Energy Inner Circle

As both crude oil and natural gas prices establish floors, opportunities are once again emerging in the midstream sector. Pipeline, terminal, storage, and initial gathering services are once again becoming nice swing plays between transport and withholding excess volume from the market.

 
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Categories:    Energy Inner Circle

espite the dip over the past two days, crude oil is beginning to stabilize. Yet the expected floor that is being formed - $36 a barrel for NYMEX benchmark West Texas Intermediate (WTI) short term; closer to $42-$45 by mid-June) - is not going to be enough to save a number of over-stretched U.S. producers. For these companies, the price of oil, even if it is rising slowly, will not be enoughto extract them from a vicious (and accelerating) debt spiral. Breitburn Energy Partners LP (BBEP) appears to be one of these companies. We last left BBEP in March of 2015 with a slight profit (7.1%). It was priced at that time at $6.23. At 1:30 this afternoon, the stock is at $0.53.

 
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Categories:    Energy Inner Circle

Not all segments of the oil and natural gas sector have benefitted to the same degree during the most recent run up in oil prices. One that has continued to languish are master limited partnerships (MLPs) and similar asset ownership arrangements intent on controlling midstream operations in both oil and gas.

Until the past year, MLPs had been the darlings of energy investors. They were consolidating the control over pipelines, storage, gathering, initial processing, and other essential midstream assets, providing some nice price rises and dividends in the process.

 
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Categories:    Energy Inner Circle

Greetings from north of Seattle where Marina and I are this week spoiling our granddaughter. Meanwhile, the energy sector is finally showing some signs of leveling off. This has been a rocky ride, fueled by emotional investors, a far too tentative Fed, and some troubling signals from emerging markets in general, and from China in particular.

As the bottom forms, there are some initial plays warranted. The initial signal, on the other hand, has emerged from renewables.   

Now, it is always difficult to move back into a Chinese-based company in the current market situation. However, the solar sector is moving into the higher stratum of most energy analysts' hit lists. When that occurs, as we have seen on several previous occasions, JKS moves rather quickly into the forefront.

 
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Categories:    Energy Inner Circle

There are indications surfacing that the current slide in crude oil prices is reaching an end. That will not translate into a hefty short-term rise, but it will require that the most imbalanced ratio between shorts and long positions witnessed in more than five years will have to be addressed.

That translates into some appreciable short covering and that will, in turn, give some support for a price improvement.

In the interim, several vulnerable production companies are caught in the middle of low prices and rising debt costs. Such a situation usually provides some profitable option plays.

 
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Categories:    Energy Inner Circle

We last left First Solar Inc. (NasdaqGS:FSLR) on July 2, selling our position after across-the-board weakness in the energy sector stripped strong double-digit gains. The triggering of its trailing stop left FSLR with a modest 8% loss (remember, the trailing stop dictates a sale once a stock declines 30% from its highest value while held).

The Tempe, Ariz.-based company is a leader in the design, development, manufacture, and installation of integrated solar energy systems. With signals emerging indicating a new round of increasing demand for solar power, FSLR is likely once again to become a primary beneficiary.

Recent improvements in share value point to this. The stock is up 19.6% over the past month. FSLR closed yesterday at $51.74.

 
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Categories:    Energy Inner Circle

The combination of a continuing irrationally-driven selloff in crude oil and an equally panic-stricken dive in the Chinese stock markets has placed one of our Portfolio members in a vulnerable situation.

China Petroleum & Chemical Corp. (NYSE:SNP) has weakened 13.8% for the month, 5.4% of that in the last two days. The meltdown in Chinese indices on Monday, in which the markets declined 8%, isn't helping.

SNP is nowhere close to its trailing stop. As of close yesterday, it is priced at $73.60 (down 16.7% since its introduction).

 
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Categories:    Energy Inner Circle

The reversal of fortunes late yesterday in the trading session was welcome. Unfortunately, three of our holdings hit their stops. Had you been following our regimen, you are already out of these positions. If not, sell this morning.

We had replaced the trailing stop with a higher hard stop for Clayton Williams Energy Inc. (NYSE:CWEI) and Gulfport Energy Corp. (NasdaqGS: GPOR) only yesterday morning. The move placed a more limited exposure to downside risk. A few hours later both stocks broke down through those stops set at $51.50 and $37, respectively.

CWEI continued to decline for the session and ended at $51.23. Selling when the stop triggered resulted in a 20.1% loss; selling at open today puts it at 20.5%.

 
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Categories:    Energy Inner Circle
Jul
07
2015

Sell CLR

In an alert yesterday morning, I recommended replacing the trailing stop for Continental Resources Inc. (NYSE:CLR) with a hard stop at $37.50. As the heavy pressure on oil intensified in the afternoon, that stop was triggered.

If you have been following our stop regimen, you should now be out of the position. If not, sell today at open. The hard stop actually minimized the loss by a full 10% from the value initially dictated by the trailing stop.

I will continue to revise stops where necessary to limit the down side risk exposure as we move through this latest round of sector volatility.

 
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Categories:    Energy Inner Circle