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TigerBite 
LSU Fan
Dallas
Member since Feb 2004
1837 posts
| Had a meeting with one of the large banks today... (Posted on 4/3/12 at 9:15 pm)
As some of you know, I'm in the oil and gas industry (work for a private E&P), and we had one of the big banks in today. I'll post some of their thoughts (random) just for some that may be interested and any that want to chime in with counter-points or other. And this is long, so those who don't like long posts, skip it, don't tell me it's long.
U.S. economy is better than expected. World economy is better than expected. China, while controlling growth, is still growing at a ridiculous rate. The US can stand $100 crude without a big pinch.
Foreign investment should give you an idea of how US natural gas is viewed...highly. It's viewed as a very low-risk investment at the moment and other countries are willing to wait for the recovery. In this same regard, without the 4th warmest winter since 1905, things would be way tighter. Also, the export of LNG is imminent...for all you Chenier people out there. Their view was that it's not about policy, it's about the fact that China has something we want (rare earths) and we have something they want (natural gas). Eventually they have to trade. Also, China's demand for natural gas is going to be huge by 2015 and while they likely have more shale gas than we do, getting it out in enough time to meet demand is a huge issue. Also, it was their view that China will eventually be a good and natural partner the way Canada is now. And I'm not talking about energy partner, I'm talking about economic and otherwise.
Crude is currently where it is (in the US) because of the middle distillate demand worldwide. Because of an increase in US supply and decreasing US demand, crude should be dropping, but because other parts of the world were cold this winter, product demand remains high enough to keep crude where it is. The fundamentals are real and "speculation" and Iranian sensitivity are not behind the current prices. US gasoline is VERY cheap compared to world gasoline. Only the subsidized countries have cheaper gasoline, and those countries will not be able to sustain those subsidies.
In general, they were big on the fact that the US has been, and always will be, able to adjust to the world economies and stay one step ahead. This wasn't arrogance IMO, but they backed it up by many examples of American ingenuity. They basically said all those touting that Asia would rule this century were heavily discounting the US and the proven track record.
They also spoke of agriculture and other items, but I'm not quite as familiar with this side of things, so I don't necessarily want to relay something I can't relate to.
Fire away.
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kfizzle85
LSU Fan
en oh, el ay
Member since Dec 2005
20376 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/3/12 at 9:56 pm to TigerBite)
 In addition to your last comment, in reading through EPD's analyst presentation, I think it gives more credence to your last point about US adjustment, particularly with the downstream side adjusting from more expensive heavier crude to the lighter and cheaper NGLs that appear to be in abundance over here.
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wegotdatwood 
Arkansas Fan
Member since Aug 2009
14166 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/3/12 at 10:17 pm to TigerBite)
Good info.
So I take it that you'll be buying Nat Gas?
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TigerBite
LSU Fan
Dallas
Member since Feb 2004
1837 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/3/12 at 10:28 pm to kfizzle85)
quote:
particularly with the downstream side adjusting from more expensive heavier crude to the lighter and cheaper NGLs that appear to be in abundance over here.
To your point, they specifically mentioned the Sunoco Philly refinery as well as the Marcus Hook refinery that are set to close this year (minus a buyer) and how it is likely that someone, probably on the private equity side, will purchase one or both and try to move rich Marcellus gas into them. Which would change the economics as you have stated. Those refineries have been killed because they are purchasing Bonny Light and you can't make the cracks work on US products margins. US consumers generally don't understand this though. When you're losing $5 a barrel and running >150k barrels/day, you're screwed.
This post was edited on 4/3 at 10:30 pm
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TigerBite
LSU Fan
Dallas
Member since Feb 2004
1837 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/3/12 at 10:36 pm to wegotdatwood)
quote:
So I take it that you'll be buying Nat Gas?
You can't believe everything the banks say, as they usually have some sort of trade on, but there message was fairly clear. I was also at a conference last year where an economist had basically the same view, which was that the US has very high f&d costs compared to say the middle east, so the low prices here are not sustainable. The problem is determining when the market will turn. I think I've stated this before, but I'm not really a buyer until around October, unless we have a ridiculously hot summer, then I may change my tune. People keep saying that things are tighter than they appear, if not for the weather, but the reality is what it is...which is there is a ton of gas in storage and climbing. It's just hard to ignore right now.
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kfizzle85
LSU Fan
en oh, el ay
Member since Dec 2005
20376 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/3/12 at 11:07 pm to TigerBite)
I believe Chevron announced some time last year plans to build out a new ethane cracker (although I seem to remember the lead time on that being kind of absurd) primarily to capture NGL throughput from the Eagle Ford and I believe Shell announced plans to build one up in Appalachia (maybe Ohio? forgot) last year as well (to capture Marcellus, as you mentioned). Couple that with the blowout in the spark spread given current natty prices, a damn near limitless supply of domestic coal out in the PRB, the glacial pace (being EXTREMELY generous) of nuclear dev and the relative pricing of renewable/alt energy...short-term, as you said, nothing to push it up, but the mediumish-run demand economics augur for sustainable price appreciation as these things fall into place over the next 3-5 years, IMO.
