Wednesday, April 10, 2013

SeekingAlpha Articles

There were so many SeekingAlpha articles over the past two days regarding the oil and gas industry, I think I will put them all on this page for today/yesterday.

Disclaimer: SeekingAlpha is geared for investors and traders. This blog, the MDW, is not an investment site. Do not make any investment decisions based on what you read here. I follow SeekingAlpha because it provides insight on the Bakken, the purpose of this blog.

Initially, just the link and perhaps a snippet. Might come back to them later.

First: the SeekingAlpha article that was pulled yesterday. I have linked and discussed it here.

Whiting is rated a buy. In fact, it's rated a strong buy:
Whiting Petroleum is a sustainable company operating in the energy sector and through its availability of lucrative growth options provides a feasible investment for both short- and long-term oriented investors. This analysis provides an overview to WLL's current performance in the market and concludes with five reasons as to why WLL is a buy at its current valuation. Specifically, the five reasons will concentrate on WLL's opportunity for growth going forward, its strong asset set, its financial position relative to its peers, its valuation, as well as where analysts think WLL's stock price is headed. For a good primer, here is a brief overview of WLL's recent market performance.
Whiting: upgrades:
I have not posted anything on the Whiting Petroleum (WLL), an undervalued E&P producer with assets in the Bakken and other promising regions, in awhile. However, the stock is starting to pick up on some positives, and it feels like it is ready to make its next leg up.
Recent positives for WLL:
  • JPMorgan upgraded the shares Monday to "Overweight" from "Neutral." It also walked up its price target to $65 a share from $62.50 a share. Analyst Joseph Allman also noted "Our model could be conservative if the company has success testing the higher-density pilot programs in the Williston Basin."
  • BMO Capital also upgraded the shares to "Outperform" from "Market Perform" in February. It also raised its price target to $60 from $50.
  • Consensus earnings for FY2013 have moved up nicely over the last two months.
  • During its last quarterly earnings report, Whiting beat on both on the top and the bottom lines on higher production.

EOG, meanwhile, is a "good value." It could earn $8/share this year. Unlike Chesapeake it saw the crude oil / natural gas disconnect early and moved quickly to avert disaster.
U.S. production is the primary source of EOG's production and is focused on the most well known oil and gas producing areas in the United States. Primary production areas in the United States are as follows; the Marcellus Shale in Pennsylvania, Williston Basin and Bakken Shale of North Dakota, the Unita Basin of the Rocky Mountains, the Permian Basin, the gulf coast of Mississippi, Louisiana, and East Texas, and the Barnett Shale of the Fort Worth Basin. In recent years, EOG has focused more on producing high margin liquids helping moderate the issues associated with low/volatile natural gas prices. In 2012, EOG expects a 4% increase in total production with a 28% increase in crude oil/natural gas liquids production and a 15% decrease in natural gas production. This change in the mix of production should push crude oil/natural gas liquids to about 55% of total production in 2013 compared to 48% of total production in 2012. We believe that increased liquids production will help profit margins and cash flow this year. Analysts estimate that EOG will earn $5.91/share in 2013 and $7.93 in 2014.
And XOM is best of breed and attractive.
Demand for energy will continue to increase as the global population grows and Exxon Mobil is well positioned to take advantage with its global presence, integrated supply chain, efficient cost controls and oil extracting technology. Because Exxon has the reputation of being the most successful integrated oil company over the long term, based on metrics such as return on invested capital, it is important to pay careful attention to price to ensure that the stock offers a good enough margin of safety. At current prices, I don't believe Exxon to be extremely attractive...
That's not exactly what the headline said.... 

A reader alerted me to a SeekingAlpha article that doesn't say anything new, and has this summary:

In my opinion production is going up, but it isn't going to continue at the breakneck speed that it has over the past couple of years.
So far we have seen the initial surge like my graphs above show. With each successive year the amount of growth is going to keep decreasing.
The implication of this for investors is simple. We might as well accept the fact that higher oil prices are here to stay because while the boom in American oil production is going to continue, the rate of growth is going to start slowing dramatically.
The unconventional oil revolution provides a welcome decrease in the amount of oil being imported from outside the country, but to extrapolate the growth of the past couple of years out over the longer term is not realistic.
I don't think anyone would disagree, given the data points the writer provided.

Most folks reason the same way: if we are all given certain data points, we come to the same conclusions. I read the article very quickly and perhaps he said some of these things but I just missed them.

But some quick thoughts:

1. That's why they call it the Bakken boom, a "boom," and, or the shale revolution, a "revolution." At some point they both come to an end. "Booms" and "revolutions" don't go on forever.

2. Production depends on, all things being equal, DEMAND. If demand goes goes down, all things being equal, production will go down unless Harold Hamm likes to pay for storage fees somewhere.

3. If demand increases, in the Bakken the limiting factor is TAKEAWAY CAPACITY. The rigs are more effective, more efficient and much potential production is being choked back due to takeaway issues. If demand increases, and takeaway capacity increases, the Bakken operators can increase production significantly. Forecasts are for a million bopd this year or next.

4. A recent article I posted suggested, coming from folks on the ground in Midland, a city of 150,000, debating what they want their skyline to look like, said the city of Midland is booming. And then they said this: Midland, the home of the Permian (an old Texas field with new life) is a year-and-a-half behind the Bakken. My hunch is that the Permian, revitalized, will be bigger than the Bakken. (I don't have data to back that up; just basing it on geography).

5. I don't post much about it, but it is commonly accepted that the Eagle Ford will be much bigger than the Bakken. If the Permian is a year-and-a-half behind the Bakken, I certainly get the feeling that the Eagle Ford is even farther behind; at best the Eagle Ford is as far along as the Permian is.

6. There are only three onshore US fields to talk about at the moment: the Bakken, the Permian, and the Eagle Ford.  The others are marginal at this point (Uinta, Niobrara, Utica, Miss Lime, etc) but that could change. If demand is there, production will increase.

7. As the reader who alerted me to the article noted, the article seems more of the same. I'm not sure what the point of the article was. But the writer is probably incorrect about the price of oil going up because of not enough oil being found/produced. The biggest determinant of the price of oil day-to-day is pretty much the weakness/strength of the dollar.

8. We haven't even begun to talk about the effect of Canadian oil if more of it could reach the market.

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