09
Feb

Wrap – Week Ended 02/08/13

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Tepid week in the markets but a strong week in the portfolios. Some moves are becoming out-sized and we'll have some comments on our portfolio as it relates to the macro backdrop in the Stuff section of the Monday post.

Comments on last week will be included in The Week That Was section of the Monday post, our weekly recap.

Fairly light energy earnings next week in calm before the storm action,

Look for updated longer pieces on a couple of names in the coming week, 

Make sure to follow us on twitter, @ZmansEnrgyBrain (not a typo, we were one letter too long).

And here on Seeking Alpha.

If you have questions about the site email us at zman@zmansenergybrain.com. 


17 Responses to “Wrap – Week Ended 02/08/13”

  1. 1
    nrgyman Says:

    Barron's article on the massive economic benefits to the people and the government of fraccing (and why the potential may be squandered by DC politics):
     
    http://online.barrons.com/article/SB50001424052748704372504578284072008965886.html?mod=BOL_hps_dc#articleTabs_article%3D1

  2. 2
    Stewart Says:

    Open question to anyone.  Blackrock is taking stakes in ng companies.  Service companies like BAS and RES are resurrecting from the dead.  Big players like GE and XOM are ready to take advantage of the abundant ng. We may have a new energy secretary who favors using ng as a bridge fuel.
     
    Are we on the cusp of a huge move?

  3. 3
    brodway Says:

    re 1:
    nrgyman.
    it would certainly be upsetting  if this enormous opportunity is not fully realized. not only would we be energy independent, putting the US in a unique political position,but we also create much needed jobs, significantly reduced the trade deficit and bring back American manufacturing . rarely are there opportunities in life that a nation can resolve so many challenges without destroying or overtaking other nations. 

  4. 4
    brodway Says:

    re: 2
    Stewart, i was just thinking the same thing this week and didn't quite know how to take advantage of the situation other than what i've been already doing, specifically holding 80% of my assets into e&p equity.
    Would love to hear comments about further opportunities in this space if others have ideas.

  5. 5
    mimster90 Says:

    nrgyman recently mentioned KMI which strikes me as a very interesting play on ng.

  6. 6
    crysball Says:

    Extract  from  the  monthly  report  on Traffic  by  the  AAR:
    "In January, six of the 20 commodity groups posted increases compared with the same month last year, including: petroleum and petroleum products, up 54.1 percent or 22,892 carloads; crushed stone, gravel and sand, up 6.1 percent or 4,732 carloads, and lumber and wood products, up 14.6 percent or 2,032 carloads. Commodities with carload declines in January were led by coal, down 14.5 percent or 91,593 carloads; grain, down 11 percent or 11,337 carloads, and iron and steel scrap, down 18.7 percent or 4,675 carloads.

    “The New Year brought a continuation of an old pattern: weakness in coal, strength in intermodal and petroleum products, and mixed results for everything else,” said AAR Senior Vice President John T. Gray. “Railroads recently announced that they expect to reinvest significantly in 2013 — an estimated $24.5 billion for the year — back into their systems. They’re making these investments because they are confident that demand for freight transportation, over the long term, will continue to grow.”
    emphasis added
    IMHO  The  above  would  seem  to  portend  well  for   NG  generation  of  electricity going forward.

  7. 7
    apbd Says:

    Z:  My website is   http://www.gentleinspiration.com.  Is this sufficient or do you want me to post it during the week?
    Bless you
    apbd

  8. 8
    nrgyman Says:

    RE 5:  Ideas?  Check out the refiners.  Especially the mid-continent refiners, though most are now shipping crude via rail to coastal refineries.  Brent/WTI spreads widening due to China, Middle East, and world recovery boosting Brent, but also high production of WTI due to all of the E&P names we follow and slow movement of this production to coastal areas that price off of Brent.  Wide crack spreads make for juicy refiner profits.  I was heavy overweight and have started pruning back to modest overweight levels (too soon, it appears), but I am leaving money on the table because these stocks are on fire and the fundamentals still look good.  The key is global economic growth spurring demand for refined products that US refiners can sell into.  They have the world's cheapest feedstock and are finding hungry markets for diesel and gasoline outside of the US.  The rails are making it possible for most refiners to participate in this growth market.  Canadian oil is an even cheaper source and the XL pipeline should help the refiners even more.  They have had a big run, but each time they pull back they rally again to higher levels.  As long as refined product exports continue to grow these stocks should do well.  Also, the supply of refineries in the US is limited and inefficient ones are closing–leaving the profitable ones remaining to share a larger piece of the growing pie.  IMO, the NAM boom in oil shales and oil sands are feeding a potentially long-term bull market in US refiner stocks.  Many look at this rally and believe it is going to top out soon.  IMO, any pullback should be bought unless the fundamentals change (mainly Brent/WTI, but also global fuel demand and crack spreads).  Plenty of good names in the space.  Currently I am long PBF, MPC, HFC and CLMT (in an income portfolio).  Was long VLO, TSO and PSX but sold them this week (too soon).  VLO surprised the street recently with a great Q4 report and the most profitable area for them was the mid-continent region.  The positions I kept get most of their crude from the mid-continent region.  The others are catching up rapidly via rail and they continue to rally as well.  Hope these ideas help.  As always, do your own DD.

  9. 9
    nrgyman Says:

    RE 8:  Sorry, meant for brodway (#4, not #5).  And, yes mimster, I am long KMI for income and growth as a play on the natgas future.  

  10. 10
    elduque Says:

    Worth listening to:
    http://www.bnn.ca/Shows/weekly-with-andrew-mccreath.aspx
     
    especially on how we might see $50 WTI with Brent still over $100. 

  11. 11
    zman Says:

    Re 10. He's wrong about Iran production coming back being the biggest threat. Will put response to these arguments again in the Monday post. 

  12. 12
    elduque Says:

    Hi Z – really more curious about his $51 call for WTI. – squeeze between no exporting, refiners full and oil "gushing" into a full market.
     
    Enjoy the weekend.

  13. 13
    brodway Says:

    re: 8
    thanks for the info nrgyman. will certainly do more reading in this space. 
    no one ever got hurt taking a profit, so nice trade there.

  14. 14
    brodway Says:

    by the way 2 guests on Bloomberg radio this week mentioned KMI as an income and growth pick in energy. have to look at that one closer.

  15. 15
    brodway Says:

    CLMT jumped on a nice earnings beat this week. i have to agree the charts on many of these look quite bullish and similar. question is if the spread was high before why is it only now that this group (profits) is actually taking off? 

  16. 16
    zman Says:

    Thanks Eld – gotcha, I'll leave it along then, back atcha on the weekend. 

  17. 17
    nrgyman Says:

    Re 15:  Refiner profits have been growing for awhile.  The move now, IMO, is due to the global economic recovery developing (see China) which allows US refiners to sell into growing world markets.  That, along with faster US production growth and slower Cushing takeaway (see Seaway delays until late this year).  Market is more bullish on Brent than WTI, which means profit spreads should be healthy for refiners–something many thought would end soon.  There is also rationalization going on in the refiner space, with closings, rail shipments of cheap crude, MLP drop-downs, efficiency gains, etc., that are helping profitability.  There is also the realization that refiners can be a bit of a hedge against declining oil prices (if product prices drop more slowly), so the risk-averse crowd–the huge one sitting on the sidelines in bonds and cash–is attracted to low PE, high cash flow, decent dividends and hedges against oil drops that characterize refiners.  They see refiners as an attractive, lower-risk way to play the energy space.  

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