my take, fwiw
my take, fwiw
with statements like GS made this am, the 3q reports will be like pissing into the wind. hope i'm wrong. the powers on the street have made the mkt really think the Saudi's are trying to protect mkt share and that don't make sense to me.
Re: my take, fwiw
Could well be the bottom too. GS, for whatever reason, is permitted to "front run" all their calls
and I'd expect they've been shorting oil and equities for the last several weeks.
Their call for 180 dollar oil was the top back in the day and I'm hoping this call is the bottom.
and I'd expect they've been shorting oil and equities for the last several weeks.
Their call for 180 dollar oil was the top back in the day and I'm hoping this call is the bottom.
Re: my take, fwiw
My take is the beginning of real winter weather and the November 27 OPEC meeting will have a lot more to say about oil prices than GS forecast.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: my take, fwiw
I was looking at CWEI and thought this comment by Richard Zeits, a frequent writer for Seeking Alpha, makes sense especially as more $75 stabilized calls are made for WTI:
"...The sharp decline in the price of oil creates valuation uncertainty across the entire E&P sector. The key concern is whether the commodity price move possibly reflects the onset of a systemic oversupply in the oil market that can only be corrected through supply destruction by a strong and possibly prolonged negative price signal. If such interpretation proved indeed accurate, shale oil stocks - with Clayton Williams being no exception - would be facing a very challenging macro environment that can be protracted over time. I would argue, however, that it is difficult to discern at this point, with sufficient degree of confidence, whether the recent oil price correction is a result of a dangerously accelerating supply growth or just a "stochastic price aberration," in part driven by demand seasonality, similar to the several corrections that we have seen with approximately once-a-year frequency over the past four years. Each of those corrections was followed by relatively quick recoveries.
Every investor would have to make a personal call with regard to the oil macro fundamentals. Without taking a view on the trajectory of the oil price, it is almost impossible to derive a judgment with regard to shale oil stocks' risk/reward. For those investors who believe that the recent oil price decline is a transitory phenomenon and that oil prices are destined to recover to at least $90 per barrel in the medium (less than a year) term, Clayton Williams shares at their current level offer an interesting risk/reward trade-off, in my opinion, and may warrant a fresh evaluation...."
"...The sharp decline in the price of oil creates valuation uncertainty across the entire E&P sector. The key concern is whether the commodity price move possibly reflects the onset of a systemic oversupply in the oil market that can only be corrected through supply destruction by a strong and possibly prolonged negative price signal. If such interpretation proved indeed accurate, shale oil stocks - with Clayton Williams being no exception - would be facing a very challenging macro environment that can be protracted over time. I would argue, however, that it is difficult to discern at this point, with sufficient degree of confidence, whether the recent oil price correction is a result of a dangerously accelerating supply growth or just a "stochastic price aberration," in part driven by demand seasonality, similar to the several corrections that we have seen with approximately once-a-year frequency over the past four years. Each of those corrections was followed by relatively quick recoveries.
Every investor would have to make a personal call with regard to the oil macro fundamentals. Without taking a view on the trajectory of the oil price, it is almost impossible to derive a judgment with regard to shale oil stocks' risk/reward. For those investors who believe that the recent oil price decline is a transitory phenomenon and that oil prices are destined to recover to at least $90 per barrel in the medium (less than a year) term, Clayton Williams shares at their current level offer an interesting risk/reward trade-off, in my opinion, and may warrant a fresh evaluation...."
Re: my take, fwiw
That is a very well written comment and it is true. Demand for oil is seasonal with the 4th quarter being the peak demand period for heating oil. If supply/demand are not in balance by year-end, then we are in for a rough first half of 2015. By the end of November, demand for heating oil will go up by over a million bbls per day.
What I have noticed in updating my forecast models is that analysts don't seem to be considering the difference between those companies that have a lot of their production hedged and those that don't. They also don't seem to be considering the production mix. Lower crude oil prices will not impact all of the E&P companies the same. I will also be looking hard at which companies have a lot of their leasehold HBP, so they can cut back on drilling without the risk of losing acreage.
I will be taking a hard look at each companies' hedge positions, production mix and liquidity is very important.
We are going to get some great buying opportunities this quarter.
BTW I think the MLPs are going to benefit from this.
What I have noticed in updating my forecast models is that analysts don't seem to be considering the difference between those companies that have a lot of their production hedged and those that don't. They also don't seem to be considering the production mix. Lower crude oil prices will not impact all of the E&P companies the same. I will also be looking hard at which companies have a lot of their leasehold HBP, so they can cut back on drilling without the risk of losing acreage.
I will be taking a hard look at each companies' hedge positions, production mix and liquidity is very important.
We are going to get some great buying opportunities this quarter.
BTW I think the MLPs are going to benefit from this.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group