I wrote this a year ago but never published it. Blackstone is way up since then. I’ll just leave it here now.
Blackstone Group LP said Thursday that it has agreed to invest $1.5 billion in a pair of drilling deals there. One came about after the New York investment firm early this year lost out to a big oil company bidding on about 12,000 acres south of New Mexico. Blackstone didn’t walk away from the auction empty-handed, though, having convinced the sellers to join it in a new billion-dollar drilling venture in the area.
The firm also committed $500 million more to another group of experienced oilmen who had purchased 16,000 acres about 100 miles to the northeast, in another section of the region’s red-hot Permian Basin.
Cash for the deals came from an $8 billion pool that has otherwise sat largely untapped since Blackstone raised the money to invest in energy early last year.
New Mexico breaks record with July oil and gas lease sales
State Land Commissioner Aubrey Dunn reported Thursday the State Land Office collected more than $30 million from monthly oil and gas lease sales in July, an all-time high. The earnings from lease sales of 82 tracts of land in July was nearly double the agency’s Fiscal 2018 budget.
I am amazed at how many people I encounter on Twitter who have no idea the Delaware Basin extends into New Mexico. The Enchanted State is raking in the cash and it seems the Natives are not restless as they are in the Dakotas, with Sioux riding around on horseback in full war paint, accompanied by unemployed social-justice “warriors” of the Caucasian Tribe.
Back in the real world, Private Equity and Institutional Investors continue to pour money into the Permian, with the core acreage located in the Delaware.
Crude short-sellers have not given me a good explanation as to why so much capital is flowing into a commodity that allegedly will be “selling at $20/bbl for the foreseeable future”. It is said that Eagle Ford breakeven is ~$46 and Permian ~$45.
EIA once again shows massive draws of crude oil and gasoline. Rig Counts continue to fall in the major producing regions of the USA. Distressed companies are wallowing in fiscal Limbo. Perhaps Purgatory is a better term. Give them a taste of The Fire before lighting the eternal flame.
Last week I started comparing my basket of oil stocks with recent additions to the Q1 portfolio of T.Boone Pickens. Here are the results as of Week Two as I hold a small but unimpressive lead. My Oil Basket was on fire before crude oil was sent to the Shit Farm on Thursday and Friday with investors running for the exits ahead of today’s insignificant OPEC/NOPEC meeting:
I say “insignificant” yet the Hookah rules the price.
NOTE: I sold my small position in $SND for a quick and dirty loss and added the proceeds to my position in $PUMP this afternoon on a 4.5% dip…with their strong presence in Midland, TX, I expect this recent IPO to soar over the next few years.
I am still ahead of Boone, though not enough to offset his advantage in dividend generation. Next update should be at the One Month mark, hopefully with updated Q2 data from Boone’s portfolio.Comments »
I fracked over 3,000 wells in my life and never had a problem with an aquifer.
-T. Boone Pickens
I’m a Republican. I don’t want to go to heaven and have to face my family up there and tell them I voted for a Democrat.
-T. Boone Pickens
Old T. Boone Pickens is making moves like there is no tomorrow. You may remember CNBC favorite T. Boone as one of the Texas Oil Investing Legends, before he bet the farm on Whiting and Chesapeake and got slapped like a donkey when the market collapsed.
But he is back and he is making waves, with a focus on midstream and logistics. He knows that despite the boom in the Permian and elsewhere, we simply do not have capacity to move it all as CAPEX has collapsed after the oil bust.
I have always believed that it’s important to show a new look periodically. Predictability can lead to failure.
– T. Boone Pickens
I used some data from GuruFocus to hone in on the long positions he had either initiated or added to in Q1 and created a Basket of stocks inside Exodus to keep track of performance and get a clear feel for his M.O. I call it Pickens Pickin’s:
As anyone who has read this blog knows, I have also (in a modest way vs my Esteemed Opponent) been very active recently accumulating what I consider value plays in the space, which I cleverly named My Oil Basket:
Obviously mine is much higher risk, as seen by the levels of short positions in each basket. Boone has clear focus, as you can see by the Dividend Yields of his picks.
I’m focused on energy only. And I know what I’m talking about. And I don’t want to be distracted on other things.
-T. Boone Pickens
I cheated by snagging a few of his picks this week, which I chose by their distance from 52-week highs and other factors that I considered extreme. Think baby out with the bathwater. Think Smart Sand, Inc.
I may jettison WLL and take a loss, they have not shown that they can make it sub-$50. My numbers get skewed by SRUNU, which is not an actual oil company yet.
He may win through dividends alone, and he beat me today, but Week One belongs to The Maven.
If somebody I don’t like gets in the crosshairs, I pull the trigger. But I don’t hunt for them.
