<any thoughts about the recent builds?>
I thought the first build was an aberration. I can't say that it is now that we've had 3 weeks in a row with significant builds. I don't know if its a robbing Peter to pay Paul or what but this trend can't continue if you believe net exports have peaked.
All eyes have to be on Saudi Arabia:
eia.doe.gov
I wasn't thrilled when I first looked at this chart:
en.wikipedia.org
After digging into the numbers though I think they are highly unrealistic:
en.wikipedia.org
Year over year Mexico adding 503 kbpd, Norway adding 175 kbpd, Russia adding 716 kbpd, etc.
If you take CERA's depletion rate of 4.5% * 85 mbpd of production = 3.825 mbpd of depletion every year. Adding 1.5 - 2 mbpd of demand growth means the world needs to add 5.3 - 5.8 mbpd annually for inventory levels to stay flat.
I like Canada's numbers as NXY, CNQ, and SU are all going to have initial production from their oil sand assets coming online this year. NXY Longlake 60kbpd, CNQ Cold Lake, Wolf Lake & Primrose 240 kbpd (this number seems aggressive), CNQ Horizon 135 kbpd, SU Firebag 140 kbpd
The entire strip is still above $85 so it is hard to get too concerned:
futuresource.quote.com
Excerpt from XOM 4th quarter report:
Worldwide Net production of crude oil and natural gas liquids
Q4 2007 - Q4 2006 - Annual 2007 - Annual 2006
2,517 kbpd - 2,678kbpd - 2,616 kbpd - 2,681 kbpd
So quarter over quarter from a year ago Exxon liquid production is down 161 kbpd despite this:
futuresource.quote.com
<Anything you're buying these days?>
Unfortunately I shot my wad too early again. I'm on margin about 2 million and am about 200K underwater on my trading positions. My portfolio hasn't changed much - I still hold COSWF, SU, CNQ, ECA, NXY, PWE, and TLM.
I still believe TLM is a steal at these levels but longer term I favor the other 6 stocks I own because of their oil sand assets. I plugged $85 oil into the CIBC cash flow estimates instead of the $68 that they are using and come up with $6.21 per share of cash flow for 2008 for TLM. That means right now at a price of $15.31, TLM is selling for 2.46 times annual cash flow. That would be an internal rate of return of 40%!
Unfortunately, I'm going to lie low for a while having shot my wad too early. I think the real crunch is going to be upon us by 2010 so I am looking forward to when the Jan 2011 leap options come out at the end of May, June, and July of this year. I might sell my long term stock positions and buy twice the amount of shares via really deep in the money leap options on them. I have to figure out the tax ramifications first and how much premium I would have to pay. I would like to double my position for what I think is going to be the opportunity of a lifetime. |
