Energy, Energy Service, Natural Gas & Oil Sectors
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- JenL_2
- Hughey
- lcha
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- lcha
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- JenL_2
- lcha
- Kirk
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» lcha - More puzzle pieces
Energy: The crisis has only just begunU.S. recovery will tax gas and oil production, analysts say
By Martin Cej & Lisa Sanders, CBS.MarketWatch.com
Last Update: 7:45 PM ET July 13, 2001
SAN FRANCISCO (CBS.MW) -- If the U.S. energy crisis is over, someone failed to inform the people who ought to know best. From Houston to Calgary to London, oil and gas chief executives are busier than they've been in decades.
North America's petroleum industry has seen five multibillion-dollar takeovers in the last two months, and a score of smaller acquisitions, and there's no sign that trend is slowing down.
Indeed, if consumers and investors took a closer look at the petroleum industry these days, they wouldn't see a shamed bunch bracing for the end of the most recent energy boom-and-bust cycle. Instead, they would espy a throng of exploration and production companies behaving like marathoners, jostling and elbowing for position ahead of a long and profitable race.
"Technically, the energy crunch has not even begun," said Christopher Ellinghaus, a principal at New York-based investment bank Williams Capital Group.
Ellinghaus and others argue that a relatively mild North American summer, compounded by a slowing economy and falling commodity prices, have created a false all-clear perception about the supply-and-demand disparity that drove gas prices to record highs, prompted rolling blackouts in some states and sent one California utility into bankruptcy this winter.
A willful and potentially dangerous complacency has overtaken consumers after months of higher bills, dimming lights and political finger-pointing, analysts say.
"I don't know if we have the national will to solve it," said Bob Gillon, vice president and analyst at John S. Herold, an energy research firm. "Every time that it appears the immediate crisis has been solved, there's a tendency for the issue to go very far back in the public's consciousness."
New plants
Consumers and politicians point to a multitude of new power generation facilities going into development in the next two or three years that appear sufficient to meet the growing energy needs of the world's largest economy. Yet with gas supply unlikely to expand quickly enough to fuel those plants, Americans may be facing years -- not just few quarters -- of occasional blackouts.
The U.S. manufacturing economy has sunk into recession, forcing the closure of plants and the shuttering of offices. Aluminum smelters, fertilizer factories, telecommunications equipment manufacturing facilities and dot-com offices have closed their doors in recent quarters. Record-high natural gas prices prompted many industrial facilities and electricity generating plants to switch over to other fuels for their energy needs.
To be sure, consumers have some cause to feel optimistic, at least in the near term. U.S. natural gas storage operators have injected about 13 billion cubic feet a day of gas into storage since April 1, almost double last year's rate of 7 billion cubic feet per day, according to the American Gas Association. That has pushed inventories 185 billion cubic feet above last year's levels. According to the AGA, Americans consumed 22,775 billion cubic feet of gas in 2000, an increase of 4.9 percent over 1999. In other words, much of the gas going into storage now is gas that would have been consumed a year ago by the normal functioning of a robust economy.
So, if the nation's economy can right itself in the final quarter of this year and hits its stride midway through 2002, as most economists expect, U.S. consumers will likely find themselves facing price hikes and blackouts similar to those suffered through the winter.
"If the economy is going to get better, we'll be back to the shortage problem again," said Bill Church, portfolio manager of the SG Cowen Small-Cap group.
History lessons
But even if there's plenty of gas in storage to meet the demand spikes seen in the recent past, the apologetic mantra hummed by a legion of technology fund managers these days holds true in this instance: past performance is no guarantee of future results.
"We can build all sorts of energy plants, but when the economy recovers there'll be a lot of competition for that gas," Ellinghaus said. "The number of plants in development for the next five years would require a 50 percent increase in the supply of natural gas."
Unfortunately, natural gas production rose just 2.4 percent in 2000, according to the U.S. Energy Information Administration. And that was a boom year for the industry.