-T. Boone Pickens
Baker-Hughes rig counts bullish for the third week in a row. Massive draws seen again from API and EIA, imports from Saudis are down. I like my chances.Comments »
A +12 rise in the total (oil+NatGas) Baker-Hughes AHEM “Baker-Hughes-General Electric” (hereinafter referred to as BHGE) weekly drilling rig count report once again reveals serious weakness in the current frenzy of short-selling. This has not dissuaded hedge funds as they continue to hold a record number of short positions in WTI futures.
For the umpteenth week in a row, oil in storage is down. This week’s numbers are scorching to any bearish thesis on a further drop in the futures price of crude. Storage at the Cushing, OK hub is of particular note. But we are talking about an enormous amount of money staked against crude oil at the moment.
A rational mind looks at the following and says “Buy”. But this is crude oil, and rational thought only bears fruit over a period of months, not days or weeks.
Of particular note is gasoline inventories. These numbers, at the beginning of fucking July, are poison. Refineries are pumping out gasoline in record numbers. They cannot keep up with demand.
“Ahhh, but hedge funds are holding record positions!”, you bleat. Yes, but if one looks at the actual performance of hedge fund managers over the past five years (dismal) perhaps it would give you pause. Perhaps.
Something is going to snap here. It will be brutal and it will be swift.
For the second week in a row, active drilling rigs are down in the Permian Basin. And flat in the Eagle Ford. The bulk of added drilling rigs in the entire 50-state region was in fucking Alaska, which increased it’s total rig count to 8 from 4. All horizontal. All meaningless.
Everything is meaningless outside the Great State of Texas, and specifically the Permian when it comes to crude oil in 2017. Everything.
The following comes from BHGE and it is not bearish at all:
Relentlessly bullish analysts at Raymond James are calling out the entire commodity market. From Bloomberg:
The recent collapse in oil prices was triggered by a breakdown in the technical charts but fueled by the ‘negative feedback loop’ of bearish headlines that usually follow price declines,” the analysts wrote in a July 3 note to investors. “Some oil price headlines have been misleading, or outright wrong, and they have distracted investors from what we believe is fundamentally a bullish overall picture.”
Those concerns have been overblown, the Raymond James analysts argued, saying trends pertaining to U.S. inventories, production and gasoline demand have been misinterpreted. They put out a list of “myths” that explain the downturn and set out to debunk them in arguing that crude can rise about 45 percent from current levels.
Raymond James focuses on U.S. inventory data since early March to capture the impact of OPEC’s production curbs given the time it takes to ship oil from the Middle East to U.S. refineries. They find U.S. crude inventories have averaged “massive” declines of roughly 280,000 barrels per day over this span, compared to a mean build of 180,000 barrels per day during this seasonal period over the past decade.
Moreover, factoring in stockpiles of refined products “would actually be more bullish than looking at the crude only trend,” the analysts contend. Extrapolating this to the global level implies that crude “inventories have been falling by about 1.2 million barrels per day over the past four months,” according to Raymond James.
EIA confirmed this week’s API news of massive drawdowns. Crude futures dropped as a result. Draw your own CONclusions. The end game will be a bloodbath.Comments »
Yeah, I’m looking at you, Mr. Short-Seller. Hedge funds currently sit on a record number of short WTI Futures. Prices fell yesterday after an unnamed source in Russia claimed that the country would not support any further cuts or extensions to the current OPEC voluntary production cutbacks.
Over a year ago I wrote about a gasoline glut as the primary driver of oil futures prices. Subsequent data proved me correct. Well, the worm has turned. The moving hand, having writ, moves on.
This is not normal. Gasoline stocks should be rising during peak driving season. Yesterday’s holiday-delayed API showed an abysmal -5.7 million barrel drop in gasoline supply. Some blame can be laid at the tropical storm that passed through the Gukf of Mexico, but in truth the effects of the storm were minimal.
We will need confirmation from EIA today as we all know that the API report cannot be trusted. Expectation for crude is -1.6 million barrels. For now, futures are up 1.7% heading into the opening bell.
Another bullish report from EIA, coupled with another drop in the number of active drilling rigs on Friday, can easily push crude oil back towards the magic $50 price point.
Let the squeeze begin.Comments »
In an act of savage bullying, a multinational #FakeNews shithole masquerading as a news source has publically threatened to expose the identity of a Reddit user who created the infamous CNN/WWE cartoon video starring President Trump. (Andrew Kaczynski, who writes the “Kfile” column, is the genius behind this blatant assholery).. Then Kaczynski bragged about it. Then he threatened the entire internet. The Reddit guy is scared to death and rightly so.
The rest of the Internet, however, has exploded with rage. How could the buffoons running this shitpile not know this would happen? It is the ultimate indictment of their life inside an impervious bubble of fuckery and stupidity. Thousands of new wrestling videos are appearing online:
— Travis Wright (@teedubya) July 5, 2017
CNN, the Clown News Network, seems intent on eating itself.
