The Lemon Fool

Hi folks,

Not sure how this is all going to work out, but I'll show willing for old times' sake.

Could be quite an interesting time again in the oil and gas space as we head into 2017, because there is every chance that we resume a rising trend in oil prices. At the present time, oil company shares are pretty depressed and unloved - but I suspect this is a time of significant political change....and who knows what the consequences of this will be for the global economy and oil prices in particular.

Saudi Arabia is starting to float Aramco in 2017...... that will be a major exercise.

regards to old friends

ee

Hi ee

Great to see you make the first post on this board.

I'd really like to hear your views on the current O&G landscape.

(FWIW I have put a fair amount into HUR, am thinking of averaging down OPHR, and have a trading punt on FRR purely in anticipation of forthcoming hype)

Regards and respect

wand

Nice to see you back emptyend.

GN

Morning EE , I agree that it's a fascinating time in the sector, let's hope this Board makes a natural home for debating the best way of making money in O&G.

Saudi Arabia is starting to float Aramco in 2017...... that will be a major exercise

As usual, I'm showing my ignorance here, but I'm fascinated by this...for years people have wanted the inside story on Saudi reserves...surely no one will buy in until all the figures have finally been laid bare, warts and all. Not knowing the process, one assumes due diligence will be allowed or will it just be based on their figures...?

Tymeric...who finally lost the will to live, with GBP.....

If we could reproduce what we had 10-15 years ago it would be fantastic.

With the knowledge of the posters we had then, together with those learning about O&G since, we would have a formidable resource.

Perhaps we could all commit to having a positive constructive mindset for our mutual benefit.


Thanks to Clariman and Stooz for setting up the site.

Buffy

The last time we touched base was at the Aminex AEX AGM and presentation. Great news, EE, that you are so quickly on his site; let's hope it grows from strength to strength and matures well.

Marvo38

Hello All! Testing the font!

Great to see you here, ee. The good times are back....

I'm also up for a renaissance of discussion and information exchange about investment in E&P.

Having exited E&P completely some time back, I recently made my first very tentative return to E&P with a small slice (1%) of PMG and an even tinier sliver (.25%) of AEX. I have a feeling that we may soon reach a situation vs the oil price recovery which is reminiscent of Churchill's famous comment that "this is not the end, it is not the beginning of the end, but it is the end of the beginning". Of course it could still be years away from any real stabilisation let alone recovery, but I feel inclined to have a little exposure as a means of keeping me focussed.

T

PS - all for the proposal to keep things constructive and civil

GeoChem here, lets see how this goes though I don't expect to post too often. ATB.

Likewise - returning to the sector after a few years of hibernation, during which I rather stupidly hung on to most of my holdings in my SIPP, and added some RXP, ELA and small punt on AST around a year back. Action plan for coming weeks. Review and housekeeping. Seems to be a bit more PE cash coming back into the sector, and some stabilisation in oil price - even around $45-$50 likely to help. I'm looking for Cos focused on low dev cost/high net backs, so Africa large focus area.

Hi, ee

Never thought I'd see the day!

Maybe those groundhogs are in action.

I hope you stick with the new/old Lemon Fools and don't disappear again

KMcK

Thanks for the various comments and for the site. As most of you will know, I continued to post on the SIA board on ADVFN - albeit with some digressions into political matters over the last few months as (frankly) SIA in particular and most of oil and gas in general has been pretty dull. I'm not going to post (or even look in) here very frequently, especially as its been quite dull of late, but I do have hopes it will liven up. Neither will I be posting anything where I am expected to have some specific knowledge - so don't bother asking!

Someone asked about a general view on the sector, so I'll give my take on that:

No-one saw the extensive oil price fall in 2014 coming. Still fewer did much about it (tournesol being a somewhat fortunate exception). I got that seriously wrong, thinking that it wouldn't get much lower than $70 - and also expecting to see a slightly quicker and much sharper rebound. But we are where we are.....and that is a place that people think is a low-volatility, low-opportunity space. Are they right? They have been for the last year or so.........

Liquidity has drained away from the sector, especially in the London market which is now not the deep pool of capital that encouraged companies to list here. Debt has been difficult to raise, partly because of the weak oil price and partly because of the lack of general and sector-specific capacity. Equity has been even more difficult, because most prospects either cannot easily be monetised or they have project economics which are uncompelling in a $40-50 world. As a result, the focus has shifted from exploration (rank exploration is now unfinancable) to development and production - but even there selectivity rules! It isn't just the first well(s) that need financing - it is the whole development right through to production.....and that is causing very serious delays to, for example, extremely capital-intensive LNG projects. And deepwater is also pretty much off-limits to all other operators other than the majors. Field economics in mature locations like the North Sea are now highly marginal, raising the prospect of fields being decommissioned prematurely.