This post was edited on 4/3 at 11:08 pm
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greenhead11
LSU Fan
Member since Feb 2012
608 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 12:03 am to TigerBite)
It will be interesting to see the future of nat gas and LNG. Nat gas prices per MCF are small multiples higher in other parts of the world, such as China. It will also be interesting to see how the competition plays out between China's abundance (95%) of the world's rare earth metals and their export policy and the US' s seeming abundance of nat gas and what our export policy will be. Right now I think Cheniere is the only company approved to export nat gas and has already sold 16 of its 18 million units to Korea and others. In addition they just announced plans to build a second export terminal. If China is unwilling to loosen up their rare earth metals export, I wonder how our administration will shape our Nat gas policy to China. Someone will have to give.
Either way I think nat gas will be a bridge fuel and the best ways to play it are through companies like LNG, Golar, Clean, Westport inn, and others not tied to commodity price itself. Owning UNG is useless
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kfizzle85
LSU Fan
en oh, el ay
Member since Dec 2005
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| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 12:48 am to greenhead11)
ETE just announced plans to build an export terminal in Lake Chuck as well.
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TigerBite
LSU Fan
Dallas
Member since Feb 2004
1837 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 8:12 am to greenhead11)
quote:
If China is unwilling to loosen up their rare earth metals export, I wonder how our administration will shape our Nat gas policy to China. Someone will have to give.
I believe we are going to have to give....have to have our iPhones. It's funny that they won't loosen up their policy (they export around 30% rare earths I believe) and we basically export 0% of our natural gas (save the Mexican p/l exports). Based on this, we're going to have to give.
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greenhead11
LSU Fan
Member since Feb 2012
608 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 8:20 am to TigerBite)
I think a large part of this will have to do with our administration and who gets elected. China is artificially manipulating it's currency keeping it pegged and keeping it low. Benefits an export economy. But it's going to be hard, I'm glad the world bank has already put pressure on China in regards to rare earths. But there are other companies like Lynas and Molycorp who have access to rare earth metals part through Chinese mines.
Kfizzle,
You like ETE? Seems like it could be another way to play nat gas without commodity exposure or the run up in LNG, Golar, and Clean Energy
This post was edited on 4/4 at 8:23 am
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kfizzle85
LSU Fan
en oh, el ay
Member since Dec 2005
20376 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 9:13 am to greenhead11)
I have no idea, but if I was trying to invest based on my perception of natural gas prices rising, I would absolutely want the commodity exposure and wouldn't shy away from it. JMO.
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TheHiddenFlask 
Clemson Fan
The Welsh red light district
Member since Jul 2008
16420 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 9:30 am to kfizzle85)
quote:
I have no idea, but if I was trying to invest based on my perception of natural gas prices rising, I would absolutely want the commodity exposure and wouldn't shy away from it.
+1
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greenhead11
LSU Fan
Member since Feb 2012
608 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 9:45 am to TheHiddenFlask)
I'm staying away from the commodity near term, medium & longer term I like the nat gas. Do you really see anyone having good margins with nat gas exposure near term? Domestic nat gas prices need a huge catalyst to produce significant upside anytime soon
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Chad504boy 
New Orleans Saints Fan
Five Oh Four
Member since Feb 2005
66197 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 10:45 am to TheHiddenFlask)
where do i go buy some nat'l gas at?
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kfizzle85
LSU Fan
en oh, el ay
Member since Dec 2005
20376 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 10:46 am to greenhead11)
quote:
short-term, as you said, nothing to push it up, but the mediumish-run demand economics augur for sustainable price appreciation as these things fall into place over the next 3-5 years, IMO.
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foshizzle
LSU Fan
Member since Mar 2008
25472 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 3:05 pm to kfizzle85)
quote:
I have no idea, but if I was trying to invest based on my perception of natural gas prices rising, I would absolutely want the commodity exposure and wouldn't shy away from it. JMO.
:runningtobuyGSG:
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TigerTatorTots
LSU Fan
The Rec, Middle Courts- retired
Member since Jul 2009
58704 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 3:19 pm to kfizzle85)
So is this thread saying that buying natural gas is good for a long term investment?
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TheHiddenFlask
Clemson Fan
The Welsh red light district
Member since Jul 2008
16420 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 3:59 pm to TigerTatorTots)
As a guy who works for one of the afore mentioned "big banks", that is the general idea.
We probably haven't seen the bottom, but the top is way above where we are right now.
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TigerTatorTots
LSU Fan
The Rec, Middle Courts- retired
Member since Jul 2009
58704 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 4:35 pm to TheHiddenFlask)
Thanks. I'm new to investing as I am not yet a year out of school. I've learned a lot from the the Money Talk!
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kfizzle85
LSU Fan
en oh, el ay
Member since Dec 2005
20376 posts
| re: Had a meeting with one of the large banks today... (Posted on 4/4/12 at 5:11 pm to foshizzle)
frick that, I don't want diversify away the play putting it into something with 40% crude exposure and only 1% true nat gas exposure (at least according to this) if that's the play I'm aiming for.
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