Monday, November 23, 2015

Mexico To Get Record Payout Due To Collapse In Oil Price -- November 23, 2015

I've talked about this occasionally -- even with low oil prices, those in the oil and gas sector can make money. Here's a great story about Mexico reporting a huge windfall due to low oil prices. Bloomberg/Rigzone is reporting that Mexico is set to get a record payout of at least $6 billion from its oil hedges this year.
The Latin American country locks in oil sales as a shield against price declines through a series of financial deals with banks including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. For 2015, Mexico guaranteed sales at almost $30 a barrel higher than average prices over the past year.

The 2015 payment, due next month, is set to surpass the record from 2009, when the Mexican government said it received $5.1 billion after prices plunged with the global financial crisis. The country’s crude has fallen by almost half over the hedging period so far this year. Crude sales historically cover about a third of the government budget.

"The windfall is huge," said Amrita Sen, chief oil analyst at Energy Aspects Ltd., a London-based consulting company. "This gives Mexico breathing space."

The hedge, which runs from Dec. 1 to Nov. 30, covered 228 million barrels at $76.40 each for the Mexican oil basket, according to government documents and statements. With less than two weeks to the end of the program, the basket has averaged $46.61 a barrel over the period.
By the way, the most important data point in that article might be this one: crude sales historically cover about a third of the government budget.

Back to the windfall. I assume to do this again in 2015, Mexico needs to lock in $40-oil and then hope for oil to drop to $20/bbl. Yes, I know. Don't even get me started.

Phillips' Largest Shareholder? Warren Buffett -- Owns Almost 12%

From Motley Fool:
On Monday, Berkshire Hathaway filed its quarterly report of stock holdings for the third quarter. The most prominent new addition was Phillips 66, and Warren Buffett did not do things halfway: Berkshire is now Phillips' largest shareholder, with a 11.5% stake worth $4.7 billion at the end of the quarter. Phillips 66 is one of only two energy sector holdings, along with Suncor Energy Inc. Surely the drubbing the energy sector has suffered has created opportunities to for a patient, value-driven investor.
What might be on Warren's energy shopping list? The linked article provides three names, but two are picks of blind-folded dart throwers, and the third suggestion is simply common sense.

By the way, back to Suncor. The company primarily focuses on developing petroleum resource basins in Canada's Athabasca oil sands; explores, acquires, develops, produces, and markets crude oil and natural gas in Canada and internationally; transports and refines crude oil; markets petroleum and petrochemical products primarily in Canada; and markets third party petroleum products. It operates in Oil Sands; ....

From USA Today:
With oil prices down roughly 50% over the past year, some oil producers are simply trying to survive. Then there's a second group that's just trying to tread water by focusing on pushing costs down to balance cash flow with outflows for capex and dividends. Finally, a third group has emerged in what's really an elite class of oil companies that are thriving in the current environment because they're generating free cash flow while still managing to grow their production. Topping that list are Suncor Energy, Oasis Petroleum, and ExxonMobil. Here are the secrets to their success.
The Canadian powerhouse

Through the first three quarters of this year, Suncor Energy has generated C$5.5 billion in cash flow. While Suncor plowed roughly C$2 billion of that amount back into maintenance and used another C$2.7 billion to fund growth projects, the company has still managed to generate C$875 million in free cash flow. In fact, it's generating so much free cash flow that it actually increased its dividend at a time when most oil producers are at best holding dividends flat. Further, Suncor Energy has even restarted its stock buyback program while also going on the offensive in making two notable acquisition overtures. Suffice it to say, Suncor Energy is thriving under the current conditions.
Its secret is simple. First, its integrated business model has really provided a lift to cash flow, with its refining and marketing segment kicking in 42% of its cash flow last quarter, which is up from 22% in the same quarter of last year. In addition, Suncor Energy has pushed its costs down to its lowest level in years, with its oil sands operating costs declining to levels not seen since 2007. When we add those factors to its growing production profile and strong balance sheet, and it puts Suncor in an elite category.
Piling On

I am cleaning out my e-mail backlog. There have been a glut of stories on ObamaCare in the past few days. The current run of articles culminates with this article from The Fiscal Times: the thrill is gone for ObamaCare as health-care approval fades.
The administration’s Obamacare enrollment projections for the coming year are down, the projected cost of premiums and out of pocket costs are up, nearly half of the insurance co-ops associated with the program are going out of business, and UnitedHealth Group, the nation’s largest health insurer, said it may withdraw from the government marketplaces in 2017.
Polling shows Americans broadly disillusioned with ObamaCare. I wonder why?

From, $7,150 ObamaCare deductible coming in 2017 -- HHS.
The backlash over ObamaCare deductibles will only intensify as customers shopping for 2017 plans a year from now face bronze-plan deductibles as high as $7,150.
The Department of Health and Human Services on Friday detailed many key ObamaCare parameters for 2017, including a $300, or 4.4%, rise in the maximum out-of-pocket expense for covered medical bills — not including premium payments — from $6,850 in 2016.
Some of the lowest-cost bronze plans for 2016 are setting deductibles and out-of-pocket limits at the $6,850 ceiling to hold down premiums, which still rose by about 12% over 2015, on average.
That means that landing in the hospital could wreck the finances of many modest-income bronze plan enrollees.
This means this isn't even high-cost catastrophic health insurance any more. It's simply high cost.

By the way, maintains a list of employers who have cut workers' hours below the 30-hour-per-week threshold at which the employer mandate kicks in. I get a particular joy out of this one; the MDW was the first non-ad supported blog that noted this and talked about it at length before mainstream media noted the new federally mandated workweek - 30 hours.

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