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Stocks - specifically the liquid energy sector

  • #101
  • Jun 22, 2016 10:55am Jun 22, 2016 10:55am
Quoting verv
{quote} Yeh that is a good idea, better safe than sorry. Cheers for the information on SIPPs brokers, question for you though. Because they come with the pension, I think, do you get a contribution for your work/gov. for every 1 you pay in? If yes do you know how much that is - I really know very little about this.
PM'd you
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #102
  • Jun 27, 2016 10:03am Jun 27, 2016 10:03am
I'm not sure whether to believe this, or what it really means ... except that possibly the Saudis are finally fed-up with low prices.
https://uk.finance.yahoo.com/news/sa...163322539.html
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #103
  • Jun 27, 2016 11:36am Jun 27, 2016 11:36am
Quoting Exodus
I'm not sure whether to believe this, or what it really means ... except that possibly the Saudis are finally fed-up with low prices. https://uk.finance.yahoo.com/news/sa...163322539.html
Well it makes sense because they are so deep into budget deficit that they are considering another USD15 billion debt issue and they called today 3 big investment banks to discuss it. Mind you it is the second time they will issue debt in like 3 months. The first one was for USD 10 billion
"Bulls make money, bears make money, pigs get slaughtered"
  • #104
  • Jun 28, 2016 8:49am Jun 28, 2016 8:49am
Quoting Exodus
I'm not sure whether to believe this, or what it really means ... except that possibly the Saudis are finally fed-up with low prices. https://uk.finance.yahoo.com/news/sa...163322539.html
There was discussion from some investors at the start of the year that the oil market would be in balance the middle of the year and that price would rise. I think I posted that video in this thread earlier. Everything I have seen suggests that is true, but there a ton of oil supply that needs to burnt off before price can rise dramatically.

I don't know if I believe the specific comments from the Saudi minister, it really doesn't matter anyway, the market will find a price where it gets all the oil it needs, by hook or by crook and it will be above current prices.
  • #105
  • Sep 23, 2016 10:30am Sep 23, 2016 10:30am
Well..... it looks as though it could be a while before there is a sustained improvement in prices.
Prepare for prices dropping if the sideline talks in Algeria next week are fruitless.
http://www.bloomberg.com/news/articl...urplus-triples
(from the FF news pages)
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #106
  • Sep 26, 2016 3:59am Sep 26, 2016 3:59am
Reports now that the oil glut has returned. I'm a little confused about this, because if that glut was real prices would have dropped quite hard already, and they haven't.

The glut can only be sustained for so long, spare capacity in the market was only something like 2% at the beginning of the year - meaning that producers were pumping at 98%.

So if the reports of countries pumping even more are true (which I personally feel there is reason to doubt given recent inventory draw), then we really are right at the ceiling of how much can be produced right not.

If everyone is pumping at as near to 100% as they can do, the market is going to be incredibly volatile to news events because supply cannot be increased to meet any unexpected reductions in oil output.
  • #107
  • Sep 26, 2016 7:02am Sep 26, 2016 7:02am
According to the ministry for dis-information ..... the oversupply has increased by 800kbpd
.... in part due to cessation of disruptions in Libya and Nigeria
Attached Image (click to enlarge)
Click to Enlarge Name: Oil_Production_snaps_Sep2016.jpg Size: 61 KB
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #108
  • Sep 28, 2016 5:12am Sep 28, 2016 5:12am
http://www.bbc.co.uk/news/uk-scotland-37475381
''It has adapted to the downturn by slashing the unit cost of producing the average barrel of oil from British waters, down from $29 to $16. That's expected to level out at $14 or $15''

This sentence doesn't make any sense to me. Anywhere else I look at the all in costs of extracting oil from North Sea (which is what I am presuming is what they mean by British waters?) it has been high $40s to low $60s.

There are other reasons to doubt the $16 figure. Last year oil hovered around $50-60 for much of the year, and earlier this year it dropped to about $30. Under all price ranges the production cost of the 'British oil' should have been profitable, why then did North Sea oil produce a negative return in the calendar year 2015-2016 as reported by the BBC here: http://www.bbc.co.uk/news/uk-scotlan...iness-36388621
''UK oil and gas production generated negative receipts in 2015-16 of -24m, compared with +2.15bn the year before.''

