Crude Oil

Oil Trades Near Week High on Stimulus Outlook, Mideast Unrest at Bloomberg.

U.S. crude oil production (ex-Alaska) reaches a 23-year high in JuneAEI.  The industrial side of the shale boom:  Reuters.

“Continental Resources Inc.’s daily oil production surpassed 100,000 barrels a  day for the first time in June, the company announced.”  NewsOK

Marathon Oil (MRO) spins off the refining business into Marathon Petroleum (MPC) and the dividend growth guys grab onto the refining business?  Dividend Growth Stocks.

“The oil companies will get better at this, not worse. They will get smarter about how to do it. Techniques will improve. Costs will fall, not rise. Production will exceed the imaginations of the geologists once again. Prospective acreage will swell. Reserves will mushroom. Oil prices will fall.”  Daily Wealth

Meanwhile, “The Biggest Untapped Oil Fields In The World” are wholly uninspiring.  Three aren’t even big next to the world stage.  The fourth is in Iraq, the fifth in the Atlantic ocean, and the sixth will always have low flow rates because it’s not even an oil field, it’s a mining operation.  Business Insider

U.S. rig count down a tinge at Haynesville Play.

The Asians are after North American natural gas.  “Shell said it had applied to the National Energy Board for a licence to export up…equivalent to 3.4-billion cubic feet per day, fully a quarter of Canada’s entire output in 2011.”  Globe and Mail

Canadian Income

Simply said, $70 would cause a slew of problems for oil producers.  Don’t look now but unless it is being priced of against waterborne oil, we are there.  Economics get very skinny and capital budgets outspend cashflow with low oil prices.  Yes Virginia, the oil producers are very leveraged to commodity prices.  Yet natural gas is showing signs of life and could be the turn-around story next winter, while NGL’s may be the next in the tank.

Today Canada’s Progress Energy (PRQ.to) is higher by 74% after agreeing to be bought by Malaysia’s state oil company for $4.7 billion in cash.  The plan is to send natural gas west in a few years.  Those Asians, always thinking long term!

With oil down $2ish, natty down a dime and the market down a full percent, many energy names are hanging in there.  Canadians income plays BTE, PWE, PGH, ERF, and FRU.to are all higher as the income seeking money flows to them from PRQ.to.  Even if they might have to cut their dividends.

Down & Dirty with Coal

Steel-making met coal has remained strong so far, a commodity I lump into the ‘industrialization of China’ investment bucket.  But most U.S. producers are electrical generation thermal coal production heavy.  Thermal coal on its own competes well in the energy marketplace.  However, thermal coal currently has two enemy’s:  The global warming/climate change crowd and excess natural gas production.

Coal: The rising star of global energy production from Globe and Mail.

Coal, Renewable Energy’s Dirty Step Child at Oil Price.

Arch Coal lays off 750 workers due to ‘unprecedented downturn’ from Mining.

Peter Epstein recent well done recent essays:

  1. Is The Powder River Basin The Next Central Appalachia? Peabody, Arch And Cloud Peak Hope Not
  2. Alliance Resource Partners
  3. Coal Stocks Killed, But Survivors Not Hard to Find

A well done piece on very distressed Patriot Coal:  Distressed Debt Investing.

Oil & Gas Dozen

Oil, coal and solar in China at Bloomberg.  Oil demand in India:  Reuters.

North American spot crude oil benchmarks likely diverging due to bottlenecks from the EIA.

“Vast fortunes await those willing to quickly claim Canada’s still-unknown troves of tight oil reserves, though it may cost them a small fortune first.”  Financial Post  Drug tests coming to the oil sands this fall at Mining.

Oil and stock market divergence:  Sober Look.

A month old, but Investing in the Eagle Ford Shale Oil Play from Oil and Gas Investments.

I’m not sure posting this is a good idea:  Oil and the CRB Approaching a Final Bottom.  Gold Scents

Statoil: Natural Gas to be Fuel of the FutureRigzoneLNG seen viable fuel for heavy-duty trucks at Oil and Gas Journal.

Oil and natural gas ratio:  Bespoke.

A fascinating look at Chesapeake’s MLP sale:  MLP Guy.

Investment Income Idea

Twice recently we’ve warned against chasing yield.  On Tuesday Forbes pumped a high yielding energy name, which promptly cut their dividend in half later that day.  Oops.

Here is a name to consider:  Natural Resource Partners (NRP).  NRP operates a favorite business model of mine:  Royalties.  NRP does not get their hands dirty, they just take a cut off the top line.  The asset base is predominately coal, of which we’ve noted the bloodbath.  NRP’s business model, met coal production and Illinois assets have softened the blow.  And NRP is moving into other businesses.

As an MLP, the yield on NRP is 9.60%.  The market cap is $2.4 billion, year end 2011 long term debt was $836 million with cash on hand for growth of $215 million.  Revenue expectations for 2012 are from $335-380 million, a range expected to be tightened up mid-year.  The EBITDA margin in 2011 was 87.5%.

Moreover, with the security bumbling along at a 52 week low, risk management for a position would be easy to define.  Good luck!

Further research:  Latest annual report and 10/kLatest presentation; and a recent piece on Seeking Alpha.