Late-Winter Blues

By Robert Rapier and Igor Greenwald • March 13, 2014 • Issue Articles

In this issue:

The Gulf of Mexico has been overshadowed of late by the shale bonanza, but it remains a vital part of the domestic crude supply and a potential source of windfalls, as a new merger between two producers reminds us. We survey the recent history and the outlook, along with lists of the leading Gulf producers

Broader market action has been unrewarding to energy stocks of late despite the high energy prices, and more trouble looms in the months ahead as shale production gains pump up the world’s spare production capacity.

Those looking for an antidote to such worries could do a lot worse than the two MLPs we’re recommending this week, one set to profit handsomely from exports of LNG and the other delivering a rich yield by retailing propane.The former has a big repurchase plan while the latter has seen recent insider buying. And while neither guarantees short-term success, these are hopeful facts. Here’s another one: Spring is coming.

Portfolio Action Summary

Adding Energy Transfer Equity (NYSE: ETE) to the Growth Portfolio. Buy below $52
Adding AmeriGas Partners (NYSE: APU) to the Conservative Portfolio. Buy below $51.

Commodity Update

The price of West Texas Intermediate (WTI) finally fell back below $100 per barrel. WTI traded Wednesday at $98.73/bbl, down $3.11/bbl from two weeks ago. Brent traded down $1.77/bbl to $107.76, increasing the Brent-WTI spread to $9.03/bbl. The front month natural gas contract flipped over to April, and traded Wednesday at $4.49/MMBtu, which is down $0.49 from two weeks ago when the front month contract was still March, but $0.78 higher than the price a year ago.

In Other News

Energy XXI (Nasdaq: EXXI), the 12th largest producer of oil in the Gulf of Mexico in 2013 announced it is planning to pay $1.5 billion to buy EPL Oil & Gas (NYSE: EPL). This would make it the largest publicly traded independent oil producer in the shallow Gulf of Mexico. I discuss Gulf oil and gas producers in a segment below.
While the federal ban on crude exports is likely to remain in place, oil companies are finding loopholes around the rule. Refiners have been upping the exports of finished products for several years, and now BP (NYSE: BP) has contracted to take 80 percent of the capacity of a new $360 million mini-refinery that will minimally process the crude, making it eligible for export.
With last week’s natural gas inventory report from the EIA, this winter officially marked the largest withdrawal of natural gas from storage on record.
Chevron (NYSE: CVX) cut its 2017 production forecast by 6 percent due to project delays and asset sales, but increased its baseline for oil from $79/bbl to $110 a barrel. (My thesis has always been that oil companies could benefit from global decreases in oil production because of a resulting much higher percentage increases in oil prices).
Senate Democrats held a nearly 15-hour all-night climate change session, in which they gave speeches on the Senate floor urging action to fight climate change.

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About The Author

Robert Rapier

Bio | Archive

It's hard to imagine anyone better suited to covering the energy-investment waterfront than Robert Rapier.

Robert is no armchair analyst—he has two decades of in-the-trenches experience in a wide range of fossil fuel and biofuel technologies, including refining, natural gas production, gas-to-liquids, ethanol production and butanol production.

During a six-year stretch at ConocoPhillips, Robert ran a team of engineers in Scotland working on oil and gas projects in the North Sea.

For two years, Robert was an efficiency expert in a Texas petrochemical plant. The process changes he implemented saved the facility $9 million a year. He later worked as the Engineering Director for a Dutch environmental-technology company and provided engineering support for a Chinese facility the company was constructing.

Robert was also a butanol engineer in Germany for the Celanese Corporation, where he designed a novel butanol unit that cut production costs by $5 million per year.

In all, Robert has spent more than a dozen years working on liquid fuels technologies. Along the way he's picked up five patents, including one for a breakthrough way to convert ethane into ethylene (U.S. Patent 7,074,977).

Now, in addition to guiding readers to timely investments in Utility Forecaster and Rapier's Income Accelerator, Robert travels the world evaluating startup energy companies for deep-pocketed investors. After grilling management and assessing the technology on-site, he makes a go/no-go investment decision. His wealthy private investors and hedge fund backers trust him to make the right choice for the same reason we do: his vast real-world experience in just about every facet of the energy industry. If Robert votes thumbs-up, millions of dollars flow into these cutting-edge outfits.

Robert earned his master of science in chemical engineering and a bachelor of science in chemistry and mathematics (double major) at Texas A&M University. He tells us he was "this close" to finishing his Ph.D. before he decided he was having a lot more fun making money in energy stocks.

A prolific writer, Robert's articles have appeared in Forbes, The Wall Street Journal, The Washington Post and the Christian Science Monitor -- and he has been a featured expert on 60 Minutes and The History Channel. His new book, Power Plays: Energy Options in the Age of Peak Oil (Apress, 2012), helps investors sort through doom and gloom, hype and misinformation to understand the true costs, benefits and trade-offs for each of our major energy options.

In what little spare time he has left, Robert consults for a number of energy projects, including biodiesel, ethanol, butanol and biomass gasification facilities.