Oil price discussion and analysis

[Realist]

Re: OIL AGAIN!

Exactly. You want low interest rates AFTER you take out the mortgage, not before.

Interest rates are variable. What is 6 months or even 5 years of high interest out of a 30 year loan? Not much.

 

[michael_selway]

Re: OIL AGAIN!

Ahh to easy.

Before I had even read the newspaper that morning the downgrade was announced the share price would have dropped. Many others hear news before I do. Market efficiency means the share price will dive - probably more than it needed to.

The share price may be $12 now (depending on the severity of the downgrade).

So would I now buy the company?

Hell yes, it makes $100M NPAT consistently year after year, and I get it at a discount. I'm planning to own it for the next 20 years so now is a great time to buy.

(the exception is if the NPAT becomes a loss) - if $100M becomes $40M so be it. But as I said before I do not like losses.

"Due to a sudden downturn in sales we now expect the next FY NPAT to be
around 50mil NPAT, but expect 50mil NPAT to be maintained from then on indefiently"

Thats the seveirty of the downgrade, the max ill pay is $10 based on those forecast numbers and the risk assumtions

So if it falls from 20 to 15 and stays there, i stilll wont buy, still too expensive. If it fall sbelow 10 then yeah one say probably buy it once dust settles.

Doesnt matter that it earned 100mil last year, future has changed now. Its not making a loss but just much less NPAT now than before

thx

MS

 

[Realist]

Re: OIL AGAIN!

"Due to a sudden downturn in sales we now expect the next FY NPAT to be
around 50mil NPAT, but expect 50mil NPAT to be maintained from then on indefiently"

Thats the seveirty of the downgrade, the max ill pay is $10 based on those forecast numbers and the risk assumtions

So if it falls from 20 to 15 and stays there, i stilll wont buy, still too expensive. If it fall sbelow 10 then yeah one say probably buy it once dust settles.

Doesnt matter that it earned 100mil last year, future has changed now. Its not making a loss but just much less NPAT now than before

thx

MS

Hi Michael,

Yes you, and the majority of investors look at future earnings and give it great importance, so you are more likely to pay alot for a company with great prospects, and you are not willing to buy a company with poor prospects. It is the way most people invest and I can see why.

But I am the exact opposite though.

I am not willing to pay too much for a company with great prospects because prospects are merely future predictions - they are not facts.
I am however willing to buy a 'great' company with poor prospects for a cheap price. Because I know companies evolve and change, and I am willing to hold for a long time.

Neither is right or wrong as such. But I believe my strategy can get me a great company for a great price. A couple of years of low earnings is irrelevant if you got it cheap and hold for 30 years, and I also know that predictions and projections are often wrong, and market sentiment can swing to extremes, severely overvaluing a company that has good prospects, and severely undervaluing a company that has poor prospects. And I know companies evolve and change to remedy poor longterm prospects - Coke used to sell just sugary drinks, now they sell water and diet drinks.

What shares have you bought recently out of interest?

the last couple I bought were CDO and PRG. CDO released a poor outlook, PRG a good one.

 

[scsl]

Re: OIL AGAIN!

oil is up sharply tonight! it's about $76.70 at the moment...

seeing as august and september are the peak months for Gulf Coast hurricanes and with the Middle East situation probably worsening, maybe this could be the start of the next leg up?

 

[YOUNG_TRADER]

Re: OIL AGAIN!

oil is up sharply tonight! it's about $76.70 at the moment...

seeing as august and september are the peak months for Gulf Coast hurricanes and with the Middle East situation probably worsening, maybe this could be the start of the next leg up?

Unfortunately it would appear so,

I shudder to think what a hurricane will do to the Oil Price, $100 US? ?

Oil will most likely hit the target of $100 US before Gold reaches $1000 US

 

[scsl]

Re: OIL AGAIN!

Unfortunately it would appear so,

I shudder to think what a hurricane will do to the Oil Price, $100 US? ?