These sums are wrong, because they simply cannot be correct. The average price of oil for 2015-2016 was $50 dollars, and the companies produced a negative return, that means the all in costs must be in the range of $50 not $16, and this happens to be inline with the $40-60 costs I have seen elsewhere.

I would really love to know how they arrive at these figures, and what exactly that $16 figure represents. Have they removed the costs of exploration, and the costs to maintain equipment and renew equipment, all necessary to keep the number of barrels extracted from the North Sea at a constant rate? I think they have.
  • #109
  • Sep 28, 2016 7:09am Sep 28, 2016 7:09am
To answer your concern here is a snip from the recent Premier Oil half-year report:
"UK unit operating costs for the period were US$31/boe (2015 H1: US$29/boe), driven by natural decline from Premier's UK legacy assets and higher equity in the Huntington field offset by cost reductions, particularly at Balmoral and Wytch Farm. Going forward, UK unit operating costs are expected to reduce significantly towards $20/boe with new production from the Solan field and as Premier benefits from a full contribution from the lower opex Elgin-Franklin field."

To me that means the cost of getting 'oil' to the shipment point is ~$31/bbl
I also wonder why they didn't just do this instead of waiting for the oil price to crash.
Premier reported an EBITDAX figure of $182.2m for the half year to 30th June 2016, so in-profit.

All the companies reports that I have read (apart from Shell whose volumes are too huge methinks) have had hedging in place to lift some of their achieved pricing to the ~$60 mark. However with the continuing weakness in oil it must be quite difficult to renew such hedging on next year's production.

For comparison here is a snip from the recent interim report from land-based Amerisur. They have finally got their pipeline functional with associated cost reduction in getting their oil to a shipment point:
"OBA pipeline complete and undergoing final commissioning, operational in the days ahead reducing OPEX per barrel to $15, ....."
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #110
  • Sep 28, 2016 7:47am Sep 28, 2016 7:47am
Quoting Exodus
To answer your concern here is a snip from the recent Premier Oil half-year report: "UK unit operating costs for the period were US$31/boe (2015 H1: US$29/boe), driven by natural decline from Premier's UK legacy assets and higher equity in the Huntington field offset by cost reductions, particularly at Balmoral and Wytch Farm. Going forward, UK unit operating costs are expected to reduce significantly towards $20/boe with new production from the Solan field and as Premier benefits from a full contribution from the lower opex Elgin-Franklin field."...

Here is the problem with those figures. Which is what I suspect is really going on.

Decline rates of conventional oil fields vary from about 5%-10%, which means production from a field will decline by a 10% every year. Every year the decline rate increased the amount of oil that can be extracted reduces, therefore putting up the costs per barrel. So a conventional oil field will have roughly 15-25 years of extraction.

In order to keep pumping at the levels a company must spend to continue replacing the declining rates of oil production in a well. This will take the form of two things (i) no new wells being drilled and (ii) no exploration and development of new sites.

As the BBC article reported, there was a £4.7 billion difference in the amount of investment this year, compared to last year. That £4.7 difference is exploration costs, and development of new wells on existing fields.

These affect the operating costs in two ways. No exploration and no development of new fields means that operating costs are reduced, meaning that EBIT is increased. The second way the bottom line improves is that there are reduced depreciation costs, because the cost of expanding to other fields means the purchase of new equipment.

The prices quoted in the BBC article and elsewhere are the costs of extracting oil, today, taking into account there is not 'future proofing' of supply by continued investment. That means the companies can expect to run out of oil in 15-25 years, each year recording less revenue from the decline rates. It isn't sustainable and not a true measure of 'normal capex' spending.

The EBITDAX is a useless figure for the oil industry. The reason why is that the D - depreciation of assets is a real operating expense, these companies are seriously telling us that the maintenance of rigs and drill bits aren't an expense? Oil exploration is a capex intensive business and it is a real expense.

