| | | Hi Minka,
I used the impulsive 5 wave to sell off my high cost shares in: PUMP, PR, VTS. I kept all of my NOG.
The Iran Israel conflict boosted crude prices,
As the Ukraine war showed us, geopolitical conflict has a short shelf life in crude spikes.
Last quarter when crude dipped to the low 60's, and a short visit to the upper 50's the CEO of Vitesse (prior to that dip) said Crude in the mid 60's is more than profitable, and the new dividend is safe with that level.
Then the dip happened and his reposne was: "we'll reduce our production and accumulate more cash, with the hope of being opportunistic buyers of more wells being drilled by the big players who then look to the nonoperating players for partial funding". He also indicated that 2025 was all but hedged up completely and a lot of 2026 was already hedged.
Hedging is what the nonoperating E&P's do to limit risk.
It's my opinion that the Iran Israel conflict was a 12 day long period in which A LOT OF FUTURE HEDGING WAS ACHIEVED.
This should lock in 2025's earnings as 2026 becomes the window of more hedging.
G&R maintains thaa the Permian has reached peak production. Greater production will require more drilling, the completion of fewer Tier 1 wells (diminishing availability ) and more drilling of lower production wells into the future.
The economics of drilling are being brought down.
Duel fuel power generation and innovative technology creates many rigs going unused due to technology making drilling more efficient.
It was not just Permian who indicated that crude production will not be chased,and in fact curtailed awaiting a higher price, Apachee, Devon, and other mid size firms all joined in on the chorus.
We'll see after July fourth, that gasoline demand is alive and well.
Hot weather will also boost the demand for Natural gas, as the world wants to buy more LNG exports.
I think we're in a C wave now. If that morphs into bigger A wave , we'll see prices hurt earnings projection for later 2025.
If the world does not blow up in conflict and drillers stick to their limited Capex, we'll see better prices during the summer till driving seasons ends.
This earnings season will most likely continue the talk about CURTAILED CAPEX.
As Harold Hamm told Trump. DRILL BABY DRILL WON"T HAPPEN UNTIL WE S.EE $80.00 oil.
In between E&P's buyback more shares aggressively, which allows the solid dividend payments to continue.
OPEC+ can add oil. Only some of OPEX + has excess capacity as others have high cost oil and are not in a position to increase production.
Permian players can adjust to price.
The big changes are far out in time as the US needs to buildout the Gulf of America, and Alaska - multi year (5-6) projects.
NOG pays a dividend of $1.80 and VTS pays a dividend of $2.25. That gives a dividend yield of 9 to 10 % if you buy them via a put assignment. I got some VTS assigned early to me by selling some 7/18/25 $25.00 puts. The net purchase price was $23.31 and a yield of 9.65% (2 cents above the market price today after the dividend was paid today.) I'm tickled to hold them long term. I could have sold the puts for much more at the bottom of may's pricing.
All of these stocks were new stocks last year and the dip in crude showed me where I can be more patient - thus my selling off the high cost shares during the 12 day conflict.
That's just me and I'm learning these new firms.
Definitely holding my XOM and CVX shares of years back.
The attitude for fossil fuels has greatly been improved.
Reliable, inexpensive energy has been brought back into common sense after the election.
The world is now backing off the renewable madness.
In the future, demand for fossil fuels will continue to grow, as we pursue real answers from Hydrogen and Nuclear, and even coal, not to mention natural gas direct to corporate power plants used in AI applications.
The need for AI power has substantially change the fossil fuel appetite.
The flooding of corporate industrial production in the USA will drive it well beyond current expectations. IMO.
Long story short ,Permian firms have a very solid future.
I have learned to buy the dip in these as they go the way of seasonal demand of the underlying commodity.
I've trimmed high cost shares and am building cash from dividends and have unwound long ago puts sold via expiration, assignment (a little) and buying to close the large positions I had this spring in oil stocks.
Pretty much only have telco puts out there now.
Hope that helps.
Bob |
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