Oil will most likely hit the target of $100 US before Gold reaches $1000 US

YT, it seems pretty likely that oil will break $100 before gold reaches $1000. but having said that, the tensions in the Middle East and further global inflation worries could make gold run up as well...

just saw a news update that petrol in Australia could reach $1.80! boy is that gonna be painful!! which will lead to inflation staying high, particularly headline CPI inflation, and another rate rise before the year's out.

 

[doctorj]

Re: OIL AGAIN!

For those that haven't seen the news, BP announced today (or yesterday perhaps) that they will have to shut in the Prudhoe Bay oil field in Alaska after detecting corrosion in the pipeline away from the field. It's not known how long it will take to fix; Credit Suisse engineers estimate anywhere from weeks to months on the optimistic side. BP have said that production won't recommence until the company/regulators are satisfied the problem has been rectified.

Prudhoe Bay is responsible for about 8% of US oil production or 400k barrels a day.

My understanding is that BP previously determined that normal corrosion prevention maintanence didn't need to be done on the pipes as their xrays/ultrasounds indicated the pipe was in satisfactory condition and they simply flushed it with an anti corrosive agent.

 

[Smurf1976]

Re: OIL AGAIN!

With the shutdown of 400,000 bpd of production at Prudhoe Bay due to corroding pipes the overall supply situation just got worse.

US hurricane season is on the way too, so no surprise to see rising prices.

Also, I'm yet to be convinced that the reason for production falls in Saudi Arabia, which seem to have been getting worse for months now, is really because they can't find anyone to buy the oil. Can't find a way to produce it more likely IMO.

Iran is also reported to be drawing down stocks to meet demand.

 

[Smurf1976]

Re: OIL AGAIN!

Looks like doctorj was posting the same thing as I was typing...

 

[doctorj]

Re: OIL AGAIN!

Do you know if the Saudi's hold, or held, significant stock piles of oil?

If they didn't I'd have expected production to reduce/prices to increase much more sharply if their some of wells had started pumping water.

I don't think we've come to the Saudis running out of oil just yet.

 

[pacer]

Re: OIL AGAIN!

So shouild iI buy or sell WPL....Hurricaine season and all......I dont Know where they base most of thier opperations so would like a bit more info.......?

 

[michael_selway]

Re: OIL AGAIN!

So shouild iI buy or sell WPL....Hurricaine season and all......I dont Know where they base most of thier opperations so would like a bit more info.......?

Smurf, do u think $40/barrel is likely?

Woodside boss predicts fair oil prices
Email Print Normal font Large font August 20, 2006 - 11:49AM

Advertisement
AdvertisementWoodside Petroleum boss Don Voelte says world oil prices will return to reasonable levels of about $US40 a barrel, but it won't happen any time soon.

The chief executive of Australia's biggest independent oil and gas producer said demand for the resource, with prices soaring in recent months, plus disruptions to supply and world-wide tensions, would keep prices up probably until next year.

"I'd say at least for the rest of this year, probably into next, what you see is what you'll get," Mr Voelte told ABC TV.

"(But) I do predict oil to come back down I think in a reasonable level.

"I think the area we have to prepare for is about $US40 a barrel, somewhere in that range."

Crude oil prices rose to $US71.14 per barrel in New York on Friday, up $US1.08...

http://www.smh.com.au/news/Business...fair-oil-prices/2006/08/20/1156012399198.html
http://www.abc.net.au/insidebusiness/content/2006/s1719280.htm
http://www.abc.net.au/reslib/200608/r101818_311329.asx (Video)

 

[Smurf1976]

Re: OIL AGAIN!

Do you know if the Saudi's hold, or held, significant stock piles of oil?

If they didn't I'd have expected production to reduce/prices to increase much more sharply if their some of wells had started pumping water.

I don't think we've come to the Saudis running out of oil just yet.

I'm not certain as to actual capacity (70 million barrels comes to mind) but to my understanding the Saudi's do have substantial tank farms for storage.

It is quite possible that the actual production never reached the 9.6 mmbpd or so that they were "producing" 6 months ago. They could have just been drawing down stocks which would explain why production has dropped significantly in recent times (official line is they can't sell the oil).

