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Hey Oil Barons.......


936horn

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With the collapse of MLPs, who are the buyers of mature conventional assets now? For example, Denbury has an asset package now of mature established CO2 floods in Mississippi. Reasonably steady 7,000+ bbl/d with minimal upside. The best thing is to buy and hold. It generates a pretty steady $5 million per month of free cash flow. Who are the buyers for something like that?

 

Hilcorp Energy would be a good example of an E&P that buys mature conventional assets for PDP and generates significant cash flow with low capital investment.

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On 4/13/2018 at 3:47 PM, ryskey said:

These used to just be private, cash-flow heavy companies that paid dividends/distributions.  They still are, to some extent.  The flexibility to increase or decrease the dividend depending on market conditions is what can enable them to survive during a downturn.  In that respect, public upstream MLPs were too rigid.  

I think patient private capital is the answer here.  Something cash-flowing so much is severely limited on the upside, but is also very protected on the downside.  Lots of cash flow with aggressive hedging, moderate leverage, and some low-risk development is a nice business model.  A pension fund or endowment should be all over that asset.  Buy the asset, pay out dividends when appropriate, re-invest cash flow when appropriate,  pay down debt when appropriate, lever up where appropriate, and finally, exit when appropriate.  It's not a tough business model but the lack of patient capital is definitely an issue.  

Exactly.  Key word being private (capital).  The buyers are rarely public so it's difficult to trade around the idea.  And to the original post (#97), I would not use a CO2 flood divestiture as an example of conventional assets.

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Haven't checked in over here. I keep up with you guys, but it's mostly finances, so I stay out of the discussion.

Just letting you know, it's my turn in the barrel. I have to go to Prudhoe Bay, AK for two weeks. I leave Thursday. We have a prototype up there on Spy Island, and it's my turn to babysit. In case I get eaten by a caribou or run over by a polar bear, just wanted to say, thanks for the laughs.

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On 4/13/2018 at 6:39 PM, Tailleur17 said:

 

Hilcorp Energy would be a good example of an E&P that buys mature conventional assets for PDP and generates significant cash flow with low capital investment.

Not sure about that but will take your word for it. There are large companies that do this all day long; again, they’re just private. What comes to mind are Merit, Fleur de Lis, and all the other Merit spinoffs that are smaller. 

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On 4/16/2018 at 11:34 PM, Rex Kramer said:

Exactly.  Key word being private (capital).  The buyers are rarely public so it's difficult to trade around the idea.  And to the original post (#97), I would not use a CO2 flood divestiture as an example of conventional assets.

I consider a CO2 flood to be tertiary production from a conventional oil field.  Unconventional would be any tight oil/gas, shales, oil/tar sands.

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9 minutes ago, PappyVanVinceYoung said:

I consider a CO2 flood to be tertiary production from a conventional oil field.  Unconventional would be any tight oil/gas, shales, oil/tar sands.

Yeah. I got ya. 

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1 hour ago, RiceOwl said:

Does anyone have an opinion on MTDR?

I've hit the most recent runup pretty good with it but trying to decide whether to sell or hold.

CEO runs through employees like shit through a goose but apparently has good assets. 

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Linn formally announces they're  re-forming as a much smaller, leaner company, Riviera Resources.

Letting go of pretty much all of their existing executives and handing over the reins to a new group.

http://ir.linnenergy.com/releasedetail.cfm?ReleaseID=1064281

Turns out leading a billion dollar company into Ch. 11 can pay handsomely. Outgoing CEO will walk away with $60M.

https://www.bloomberg.com/news/articles/2018-04-19/ceo-awarded-60-million-to-lead-linn-energy-firm-past-bankruptcyhttps://www.bloomberg.com/news/articles/2018-04-19/ceo-awarded-60-million-to-lead-linn-energy-firm-past-bankruptcy

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26 minutes ago, Storm the Field said:

Linn formally announces they're  re-forming as a much smaller, leaner company, Riviera Resources.