"A record number of gas wells are being drilled right now Dictating demand
Analysts at Raymond James & Associates say the volume of gas in storage will approach historically normal levels by the end of the summer injection season. Raymond James adds, however, that the demand side of the equation is still the primary factor determining whether a more severe and enduring energy crunch lies ahead.
An improving economy, new electricity generating facilities and the potential for surprise cold snaps and heat waves will all take their toll on supplies.
Stringham cautions that one "strong heat wave would have a tremendous impact."
And don't bet President Bush's aggressive energy plan will yield results anytime soon.
The White House is powerful, but so is the U.S. environmental lobby. And the oil and gas beneath the Alaskan National Wildlife Refuge, where Bush wants to allow drilling, in the northeast corner of the state is a long way away geographically and developmentally.
While it's true that there are massive natural gas reserves beneath the Beaufort Sea off the northern coasts of Alaska and the Yukon Territory, and U.S. companies such as Conoco have a firm foothold there, it will take years for that gas to get to market.
"The infrastructure doesn't exist yet," Stringham said. "The gas has to get to the hub, and the fastest estimates for delivery are in five to seven years."
The people poised to benefit most from the demand for northern gas in the next few years are not consumers but shareholders of companies such as Mexico's Tamsa (TAM: news, msgs, alerts) , which builds the seamless pipe for gas pipelines, and oilfield services companies including Halliburton (HAL: news, msgs, alerts) , Schlumberger (SLB: news, msgs, alerts) and Precision Drilling (PDS: news, msgs, alerts) .
Petroleum producers focused on gas production such as Anadarko (APC: news, msgs, alerts) , Apache (APA: news, msgs, alerts) and Canada's Alberta Energy (AOG: news, msgs, alerts) are also likely to see their earnings continue to grow for years to come.
Ellinghaus of Williams Capital also points to a handful of electricity generators, including Calpine, Duke and Dynegy that will help keep investors' portfolios warm in the coming quarters, even as consumers shiver in the dark.
"The structural issues on the U.S. energy side have not been addressed," warned Stringham of the Canadian Association of Petroleum Producers. "There is potential for a much bigger crisis than they've had."
and that has helped to alleviate the imbalance, but the trend has not gone away," said Greg Stringham, vice president of the Canadian Association of Petroleum Producers. "There have been very moderate temperatures in North America recently, and that has allowed a lot of gas that would normally be used for electricity generation to go into storage."
So far this year, Canada has provided 15.4 percent of the total crude oil imports into the United States, compared with 14.6 percent from Saudi Arabia and 11.5 percent from Mexico, according to the U.S. Energy Department. Canadian natural gas already accounts for about 94 percent of the gas the U.S. imports.
What energy crisis? The whole things been made up by the White House and Big oil.
Ya'll just go on about your business now, soon as we lock up a few of the rascals the whole thing will be over.
-- posted by lcha
» JenL_2 - Re: More puzzle pieces
In response to message posted by lcha:Icha - You're right....
What energy crisis?
The whole things been made up by the White House and Big oil.
Ya'll just go on about your business now, soon as we lock up a few of the rascals the whole thing will be over.
As soon as the energy shortage crisis is perceived to be over .... as soon as energy prices go down....consumption will go up, further escalating the energy shortage. As Energy consumers - we might as well get used to paying through the nose, or at least paying the free market price....but at the same time as investors we can share in the profits of the energy suppliers....
The article says....
The people poised to benefit most from the demand for northern gas in the next few years are not consumers but shareholders of companies such as Mexico's Tamsa (TAM) , which builds the seamless pipe for gas pipelines, and oilfield services companies including Halliburton (HAL) , Schlumberger (SLB) and Precision Drilling (PDS).
Petroleum producers focused on gas production such as Anadarko (APC) , Apache (APA) and Canada's Alberta Energy (AOG) are also likely to see their earnings continue to grow for years to come.
<img SRC="http://pvcharts.quicken.com/bin/icenter...." width=470 height=250>
Petroleum stocks poised to benefit from increased demand?
