ARMCO

Exxon Mobil Puts on a Brave Face

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Image Source: Exxon Mobil Corporation – November 2019 Guyana IR Presentation By Callum Turcan Near-term oil prices and most importantly, the oil price futures curve, have improved materially since just a couple of months ago when it looked like the sky was falling. For the first time ever, WTI turned negative in April 2020 for physical deliveries due May 2020 of light sweet oil to Cushing, Oklahoma, as storage options were limited (and arguably, many speculators had jumped into the market not fully aware of the risks they were taking on). Exxon Mobil Corporation (XOM) has seen its share price recover considerably since the drop, though we caution that management’s commitment to the dividend will prove a hard task if … Read more

Stress in the Oil & Gas Industry Grows as Major Energy Exporters Hunker Down

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Image Shown: WTI is down almost 61% over the past year as raw energy resources prices were decimated by the news that OPEC and non-OPEC members couldn’t reach another production curtailment deal in early-March 2020. By Callum Turcan Raw energy resources pricing has crashed through the floor, so to speak, with WTI (USO) (US oil pricing benchmark), Brent (BNO) (international oil pricing benchmark), Henry Hub (UNG) (US natural gas pricing benchmark), and the LNG Japan/Korea Marker (pricing benchmark for liquefied natural gas [‘LNG’] deliveries to East Asian markets) are all trading at or near multi-decade lows as of this writing. The pricing for natural gas liquids (‘NGLs’), like ethane, propane, and butane, have also come crashing down (seen through Mont … Read more

Oil Markets Get Decimated

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Image Shown: Oil prices have been decimated year-to-date. By Callum Turcan We are following up on our ‘Oil Prices Collapse, Reiterating 2,350-2,750 S&P 500 Target Range; Credit Crunch Looming?’ note (link here) published Sunday, March 8, to provide additional commentary on what’s going on in the shale patch right now. As of this writing, oil prices (BNO, USO) continue to get hammered. Here’s what we had to say in that recent note: The independent upstream producer space (XOP) is careening off a cliff, and that was before the OPEC+ cartel was unable to reach an agreement during their joint meeting (OPEC and non-OPEC members) on March 6. Due to the inability for the oil cartel to reach a deal, largely because Russia … Read more

Covering Oil Markets Ahead of the Upcoming OPEC/OPEC+ Meetings

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Image Source: Exxon Mobil Corporation – 2019 IR Presentation  By Callum Turcan On March 5, the Organization of Petroleum Exporting Countries (‘OPEC’) is holding an “extraordinary” meeting in Vienna, Austria (EWO), which will be followed up by a ministerial meeting between OPEC and non-OPEC members the next day. The group had already agreed to cut oil (USO, BNO) supplies by an additional 0.5 million barrels of per day (‘bpd’) back in December 2019 through an agreement that would last through March 2020 (that was on top of an existing deal to keep 1.2 million bpd off of the market which runs through the end of March 2020 as well). As part of that deal, Saudi Arabia (KSA) offered to “voluntarily” … Read more

GasLog MLP Family Highlights Problems with Flawed Model

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Image Source: GasLog Ltd – 2018 Analyst Day Presentation By Callum Turcan We’ve written about it many times in the past and we’re writing about it again: the master limited partnership (‘MLP’) model is fundamentally broken. Equity holders in this arrangement have little to no say over how the family of companies are run, and management is often beholden to no one. Only by converting to a C-Corp can this arrangement be rectified. Massive Payout Cut As you can see in the graphic below, the ownership structure of GasLog Ltd (GLOG), the general partner (‘GP’), and GasLog Partners LP (GLOP), the limited partner (‘LP’), is quite convoluted. This MLP family leases own vessels that transport liquified natural gas (‘LNG’) and … Read more

The Great Guyanese Oil Boom

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Image Shown: A drill ship floating in open waters. Image Source: Exxon Mobil Corporation – 2019 IR Presentation By Callum Turcan We’re going to get into the potential opportunity for energy producers in Guyana, but first, one thing that often gets lost in the noise surrounding press releases and presentations announcing new upstream projects coming online is that Exxon Mobil Corp (XOM) and its peers are contending with serious base decline rates. Decline rates are around 3-5% per year for conventional fields depending on the level of investment made in base maintenance (along with recovery rates and the quality of the rock), which includes such things as gas/water injection projects (this entails drilling injection wells to maintain reservoir pressure and often involves … Read more

Update: US and Iran Now De-escalating Tensions

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By Callum Turcan On January 7, Iran retaliated against the US for the killing of Iranian major general Qasem Soleimani (leader of a group that the US has deemed a terror threat under the Trump administration) less than a week earlier by firing missiles from Iranian soil at bases in Iraq that contain US, Iraqi, and coalition troops. The Iranian government aggressively publicized the attack by providing Iranian media outlets with footage of missiles leaving Iran that were targeted towards Iraq. Fortunately, no US, Iraqi, or coalition casualties were reported. We are very thankful that nobody was hurt as a result of the Iranian missile strike. For our first article covering recent events regarding Middle East tensions, click here. In … Read more

Middle East Tensions on the Rise

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By Callum Turcan Early Friday (Arabian Standard Time) on January 3 (the strike was carried out late Thursday evening Eastern Standard Time), under the orders of President Trump, the US took out major general Qasem Soleimani who was the leader of Iran’s Quds military group within the Islamic Revolutionary Guard Corps (‘IRGC’). Please note the US designated the IRGC as a Foreign Terrorist Organization in April 2019, and that the justification for the strike was due to there being an immediate threat to US lives (namely soldiers and contractors stationed in the Middle East), according to the Pentagon. It’s important to note that the strike occurred on Iraqi soil. The Quds force is known to be Iran’s extraterritorial military outfit, … Read more

ConocoPhillips Pushes Through a Big Dividend Increase, Emerging” Play Is a Dud”

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Image Shown: Shares of ConocoPhillips traded modestly higher on October 7 after announcing a significant dividend increase and plans for additional share buybacks in 2020. However, please note ConocoPhillips is still trading far below where it was at the start of 2019 as an abundance of supplies combined with deteriorating macroeconomic conditions to weigh negatively on expected future raw energy resource pricing. By Callum Turcan On October 7, shares of upstream super-independent ConocoPhillips (COP) traded up modestly after the company announced that it was boosting its quarterly dividend by 38% sequentially and would repurchase $3.0 billion worth of its shares in 2020. Management noted that the upsized dividend would cost an additional $0.5 billion on an annualized basis. Shares of … Read more

Saudi Arabia Attacked, Oil Prices Shoot Higher

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Image Shown: Saudi Arabia’s oil infrastructure was attacked over the weekend, causing WTI and Brent to rally at the start of the trading session. By Callum Turcan Disaster struck this weekend when several drones took out the Abqaiq oil processing facility and the massive onshore Khurais oil field in Saudi Arabia (KSA) on Saturday, with WTI and Brent both surging on the news once trading resumed at the start of the week. The Khurais oil field produces around 1.5 million barrels of crude per day and the Abqaiq oil processing facility is the largest in the world. Saudi Arabia’s oil production capacity was reduced by 5.7 million barrels of crude per day due to these attacks and the country is … Read more