I never look at the numbers a company gives me, I always use the GAAP figures and try to understand what is going on from there.
  • #111
  • Sep 28, 2016 8:22am Sep 28, 2016 8:22am
Quoting verv
{quote} Here is the problem with those figures. ....
I have no issue with anything you wrote.
EBITDAX shows that the basic business is profitable, the rest is a game of paper for the accountants mixed with a need to maintain production, as you wrote.

At the beginning of last year there were a number of companies, which included Premier, taking great pains to show how their contracted expenditure for capex was covered by monies or borrowing facilities already in place ... along with projections for nett debt thereafter.

In Premier's case the Solan field is a new development coming online to maintain production.
If I dug through the reports I expect to find that current capex is covered by earnings.

In the case of Amerisur they cancelled planned drilling (which has in part re-started) and shut-in their expensive production rather than run at a loss. Earlier this month they were testing the pipeline prior to making/declaring it fully operational, and some of their production has restarted since the barrel price rose above $40. Amerisur has no debt.

There is also an element of "things will get better" since people do not believe that prices will persist indefinitely below $50.
If the barrel cost remains below $50 for the next 2 years you will be able to hear the screams all around the world ... mostly in Arabic I suspect.
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #112
  • Edited 10:10am Sep 28, 2016 9:39am | Edited 10:10am
Quoting Exodus
{quote} I have no issue with anything you wrote. EBITDAX shows that the basic business is profitable, the rest is a game of paper for the accountants mixed with a need to maintain production, as you wrote. At the beginning of last year there were a number of companies, which included Premier, taking great pains to show how their contracted expenditure for capex was covered by monies or borrowing facilities already in place ... along with projections for nett debt thereafter. In Premier's case the Solan field is a new development coming online to...
I will check Premiere oil later - you wouldn't think it from the amount that I post, but I am actually at work

The problem with:
Quote
''EBITD(epreciation)AX shows that the basic business is profitable''
is that it doesn't actually show if the business is profitable - even after all the expense cutting.

I know what you mean though, costs of goods sold - minus operating expenses is profitable... what it means is they have a positive operating margin.

However, as mentioned previously depreciation is a capex costs. Costs of buying and replacing assets are occurring as a cash expense, but they are costed for over the length of their use and substracted from income.

So if you buy a drill worth 100,000 and it last for 5 years, you would reduce income by 20,000 every year. The idea is that by accounting for the cost of 100,000 upfront when it is bought, it distorts 'normal' earning power.

By not including those depreciation costs, it is effectively saying these costs do not exist. But if you don't have a drill, there is no oil coming out of that ground.

edit - can you telling I have been jogging my memory . It is deeply worrying how quickly I can forget basic stuff
  • #113
  • Sep 29, 2016 1:07am Sep 29, 2016 1:07am
Quoting verv
{quote} I will check Premiere oil later - you wouldn't think it from the amount that I post, but I am actually at work


Quote
The problem with:
Quote
''EBITD(epreciation)AX shows that the basic business is profitable''
is that it doesn't actually show if the business is profitable - even after all the expense cutting.
That is true, but it shows that there is a chance to be overall profitable because the total cost of getting product to the selling point is comfortably less than the market price.
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #114
  • Sep 30, 2016 3:54am Sep 30, 2016 3:54am
As part of their thrust to improve their image, VW are attacking the electric vehicle market. The next generation of vehicles will feature a typical single-charge range in excess of 300ml/500km. So Tesla have about 18 months to get their drive reliability issues fixed.

On a slightly different tack, perhaps VW have visions of developing a separate thread to their business: "In a note provided on Volkswagen's press release, it also mentioned the ability of the car to receive parcels via a new delivery service when its owner isn't home."
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #115
  • Sep 30, 2016 4:36am Sep 30, 2016 4:36am
Quoting Exodus
As part of their thrust to improve their image, VW are attacking the electric vehicle market. The next generation of vehicles will feature a typical single-charge range in excess of 300ml/500km. So Tesla have about 18 months to get their drive reliability issues fixed. On a slightly different tack, perhaps VW have visions of developing a separate thread to their business: "In a note provided on Volkswagen's press release, it also mentioned the ability of the car to receive parcels via a new delivery service when its owner isn't home."
I bought VW earlier this year, or last (can't remember) after the emissions scandal.