Would be nice if somehow the boom and bust cycle for energy could be eliminated - but guess that's not how it works......Jen
-- posted by JenL_2
» lcha - Re: Re: More puzzle pieces
In response to message posted by JenL_2:The people poised to benefit most from the demand for northern gas in the next few years are not consumers but shareholders of companies such as Mexico's Tamsa (TAM) , which builds the seamless pipe for gas pipelines, and oilfield services companies including Halliburton (HAL) , Schlumberger (SLB) and Precision Drilling (PDS).
Here's why I don't particulary like energy service stocks right now.
Halliburton:
P/E 57.8
profit margin 2.2%
operating margin 4.7%
return of asets 2.68%
return on equity 5.67%
Schlumberger
P/E 35.1
profit margin 7.7%
operating margin 10.4%
return of asets 5.1%
return on equity 10.28%
These are not numbers that blow me away and are far below returns available with E&P companies.
Parallel Petroleum(PLLL)
P/E 9.61
profit margin 48.1%
operating margin 50.3%
return of asets 23.07%
return on equity 33.47%
Denbury Resources(DNR)
P/E 2.51
profit margin 69.6%
operating margin 46.5%
return of asets 42.93%
return on equity 103.17%
The numbers sort of speak for themselves.
Too bad I WORK for an energy service company! When it comes to dealing with Big oil, we're bent over even farther than consumers.
-- posted by lcha
» lcha - Canadian E&Ps
Based on trailing four Q`s from quarterly reports. Fully diluted. Friday`s close on TSE.P/CF, P/E, approx. % oil
-- posted by lcha
» lcha - Is Cheap oil over?
July 15, 2001, 6:31PMWorld running out of cheap oil that fuels economies
By SCOTT BURNS
It was a stunning idea. Have the Saudis buy billions in depressed equities just before they cut the price of oil to $10 a barrel. Then watch the stock market soar. Watch Western economies bubble. Watch interest rates fall.
That was the story line of Green Monday, a financial thriller. Published in 1980, it seemed far-fetched if only because the world was reeling from the impact of the second oil price shock, the one that followed the fall of the Shah of Iran in 1979.
In fact, Michael M. Thomas' novel was stellar economic prediction. The only difference between Green Monday and real events is that in Green Monday stock prices soared overnight. In reality, stock prices soared, economies boomed and interest rates fell -- but for 20 years.
As recently as 1998 we were still enjoying the boost in consumer spending created by low oil prices. In April of that year, oil-industry observer John S. Herold declared: "Oil is dirt cheap."
His newsletter compared oil at $15.25 a barrel with Coca-Cola at $78.73 a barrel and milk at $126 a barrel. Budweiser, priced the same way, was tragically expensive at $342.72 a barrel. The firm also noted that gasoline, at $1.12 a gallon, would save U.S. consumers a whopping $70.5 billion in a year.
In fact, 1998 may have been the last hurrah of cheap oil. It may also have marked the end of a global boom and the beginning of a struggle with rising energy costs that will never end.
Yes, you read that right. Never end. This may not be a momentary cycle or political phase. Rising energy costs may be a major secular trend.
It will change how we live.
If this change has a Rosetta stone, it is an article in the March 1998 issue of Scientific American. Written by Colin J. Campbell and Jean H. Laherrere, the article challenged the conventional wisdom of rising oil reserves.
The article, titled The End of Cheap Oil, asserted that global oil production would start to decline around the year 2010. Based on a global extension of techniques developed by geophysicist M. King Hubbert, the article showed that we were rapidly approaching the point where half of all oil reserves had been pumped out of the ground.
The article also showed that most of the recent increases in oil reserves were political fictions, that new finds were smaller fields and that global oil production would turn down as certainly as U.S. oil production had peaked in the late '60s.
Still worse, the authors predicted production would increasingly depend on the Middle East. "By 2002 or so the world will rely on Middle East nations, particularly the five near the Persian Gulf (Iran, Iraq, Kuwait, Saudi Arabia and the United Arab Emirates), to fill in the gap between dwindling supply and growing demand."