Fortunately, this massive and continuing squeeze on capex also brings with it some hope of an improvement. Depletion continues at a steady pace - and production is also falling for many companies due to lower capex. Only companies that had a big development pipeline in 2014 have been able to buck this trend and raise production - thus ameliorating the impact of the price decline. Arguably both supply and demand are now under some pressure - the former from depletion, capex squeeze and (as ever) politics and war taking supply sources offline...... and the latter from subsidised renewables and substantial improvements in battery economics for electric vehicles etc. This big question will be what path supply and demand will take on the next 5-10 years.....

...and that is the difficult bit!

That is why I mentioned the Saudi sale of Aramco. They have said they expect the oil price to be materially higher by H2 2017, when they plan to start selling the first 5% stake. Certainly it will need to be! As you know, OPEC have a meeting at the end of this month - and there is talk of coordinated output limits involving Russia and Iran for the first time.....and perhaps others too. Can they deliver that and will it have much impact? The market is betting not. But markets have been wrong before.....going right back to 1999 (amongst other occasions) when I first invested in oil and gas three weeks before an OPEC meeting was expected to agree nothing material.....and was actually the start of a major bull run for oil prices.

I'm relaxed about the demand impact of renewables. Heavy subsidies will come down and perhaps end......consumers (and voters) won't wear it for much longer. Batteries will continue to power more electric vehicles, but will still be only marginal (I've leave it to others to consider the extent to which supply of battery minerals can be raised). There are still chunks of the world's population reliant on coal-fired power stations or even burning charcoal. Gas, in particular, is still an important part of the generating mix especially when nuclear continues to be resisted. But oil will also remain important.

In sum, I think there is still a persistent negative pall over the sector. Many institutions are out altogether and virtually all are still underweight. And it is similar for individuals. However, the attractions of other sectors and markets don't look very compelling either......and apart from trading macro changes (such as the currency/export impacts from Brexit etc) we look to be stuck in a low-return, low-opportunity environment for a while.

So I wouldn't ignore it altogether. And I think that private investors may have greater opportunities to get in and out than the institutions .....if they remain alert for opportunities. For example, Sound Oil's shares quintupled over Q3.... so companies that are actually active in the current dead market can still offer interesting upside. Just perhaps far fewer of them than we were used to 10 years ago?

I feel like Bill Murray

Only wish I hadn't aged.

Hello all,still lurking,with less money.

How does it play out with Trump in Power I wonder.

Presumably positive for oil :

Less subsidy for renewables -> greater demand for oil
Saudi/US relationship sours -> Saudi spend more and need higher oil

Negative:
World demand for oil tanks with economic instability
More oil production in US -> increased US oil production

nigelpm wrote:How does it play out with Trump in Power I wonder.

Presumably positive for oil :

Less subsidy for renewables -> greater demand for oil
Saudi/US relationship sours -> Saudi spend more and need higher oil

Negative:
World demand for oil tanks with economic instability
More oil production in US -> increased US oil production

As a climate change denier (it is just "weather" apparently), it will be full steam ahead for tar sands, shale gas and anything else messy. Add to this the reluctance to import oil from 'dodgy' muslim nations and there is an upside for the US domestic oil industry.

Having said that he is also going to 'build a wall' and get the US economy growing by 5-6% with apparently no detailed plans for either. Plenty of hot air and rhetoric but by the time he takes power in January the markets should have had time to get used to things.

I'm not sure oilers are that cheap at the moment, they look cheap, but not bargain territory.

I say this because if you divide the oil ETF by the price of oil, and look at it historically then it doesn't look ultra cheap at the moment.

you can see this on stockcharts by using $xoi:$wtic and change the date range going back 15 years etc, taking log scale off.

I think oil will rise, but not yet, and I also think oilers will get cheaper before they rise.

regards

Steve W

Good to see some old names from TMF here - and ee as well, now that's a welcome surprise.

Like many I didn't see the long fall in oil prices coming, and whilst I did clear all the oilies out of my SIPPs eventually, I left it a little late and lost money I should not have. C'est la vie

Happy to watch the oil situation improve - hopefully - not yet convinced how the recent OPEC production news will play out though - will cuts really happen - and does OPEC per se really matter any more.

But I digress - good to have such a board again.

As for O&G, I am left with BP.L which I bought while Macondo was causing panic, it's currently about 12% over what I paid—but also provides a little revenue stream.

Other than that I have a couple of minnows that are now worth so little I think the commission would wipe the proceed of any sale!

Glad to have stayed strong in my arguments against imminent Peak Oil on the Fool...

SW10