Letting go of pretty much all of their existing executives and handing over the reins to a new group.

http://ir.linnenergy.com/releasedetail.cfm?ReleaseID=1064281

Turns out leading a billion dollar company into Ch. 11 can pay handsomely. Outgoing CEO will walk away with $60M.

https://www.bloomberg.com/news/articles/2018-04-19/ceo-awarded-60-million-to-lead-linn-energy-firm-past-bankruptcyhttps://www.bloomberg.com/news/articles/2018-04-19/ceo-awarded-60-million-to-lead-linn-energy-firm-past-bankruptcy

I could do it for $30MM.

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Quote

President Donald Trump's broadside against foreign oil producers on Friday took investors by surprise and included some notable inaccuracies about the state of the oil market.

On Friday, Trump aimed his social media firepower at OPEC, tweeting that the 14-member producer group is keeping crude prices "artificially high."

 

 

 

There's a lot to evaluate in that statement, so CNBC broke it down and checked the president's facts.

"Looks like OPEC is at it again": What is OPEC doing and why?

OPEC worked out a deal with Russia and several other nations at the end of 2016 to remove 1.8 million barrels a day from the market. The two dozen oil-producing countries agreed to limit their production to clear a glut of crude that sent prices from more than $100 a barrel in 2014 to about $26 in 2016.

Saudi Arabia, OPEC's largest producer, actually refused to take action at first, arguing that the glut was caused by a flood of new U.S. oil production. The Saudis instead bet that U.S. drillers with high production costs would be forced to cut output, and that would drain the oversupply.

Instead, American drillers cut costs, kept pumping and oil prices continued to fall. That heaped pressure on nations and U.S. states that depend on oil revenue, bankrupted about 200 American energy companies and wiped out hundreds of thousands of jobs.

After prices bottomed in 2016, OPEC worked out the deal with Russia and began limiting its output in January 2017. The producers have since extended the agreement to run through the end of this year.

Are there really "record amounts of Oil all over the place"?

Yes and no, but mostly no.

While U.S. oil output has recently risen to all-time highs above 10 million barrels a day, many of the world's biggest oil producers are purposely limiting their production and pumping below record levels.

OPEC's output caps have also shrunk the amount of oil sitting in storage around the world. The group's goal is to whittle down stockpiles in developed countries to the five-year average.

Those inventories stood at just 30 million barrels above that level in February, the International Energy Agency said last week. These stockpiles peaked in 2016 and have since fallen.

What about "the fully loaded ships at sea"?

Trump could have meant several things when he said this, but this part of the tweet is misleading.

Oil shipped by sea is actually down 48 million barrels from a peak at the start of the year, according to data from tanker-tracking firm ClipperData. The amount of crude loaded on ships around the globe averaged 50 million barrels a day last month, down from a record 52 million barrels a day last July.

While U.S. exports have recently hit highs above 2 million barrels a day, top oil exporter Saudi Arabia has cut its shipments to help balance the market.

Traders also store oil in floating tankers, but here too, those levels are down 25 percent from their high in the middle of 2017.

"Storage at sea has dropped, which is what you would expect because the market is in backwardation, which disincentivizes storage, be it onshore or offshore," said Matt Smith, director of commodity research at ClipperData

So are oil prices "artificially Very High"?

That's up for debate.

Trump's accusation may have been fueled by recent reports that Saudi Arabia would like oil prices to rise to $80 to $100 a barrel. Those higher prices would support the planned stock market debut of the kingdom's energy giant, Saudi Aramco, industry sources who spoke to Saudi officials told Reuters and Bloomberg.

Some analysts are doubtful that's official Saudi policy, but the reports have fueled speculation that the Saudis will lobby against winding down the production deal even if that's what's best for the market. That could cause prices to spike as the world's appetite for oil outstrips supply.

But if Trump is criticizing the OPEC deal itself, that would make him something of an outlier. The market generally sees the agreement as a necessary measure that stopped a devastating price crash. OPEC is viewed less as a manipulator and more of a manager.

It's worth noting that Trump and his polices are at least partially responsible for oil prices hitting their highest levels in more than three years in recent weeks. His decision to launch air strikes in Syria this month contributed to geopolitical tension in the Middle East. His threat to restore sanctions on Iran next month has also raised fears about supply disruptions from OPEC's third biggest producer.