Campbell and Laherrere expected that the Middle East share of production would pass 30 percent by 2000 and "will quite probably hit 50 percent" by 2010. Thirty percent was the level that set the stage for the price shocks of the '70s.
It should be noted that the authors are not members of the gloom-and-doom school. They were careful to acknowledge alternative sources of oil that are, as yet, undeveloped. "The world is not running out of oil -- at least not yet," they declared. "What our society does face, and soon, is the end of the abundant and cheap oil on which all industrial nations depend."
One implication: The energy jolts of the last year could signal that we are about to experience the economic boom of the '80s and '90s in reverse.
Whether we focus on rising energy prices or their side effects, however, the important question is how we respond to the challenge.
· Readers who would like to read the original Scientific American article can download it at www.hubbertpeak-
.com/sciam983.htm.
· Readers interested in the Hubbert Peak concept can visit www-
.hubbertpeak.com.
· Readers who believe the Scientific American article is too pessimistic can experience world-class pessimism by reading about the Olduvai Theory at www.dieoff.com/page224.htm.
Visine sells for about $350,000 per barrel and it is 99.5% saltwater.
-- posted by lcha
» lcha - Environmentalist wish
Lcha's soapbox:It's time for the environmentalist(Envs) to re-focus from energy supply issues to energy demand issues. I would like to see the Envs petition the consumers of energy as much as they have petitioned the providers of energy and spur a period of conservation awareness and action unlike anything we have experienced so far.
The bottom line is we can not supply the energy that the current growth in demand is requiring. We have to slow the growth in energy demand down sometime so let's start now before we become too dependent on foreign supplies and/or it becomes too costly.
I want to see the Envs focus on the automakers to ensure much more fuel efficient cars in the future. I want to see the Envs focus on home and office builders so we get much more energy efficient homes and offices than we have now. I want to see the Envs focus on city planners so we get much more efficient designs of neighborhoods and mass transit options. I want to see the Envs focus on ALL electronics and appliance makers to ensure we are getting smart, energy efficient gadgets and STUFF. But nothing is going to change until the Envs start focusing on the consumers and not just the suppliers of energy.
The drug war has taught us that it is a futile effort to try to deal with just the supply side of the equation. Energy issues are no different.
Will it happen? Naw. Not until we see sustained $40 oil and $10 gas. Not until the dictatorships of the world are supplying 80% of our oil and we are either held energy hostage or forced to fight destructive oil wars(aka Gulf war).
That's one doodlebuggers(seismic term) pitch for conservation.
-- posted by lcha
» JenL_2 - Re: Environmentalist wish
In response to message posted by lcha:Thanks Lcha (Ah it's Lcha not Icha!) - hope your wish comes true....but don't hold your breath - it's easier for the Envs to go after Big Business than it is to go after consumers.
The doodlebugger name caught my imagination.....Here's a fun site that explains what a doodlebugger is...
....Jen
-- posted by JenL_2
» lcha - Re: Re: Environmentalist wish
In response to message posted by JenL_2:Jen, you are great! I didn't know that site existed. I started my career at GSI. They were eventually sold by Texas Instruments to Halliburton, merged with Geosource and then the whole lot was sold to Western Geophysical. It was then that we decided to start our own company.
GSI was the first geophysical seismic company. In the 1950's, in order to try to satisfy the massive computation requirements that seismic data processing and acquisition needed, GSI formed a division that would later become Texas Instruments. TI grew to dwarf GSI and GSI became just a subsidiary of TI.
I've sent the doodlebugger URL to several ex GSIer friends and by this time tomorrow night I bet at least 100 ex GSIers have it.
Thanks again!
-- posted by lcha
» Kirk - Re: doodlebugger
In response to message posted by lcha:. I've sent the doodlebugger URL to several ex GSIer friends and by this time tomorrow night I bet at least 100 ex GSIers have it.
You should invite them here and have them join in the discussion! The more experts the better!
-- posted by Kirk
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