When to enter or reenter PFIE

If the POD is accurate, the second half of 1015.

Has Oil Reached a New Bottom?
MARCH 17, 2015 – COMMENTS (0)
Board: Macro Economics

Author: saunafool

[snip]

So, if the rig count follows a parallel path to 2009, I think it bottoms sometime in June around 800 rigs. If that appears to be happening and the price of oil is back above $60, it will probably be a good time to invest in the oil patch. (i.e. we will no longer be in a “falling knives” environment like we seem to be now.)

http://caps.fool.com/Blogs/has-oil-reached-a-new-bottom/1046…

Denny Schlesinger

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1015? Dang! Missed it again.
Day job…

gator

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What’s a millenium among friends?

Denny Schlesinger

>What’s a millenium among friends?

Depending on the friend, a day.
-FrickNFool (safely back from Ethiopia, and caught up on 1000 posts)

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I must congratulate Saul on the excellent timing of the PFIE sell recommendation. I disagreed with it at the time saying “give your stocks a chance.” One can never know ahead of time how far a stock will fall, the best one can do is to collect the available facts and make a choice “for better or worse.” In this case Saul’s was for better and mine for worse.

The critical item was whether PFIE would follow crude prices as most of the oil industry does or whether it would march to its own tune, what management thought. Crude prices are the driver and on that basis good news is starting to filter out.

Commodities Today: Another Oil Company Files For Bankruptcy, More Companies To Follow
Mar. 18, 2015 1:06 PM ET

Summary

- Another Texas based E&P has filed for bankruptcy protection.

- WG announced that it could face liquidity issues if it cannot get creditors to grant it certain waivers related to debt covenants for the next year.

[snip]

The really good news that we saw this morning was that production in both the Bakken and Eagle Ford fell this month. That marks the first time that production from both areas have fallen in the same month in 6-years. Add in the fact that the Niobrara shale play also saw declining production and it is apparent that E&Ps are cutting back.

The reason that the Permian still saw production gains is that the area is still seeing efficiency gains related to rig usage, drilling techniques and well completion. Over time this will taper off.

http://seekingalpha.com/article/3010916-commodities-today-an…

The Saudi’s goal was to limit frack oil production and it is happening. Once supply and demand get back into balance crude prices will rise and it will be energy buying time. Keep tracking crude!

Brent: http://www.nasdaq.com/markets/crude-oil-brent.aspx?timeframe…
WTI: http://www.nasdaq.com/markets/crude-oil.aspx?timeframe=10y

Denny Schlesinger

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One weird thing I saw on the way to work today. Diesel fuel was 10 cents cheaper than Regular unleaded. I haven’t seen that for years.

Andy

The critical item was whether PFIE would follow crude prices as most of the oil industry does or whether it would march to its own tune, what management thought. Crude prices are the driver and on that basis good news is starting to filter out.

I disagree, although it may seem like I’m splitting hairs I don’t believe it is accurate to say PFIE lost sales because of lower oil prices (they derive no revenue from oil) what is accurate to say is they have lost sales due to the stress on producers finances brought on by lower oil prices.

Again while on the surface that might sound like a difference without a distinction IMO there is a very large difference. I have no idea when prices will recover in any significant way, what I do know is for everyday prices do linger at these prices the majority of North American producers finances will continue to get weaker. Point being anyone that thinks that there will be a immediate and direct correlation between what producers will spend and the price of oil is deluding themselves.

That’s not to say higher oil prices should’t eventually help PFIE on a fundamental basis, but I wouldn’t bet my last dime assuming the trajectory on the way back up will in anyway mirror the trajectory on the way up. Like any recovery, there will be companies that can be expected to move first, then as the recovery ages there will be a shift to other types of investments. I may be proved to be wrong but, beyond the beaten up small cap part of the story (essentially speculators doing what speculators do), from a business sense I don’t see PFIE fitting into the early part any recovery.

Balance sheets matter and when you are a supplier it isn’t only yours you need to worry about.

Another Texas based E&P has filed for bankruptcy protection.

Oh bother,

Kwiksilver was living at death’s door well before the decline in oil prices started and it got that way not because of oil prices but because they were primarily a ng company.

But it makes for good meaningless drivel I guess. :<)

Finally, if I might suggest, I think the subject line of the thread might have included “if I should enter PFIE” as that seems like a reasonable option as well.

B

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One weird thing I saw on the way to work today. Diesel fuel was 10 cents cheaper than Regular unleaded. I haven’t seen that for years.

Care to share where and did you see this at multiple locations?

B

I don’t look for diesel prices, but it’s been interesting to see gas prices deviate greatly from crude oil prices lately. Two months ago I could buy regular for $2.10/gallon (actually $1.99 once at Costco), now it’s $2.70, taxes are unchanged and crude prices have fallen. In Seattle anyways.

http://www.fuelgaugereport.com/states/washington/washington-…
(Look at chart in lower right corner)

In Seattle anyways.

Refineries are going though their usual seasonal down time/re-configurations this time of year bad for oil prices (glut), good for gas prices (shortage).

Unless that is you are a retail buyer of gas, then it’s bad for gas and who gives a crap about oil. :<)

All IMO, because I truly know nothing about your specific regional conditions.

B

In Las Vegas Nevada at the 7-Eleven station at Lamb and Charleston (2.73). I only saw it at one location so it could be a fluke. But I just cant remember the last time that happened. Right down the street at a shell the price was around 2.89 a gallon for regular. You could probably find cheaper regular gas if you looked around but I was driving to work.

Andy

Hey B,
I saw a shell today that had diesel for 2.74 and regular gas for 2.87. This was about 2 miles from the other gas station. What do you think is going on?

Andy

I must congratulate Saul on the excellent timing of the PFIE sell recommendation. I disagreed with it at the time saying “give your stocks a chance.” One can never know ahead of time how far a stock will fall, the best one can do is to collect the available facts and make a choice “for better or worse.” In this case Saul’s was for better and mine for worse. The critical item was whether PFIE would follow crude prices as most of the oil industry does or whether it would march to its own tune, what management thought. Crude prices are the driver and on that basis good news is starting to filter out.

Hi Denny, It wasn’t just the oil prices. I believe I wrote that that was one factor. The second was that they had just hired a large cohort of new sales people, greatly increasing their operating expenses. Also that sending out these naive young salespeople to make cold calls on drilling companies who were in a state of shock over oil prices was not going to bring in much in sales. All this could result in some significant losses short term. And finally that there was some issue about the CFO having been investigated and sued some time in the past, which I was willing to give a pass on, when everything was booming, but which now, I could find better places for my money.

Saul

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Hey B,
I saw a shell today that had diesel for 2.74 and regular gas for 2.87. This was about 2 miles from the other gas station. What do you think is going on?

I honestly have no idea, with Las Vegas’s gasoline coming from California refineries the refinery strike is likely playing a role. With the amount of heavy oil California uses which refiners that actually have been hit by strikes matters, shutting down a less complex refinery would skew the balance to more diesel and less gasoline being available but without trying to find out the specifics of the refineries actually impacted by the strike that is nothing but a WAG.

Whatever the reasons, it is not something that is likely to last very long.

B

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Out of curiosity I did a little digging around and sure enough the Tesoro’s Golden Eagle plant is the only refinery that was actually shut down from the strike and yes it almost certainly provided gasoline to Vegas based on it’s location.

http://en.wikipedia.org/wiki/Golden_Eagle_Refinery

Old refinery, history of problems, likely has far less options when it comes to tweaking the mix of the end product it produces.

I have now officially upgraded my guess from a WAG to a low level educated guess.:<)

B

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