And sold it after 3 days when I realised there was just no way I couldn't understand how the company was structured. Very difficult to understand and value as a retail investor.

Tesla are going to get eaten up as the big car manufacturers get their teeth into electric. Tesla don't have the scale, or the technology to compete longer term - in my view. But shorting can be a difficult thing, so I don't bother, but I would be short Tesla if I had the balls.
  • #116
  • Sep 30, 2016 5:31am Sep 30, 2016 5:31am
Quoting verv
... Tesla are going to get eaten up as the big car manufacturers get their teeth into electric. Tesla don't have the scale, or the technology to compete longer term - in my view. But shorting can be a difficult thing, so I don't bother, but I would be short Tesla if I had the balls.
I would buy a 350bhp vehicle, if the larger manufacturers match that kind of performance it will be interesting.

Technically there is nothing too challenging in making an electric vehicle, it is the energy store which is expensive.

I once tried to short something (last century). My broker used to let me buy 3-times the value of my cash account on the basis that I either closed the deal within 10 days or put up the rest of the money. They would not let me short 'whoever'. I tried the line "you will let me buy shares with money I haven't got, why can't I sell shares that I don't have"? ....no sympathy from them.
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #117
  • Edited 8:11am Sep 30, 2016 7:57am | Edited 8:11am
Quoting Exodus
{quote}I would buy a 350bhp vehicle, if the larger manufacturers match that kind of performance it will be interesting. Technically there is nothing too challenging in making an electric vehicle, it is the energy store which is expensive. I once tried to short something (last century). My broker used to let me buy 3-times the value of my cash account on the basis that I either closed the deal within 10 days or put up the rest of the money. They would not let me short 'whoever'. I tried the line "you will let me buy shares with money I haven't got,...

I don't think they will have any problem matching the 350bp vehicle.

Take the hybrid F1 engines, they are considerably more complicated than a straight electric engine. They have a combustion engine, integrated with an electric motor which recovers energy from the braking, and a separate recovery system for heat, with a turbo and an energy store. Mercedes owns all that technology, as does Renault and Honda.

Then you have Formula E, which I understand are lower than 350bp, but considerably lighter engines than Tesla.

Like you said, the key is the battery to electric cars - I understand that Tesla don't even own the rights to their energy store, Panasonic does.

When I was talking about buying VW above, I was talking about the shares - got the impression you were thought I meant buy a car, I'm happy with my banger
  • #118
  • Sep 30, 2016 11:07am Sep 30, 2016 11:07am
Quoting verv
... When I was talking about buying VW above, I was talking about the shares - got the impression you were thought I meant buy a car, I'm happy with my banger


Yes I knew you meant VW stock.

I had just read an article about VW's forthcoming electric vehicle with a 300ml/500km range, and the fact that you will be able to use it as a mail-drop...
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #119
  • Oct 1, 2016 5:45pm Oct 1, 2016 5:45pm
Valuation of Tesla

http://aswathdamodaran.blogspot.co.u...ise-meets.html

better to ignore his images and figures and just read your text, it will give you a headache otherwise lol
  • #120
  • Oct 2, 2016 4:02pm Oct 2, 2016 4:02pm
Quoting verv
Valuation of Tesla http://aswathdamodaran.blogspot.co.u...ise-meets.html better to ignore his images and figures and just read your text, it will give you a headache otherwise lol
It is people writing articles like that which make analysts come up with crazy assumptions.

A long time ago I looked at share price assessments and asked how anybody could come up with a realistic value for a stock. After a while I concluded this:
Is the company making consistent profits?
- yes; the share price is worth ten times the current EPS
- no; the share price is worth 3 times the turnover provided that the company is not burning cash from its reserves (in which case the end is predictable).

A bit simplistic I know. So I have modified that view somewhat.

After that comes the thing which drives the share price ... sentiment. Does the company have a plan for the future? Do you believe it and is it plausible? The answer to those two questions brings you back to the reality, namely that stocks or shares are merely pieces of paper that are worth as much as you can persuade another person to pay.

I will not buy Tesla stock, I might buy VW....
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
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