Official data puts Saudi wells on average declining at 8% per year. They can maintain production only by constant drilling of new wells. The main concern is that many of these wells are being drilled into the same reservoirs as the depleting wells - more holes in the ground to get at the same oil. If those reservoirs were to undergo a spectacular decline (quite possible - it's happened using the same technology in Oman and Russia) then they simply couldn't maintain production. That's a big "if" however since the West hasn't had proper (uncensored) data since the 1970's on key Saudi oil fields.

As for water, officially 30% of the liquids extracted at Ghawar (largest Saudi oil field) are water. This used to be somewhat higher until they (presumably) closed the wells that were flowing very high amounts of water.

Water itself isn't a problem (though it can be - look at the corrosion in Alaska with their reported 75% water cut) - it's how much oil that comes up with it that matters. That said, when water starts coming up it's a bit like having blood come out of your body. You feel fine but it's a warning sign of trouble.

 

[WaySolid]

Re: OIL AGAIN!

Smurf what are your sources for your quoted data?

Official data has the Saudi oil wells going down at 8% a year? How official exactly?

Seeing as the Saudi's are very secretive and the chief oil minister continues to tell the world don't worry be happy for the next 50 years, I can't think the source is that official!

The Saudi's huge push into the promotion of local tourism as an industry and their appetite for gold speak much louder than their words for me.

 

[DB008]

Re: OIL AGAIN!

I heard/read somewhere that some of the wells in Saudi are on the way out as they have been pumping to much water into them to extract the oil.
Then again, l just saw on the news that discovered a new oil field off the US. Who knows where the price is going? If l knew where the price was heading, l'd be rich.

 

[Smurf1976]

Re: OIL AGAIN!

Smurf what are your sources for your quoted data?

Official data has the Saudi oil wells going down at 8% a year? How official exactly?

Seeing as the Saudi's are very secretive and the chief oil minister continues to tell the world don't worry be happy for the next 50 years, I can't think the source is that official!

The Saudi's huge push into the promotion of local tourism as an industry and their appetite for gold speak much louder than their words for me.

That is the official line from Saudi Aramco. That their wells (as opposed to fields) are declining at 8% per annum.

It does seem to be perfectly reasonable number. Practically any individual oil well that isn't reasonably new will have ongoing continuous decline and those in Saudi Arabia would logically be no exception.

That they have quite a number of active drilling rigs and, at best, flat production capacity (though actuall production has declined - supposedly because nobody will buy their oil) adds considerable weight to this. It's perfectly normal to be drilling additional production wells to offset decline and this appears to be what they are doing.

If their fields, as opposed to individual production wells, start declining at that rate then it's time to panic.

Likewise if they stated their wells were not declining at all then that would be clearly not true unless Saudi wells are incredibly different to those everywhere else. Unlikley.

 

[DB008]

Re: OIL AGAIN!

http://www.msnbc.msn.com/id/14678206/from/RS.1/

 

[mime]

Re: OIL AGAIN!

About that big find in the gulf. It will take years to get the feild running and make little change to the current demand for oil.

 

[Smurf1976]

Re: OIL AGAIN!

IThen again, l just saw on the news that discovered a new oil field off the US. Who knows where the price is going? If l knew where the price was heading, l'd be rich.

Proper figures aren't available yet and won't be for some time. But when initial estimates show that the biggest oil discovery in years might ultimately produce enough oil to run the world for 5 WEEKS then you start to understand what the problem is...

It is a big discovery only in the context of disastrous discovery results in recent years. Based on what is announced so far, it's pretty much irrelevant compared to any real, major oilfield. Small even compared to Alaska and less than 2% of all oil discovered in the US to date. That this is the best the industry has done for a long time is the very nature of the oil problem...

It's still good news however. But it doesn't materially change the oil supply situation unless it is very much larger than initial estimates show. Producing less than 0.5% of world supply for 20 years isn't going to change everything although obviously it's good news for those involved with it.

 

[Smurf1976]

Re: OIL AGAIN!

Too late to edit...

Those figures are for the lower end of the estimated size, 3 billion barrels of liquids (oil and condensate). The upper end is 15 billion barrels - about what the world uses in 6 months. Better but still not something that will change the situation radically.