Is OPEC's price support "No good"?

That depends on who you ask.

Oil-producing nations and energy companies surely welcome higher oil prices, which have stabilized their finances and returned many drillers to profit after years of pain.

But the rebound means higher prices at the pump. A gallon of regular gasoline is currently fetching an average $2.75 at U.S. filling stations, up from $2.42 a year ago, according to AAA.

However, there's an argument to be made that the best thing for both consumers and producers is stability. Sky-high oil prices hurt consumers and ultimately shrink demand for fuel, while super low prices discourage energy companies from making investments in future production, which can lead to undersupply and price spikes.

OPEC's action "will not be accepted": What can Trump do?

Unlike many oil-producing nations, the U.S. government can't tell drillers how much to produce. That means Trump can't ask companies to flood the market to offset OPEC's production cuts. Even if he could, American drillers are already pumping at all-time highs.

The Trump administration has developed a close relationship with Saudi Crown Prince Mohammed bin Salman, so it's possible he will appeal directly to the kingdom to change its policy.

The U.S. president also controls the Strategic Petroleum Reserve, a stockpile of emergency crude supplies that currently stands at 665.5 million barrels. The government sometimes sells oil from the reserve to raise revenue, but it would be unprecedented for a sitting president to threaten to use the SPR as a weapon.

https://www.cnbc.com/2018/04/20/trump-accused-opec-of-jacking-up-oil-prices-heres-what-he-means.html

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So which argument do you buy?

1. Stability: OPEC cutting production is a good thing. They need to stabilize the market to avoid huge price swings 

2. Manipulation: OPEC is limiting production to prop up the oil price for their own benefit. (specifically for the Aramco IPO)

3. OU sucks 

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So which argument do you buy?
1. Stability: OPEC cutting production is a good thing. They need to stabilize the market to avoid huge price swings 
2. Manipulation: OPEC is limiting production to prop up the oil price for their own benefit. (specifically for the Aramco IPO)
3. OU sucks 


4. OPEC has a huge unfunded liability problem (not unlike the US, but much less diversification) and needs higher oil prices to support an unproductive populace to remain in power.


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37 minutes ago, Rex Kramer said:

Kolja Rocko is a total doucher. 

Oh lawd, don't get me started on that guy. Somehow despite his colossal fail at Linn, he still seems to have no trouble finding investors to trust him with hundreds of millions in funding. He's up and running again with a PE-backed outfit in Jackson Hole. 

I swear once people reach a certain level in this industry, they can continue to cash in no matter their track record. Just keep failing their way upwards.

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4 hours ago, Storm the Field said:

Oh lawd, don't get me started on that guy. Somehow despite his colossal fail at Linn, he still seems to have no trouble finding investors to trust him with hundreds of millions in funding. He's up and running again with a PE-backed outfit in Jackson Hole. 

I swear once people reach a certain level in this industry, they can continue to cash in no matter their track record. Just keep failing their way upwards.

I’m not sure about his particular culpability. I mean it was an MLP. But surely he contributed to the over-levered nature, and he’s a flashy doucher who couldn’t handle the mansion he’d started to build. 

I just noticed Rockov auto-corrected to Rocko above. I don’t know whether to curse my iPhone and hang my head in shame or laugh.  

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41 minutes ago, Storm the Field said:

WTI got very close to hitting $70 today, finished the day right around $69.80.

Rig Count went up for a fifth-straight week. Texas is now back up to 515 active rigs, highest level since February 2015.

I guess we'll see F250's and high five figure inboard wake boats flying off the lots again.

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I was told oil would never be over $50 a barrel again.


Love it. I can't tell you when, but oil will hit $140 again. It also will hit $40 again. It's a commodity.

My personal favorite from pre-2014 was that oil can't go below $80 because it costs too much to produce.
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2 minutes ago, Trey3216 said:

And now it's running back up because Trump told Macron that we'd be backing out of the deal.  Who the hell knows

Some hedge fund out there was like "wait wait send out a new statement, we didn't liquidate our position yet!!!"

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