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America’s Energy Renaissance: Top Plays for
Income and GrowthElliott H. Gue
January 18, 2014Editor, Energy & Income Advisor
Editor, Capitalist Times
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Back to July 1988
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The World’s Largest Oil and Gas Producer
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US Energy Liberty Day is Approaching
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US Enjoys Cheap Gas and Electricity Prices
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The US Manufacturing Renaissance
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It’s Morning in America
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Where’s the Crude Coming From?
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Half of American Oil Production is Unconventional
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Where’s Oil Trading?
10/7/2005
1/13/2006
4/21/2006
7/28/2006
11/3/2006
2/9/2007
5/18/2007
8/24/2007
11/30/2007
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6/13/2008
9/19/2008
12/26/2008
4/3/2009
7/10/2009
10/16/2009
1/22/2010
4/30/2010
8/6/2010
11/12/2010
2/18/2011
5/27/2011
9/2/2011
12/9/2011
3/16/2012
6/22/2012
9/28/2012
1/4/2013
4/12/2013
7/19/2013
10/25/20130
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160 Oil Prices
LLS WTI Brent WTI Midland Bakken
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Refining: As Easy as 3-2-1• Refiners are manufacturing firms:
convert oil to gasoline, diesel, jet fuel, other 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 = $23.58 per Barrel.
12/31/1
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NYMEX 3-2-1 Crack Spread
Crack Spread 1999 to 2013 AverageCr
ack
Spra
d ($
/bbl
)
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Valero Energy (NYSE: VLO)
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Valero Energy (NYSE: VLO)
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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
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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 1/4
/2008
8/8/2008
3/13/2009
10/16/2009
5/21/2010
12/24/2010
7/29/2011
3/2/2012
10/5/2012
5/10/2013
12/13/20130
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Upstream MLPs and the Alerian
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California is . . . . .Different
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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
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Going Horizontal
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More Gas With Fewer Rigs
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Drilling Efficiency Gas and Oil
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Launch Pad for Growth
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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
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The Denver-Julesburg Basin
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Niobrara Offers Solid Economics
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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
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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.
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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
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Thank You.Elliott H. Gue
January 18, 2014Editor, Energy & Income Advisor
Editor, Capitalist Times1-888-960-2759