Americas Energy Renaissance: Top Plays for Income and Growth - - PowerPoint PPT Presentation

America’s Energy Renaissance: Top Plays for Income and Growth

Elliott H. Gue January 18, 2014 Editor, Energy & Income Advisor Editor, Capitalist Times

Back to July 1988

The World’s Largest Oil and Gas Producer

US Energy Liberty Day is Approaching

US Enjoys Cheap Gas and Electricity Prices

The US Manufacturing Renaissance

It’s Morning in America

Where’s the Crude Coming From?

Half of American Oil Production is Unconventional

Where’s Oil Trading?

20 40 60 80 100 120 140 160

Oil Prices LLS WTI Brent WTI Midland Bakken

Refining: As Easy as 3-2-1

• Refiners are manufacturing firms:

convert oil to gasoline, diesel, jet fuel,

• ther products.
• 3 Barrels of oil ($93.82/bbl x 3) =

$281.46

• 2 Barrels of Gasoline ($2.68/ gallon x 42

x 2) = $225.12

• 1 Barrel of Diesel ($3.05/gallon x 42 x 1)

= $128.1

• 3-2-1 Spread: $225.12 + $128.1 -

$281.46 = $70.76 divided by 3 = $23.58 per Barrel.

5 10 15 20 25 30 35 40 45 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004 12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012

Crack Sprad ($/bbl)

NYMEX 3-2-1 Crack Spread

Crack Spread 1999 to 2013 Average

Valero Energy (NYSE: VLO)

Valero Energy (NYSE: VLO)

Shale Development: Where’s the Money Coming From?

$297 , 55% $112 , 21% $74 , 14% $53 , 10%

Major North American E&Ps Capital Raised Since 2007 Asset Sales Debt Equity JVs

Vanguard Natural Resources (NYSE: VNR)

• Recently acquired 87,000 Gross

Acres in Pinedale and Jonah fields WY.

• 80% NatGas, 16% NGLs
• Historically Hedges 85% of Gas

production through 1H 2017 and 75% of Oil through 2015

• Opportunity for more

acquisitions as producers need to fund shale.

• Yields 8.4%, Paid Monthly

1 2 3 4 5 6

Upstream MLPs and the Alerian

California is . . . . .Different

Pacific Coast Oil Trust (ROYT)

• Perpetual trust with an 11.7

percent yield.

• Produces 98 percent crude oil.
• Southern California fields are

mature and have a low decline rate, often well under 5%.

• 80% interest in developed

properties.

• 25% royalty interest in Diatomite

formation.

• Active waterfloods and

steamfloods

Going Horizontal

More Gas With Fewer Rigs

Drilling Efficiency Gas and Oil

Launch Pad for Growth

Patterson-UTI (NSDQ: PTEN)

• 60% of revenues from contract

drilling, 40% from pressure pumping

• 300 working rigs
• 2009: 75% of rigs mechanical,

2013: more than 50% electric, 126 rigs APEX.

• 6 New APEX Rigs (all “Walking”)

in 2H 2013, 12 in 1H 2014

The Denver-Julesburg Basin

Niobrara Offers Solid Economics

Noble Energy (NBL)

• First wells in the DJ Basin in

2010, last year drilled 195 Wattenburg, 25 in CO

• By 2016 plans 500 wells/yr. in DJ

Basin

• Liquids rich portion of Marcellus
• Eastern Med. Tamar 9 tcf and

Leviathan 17 tcf in Israel, Cyprus- A 5 to 8 tcf

Eni (NYSE: E)

• 16.81% stake in Kashagan in Caspian

Sea first oil produced middle 2013

• 100,000 boe/day in deepwater GOM
• 700,000 in new projects over 4 years,

3 to 4% annualized

• Mamba Complex Mozambique 30 tcf

gas

• Barent’s Sea Norway and Russia
• Disposing of non-core assets
• PIIGS discount unwarranted.
• Offers a 6.5% yield.

LyondellBasell Industries (NYSE: LYB)

• 80 percent of Companies EBITDA

benefits from favorable US NGLs prices.

• Ethane cracking capacity to

expand in 2014-2015, before competition.

• Using NGLs imported from USA

to reduce EU costs

• Near 3% yield and share

buybacks

Thank You.

Elliott H. Gue January 18, 2014 Editor, Energy & Income Advisor Editor, Capitalist Times 1-888-960-2759 Service@CapitalistTimes.com