil and gas investments will almost always beat investments in renewables. But the equity return of a solar asset with a nice PPA and 5x leverage can definitely compete with PXD at 1x.
  23. Buzbee saying all the Trumpy robotexts and robocalls were not from his campaign. I got 4, and they motivated me to go vote against Buzbee. Was neutral before. Maybe it was Turner’s campaign? Aligning yourself to Trump in a very blue county is incredibly stupid.
  24. It's also an indication that he still does not tolerate dissent or other views. When he first started talking about alignment, I don't think I was alone when I thought he meant players and other coaches buying into the same vision and core values. What he actually meant was he needed a bunch of sycophants to reinforce his worldview that he's always the smartest person in the room. It's narcissism, ego, whatever, but think we can all agree that in his own head, Tom's internal narrative is "I'm smarter than anyone else, so if I thought if it, then it has to be correct. And anyone who thinks differently is therefore stupid and inferior." Really dangerous cycle and it appears in the corporate world all the time. Those organizations nearly always fall apart, and/or never make any money. Tom can go one of two ways: Continue the status quo, and leave in disgrace. Or learn some humility and have a chance to leave Texas a winner.
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