Some rather big names have taken notice as well. This is a public relations disaster for the Criminal News Network.
— Julian Assange (@JulianAssange) July 5, 2017
And here is one more scumbag gloating over the bullying of a teen. It does not matter that the teen is a racist and a scumbag himself.
Fuck CNN.Comments »
Go ahead, hotshot. Bet against crude oil at this level. No stop loss needed. Hell, what does Blackstone know that your charts aren’t telling you? As-salaam alaykum.
2017 Population of India 1.4 Billion
2017 Population of China 1.8 Billion
That is well over one-third of the world population, folks.
1st Qtr 2017 China GDP Growth = 6.9%
1st Qtr 2017 India GDP Growth = 6.1%
You do not have to be good with numbers to come up with the conclusion that energy demand cannot be met without substantial capital investment in exploration. There is, however, a rather large elephant in the room and that is the fact that CAPEX has dwindled to almost nothing since the oil market collapsed in 2014-2015. There is simply no money available to companies that have been losing money on every barrel they have produced since the heady days of $100 Oil.
For the second year in a row, proven world reserves of crude oil have fallen. One can rightly assume that lack of exploration would have something to do with that.
This shit is going to hit the fan, people. In fact, the shit-train has already left the station. Here are this week’s numbers for rigs in the places that matter (data courtesy shaleexperts.com):
Shale Experts Rig Count
Contrary to Baker Hughes, the rig count is down in the Permian, Eagle Ford, SCOOP/STACK, and many other basins:
Of course the Headline News is that the Baker Hughes Rig Count that many traders rely on has risen for 21 weeks straight. This mantra is being repeated in just about every article I have read this week.
There is an old trading adage that says when the noise is loudest, the market has hit a bottom. The noise right now is deafening. Case in point, the “Commodity King” David Gartman has just said that the price of crude is basically going to zero and that the Saudi Kingdom will soon be broke. The man should be called the Contrarian King as he has been 100% wrong for the past there years.
Yet if you look at yesterday’s Baker Hughes data, you will see that the bulk of the rise last week was in the category of “Other”, essentially meaning areas outside the more efficient production areas of Texas, New Mexico, Oklahoma, Louisiana, Alaska and South Dakota. In other words, current drilling contracts in areas that are most certainly not about to make money actually pumping crude oil.
Why a DUC?
What we are talking about here are DUCs (drilled but uncompleted wells). It is a common misconception that the weekly rig counts are tied to actual production of crude oil.
DUCs are everywhere. Over a year ago, DUCs were said to be at the highest percentage ever recorded. The BAKKEN play is inundated with DUCs. And with the frenzy over the stacked plays in the Permian Basin, with tens of billions being thrown at the area by the Oil Majors like Exxon, Apache and Pioneer, (not to mention private equity investors like Blackstone or blank-check firms such as Silver Run Acquisition Corp), the number of DUCs has continued to soar.
For more info on the current state of, and influence of, DUCs, see this fine article from 2016 in Oil & Gas Investor
“But wait”, you bleat. “Shale production is soaring”. Well yes, yes it has been. It has also begun to level off. Nobody wants to sell oil at $43. Some have no choice but the slow bleed they have been producing for the better part of three years.
The firms financing this fiasco have been covering and extending credit during this downturn. Don’t expect that trend to continue. M&A has been ramping and as hedges come off and the banksters come calling, I expect to see a lot of blood in the streets over the rest of 2017.
Crude Futures have been trading purely on emotion during this current downturn. Investors do not trust OPEC, even though available data shows the cartel’s compliance on the agreement to limit production is currently at 106%.
Below you can view my current “Oil Basket”, which is a table of energy stocks I currently own (subscribers to Exodus have the ability to share our investment ideas). It exploded higher yesterday on a rise in the futures price of thirty-eight cents. Take from that what you will, Thursday’s and Friday’s action signaled the first inklings of bullish enthusiasm in weeks.
My Oil Basket is now comprised of 17 equities ranging from mega-caps like $XOM to pure-plays like $CDEV to blank-check acquisition companies like $SRUNU which have not even completed one transaction yet. From risky bets like $CHK and $WLL to bets on valuation like $APA, $PDCE and $MDR. Many of these names were beaten to shit before the latest downturn, and that is when I did some buying recently. Look at the Short Percentage of Float!…an Epic short squeeze will be the reward for my patience.
As always, betting on the volatile commodity is not a game for the weak. The swings in the value of my Oil Basket over the past two weeks would curl your hair. I have daytraded in and out of some of the stocks listed but many will be held through 2018-2020 time frame.
Have a Ducky Saturday.Comments »