With Valero posting monster profits I believe we should continue to look at refineries as cash machines for our next round of entries. I am adding Frontier Oil as a potential play.
Frontier Oil has a positive buyback plan and a positive chart. We have played FTO in the past and I look forward to adding them in the future. Earnings are Monday so we get a free look at how the market reacts to their results.
Holly is another refiner with a positive outlook and chart. HOC saw earnings rise +82% in the report issued last Wednesday. Hopefully we will see some post earnings depression settle in as we await the next dip in oil prices.
Current Watch List
CEO - CNOOC Limited
CNOOC Limited is a producer of offshore crude oil and natural gas and an independent oil and gas exploration and production company. It mainly engages in oil and natural gas exploration, development, production and sales. The Company has four major oil production areas offshore China, which are Bohai Bay, Western South China Sea, Eastern South China Sea and East China Sea. It is an offshore oil producer in Indonesia. The Company also has certain upstream assets in regions, such as Africa and Australia. As of December 31, 2005, it owned net proved reserves of approximately 2.36 billion barrels-of-oil equivalent (BOE) and its annual average net production was 424,108 barrels-of-oil equivalent per day (BOEPD).
CEO has been rather volatile over the last year but the 50-week moving average currently at $75 has been decent support. The June drop in oil prices saw CEO trade as low as $70. I want to target the $70 level on any future dip.
CEO does not have LEAPS so I am going to email everyone the play particulars depending on when that $70 level is hit. Currently December is the longest option series available. I am hoping before $70 is hit a new series in 2007 will be added.
I repeat, we will buy the dip sometime in August. Details to follow at that time.
UPL - Ultra Petroleum
Ultra Petroleum Corp. (Ultra) is an oil and gas company engaged in the development, production, operation, exploration and acquisition of oil and gas properties. The Company's operations are focused primarily in the Green River Basin of southwest Wyoming and Bohai Bay, offshore China. As of December 31, 2005, Ultra owned interests in approximately 148,007 gross acres in Wyoming covering approximately 230 square miles. The Company owns working interests in approximately 330 gross productive wells in this area and is operator of 53% of the 330 gross wells. Its domestic operations are focused on developing and expanding a tight gas sand project located in the Green River Basin in southwest Wyoming. During the year ended December 31, 2005, the Company's Wyoming production was approximately 87.4% of total oil and natural gas production on a thousand cubic feet of natural gas equivalent (MCFE) basis and 98.5% of the Company's estimated net proved reserves were in Wyoming on an MCFE basis.
Ultra has been extremely volatile for the last six months with the price of natural gas falling more than -50%. Ultra has current support at $50 but I would like to target something even lower if gas supplies hit a new record late in the summer. $40 would be my initial target depending on the price of oil and gas in September.
SU - Suncor
Suncor Energy Inc. (Suncor), formerly Suncor Inc., is a Canadian integrated energy company that explores for, acquires, develops, produces and markets crude oil and natural gas, transports and refines crude oil and markets petroleum and petrochemical products. Periodically, the Company also markets third-party petroleum products. Suncor also carries on energy trading activities focused principally on buying and selling futures contracts and other derivative instruments, based on the commodities the Company produces. The Company has four principal operating business units: Oil Sands; Natural Gas; Energy Marketing and Refining, Canada, and Refining and Marketing. During the year ended December 31, 2005, the Company produced approximately 206,100 barrels of oil equivalent (BOE) per day, comprised of 174,500 barrels per day (bpd) of crude oil and natural gas liquids and 190 million cubic feet per day (mmcf/d) of natural gas.
Suncor has performed better than the sector over the last month and appears to be holding above $75. I would normally like to target the 200-day average in the $71 range but June's low of $68 is slightly below that average. That makes $60-65 a more likely target as a retest of that June low.
DO - Diamond Offshore
Diamond Offshore Drilling Inc. (Diamond Offshore) provides contract drilling services to the energy industry worldwide and is also engaged in deepwater drilling with a fleet of 44 offshore drilling rigs. The Company's fleet consists of 30 semisubmersibles, 13 jack-ups and one drillship. The Company's offers a range of services worldwide in various markets, including the deep water, harsh environment, conventional semisubmersible and jack-up markets. The Company provides offshore drilling services to a customer base that includes private and independent oil and gas companies and government-owned oil companies.
Diamond Offshore appears to have fallen out of favor with investors and has been on a steady decline since hitting $86 in early July. It has decent support in the $55-$60 range but we need to see a rebound appear before taking a position.
SLB - Schlumberger
Schlumberger Limited (Schlumberger) is an oilfield services company, supplying technology, project management and information solutions. Schlumberger consists of two business segments: Schlumberger Oilfield Services and WesternGeco. Schlumberger Oilfield Services is an oilfield services company supplying a range of technology services and solutions to the international oil and gas industry. WesternGeco, 70% owned by Schlumberger and 30% owned by Baker Hughes, is an advanced surface seismic company.
SLB has decent support at $55 and again at $50. SLB said business was booming in its July earnings release and yet it still sold off. I would initially target $55 but would want to see some buyers appear before making an entry.
WLT - Walter Industries
Walter Industries, Inc. (Walter) is a diversified company with seven operating segments: Mueller, Anvil, Industrial Products, Natural Resources, Homebuilding, Financing and Other. The Company's seven segments are further grouped into Water Products, Natural Resources, Homebuilding and Financing, and Other. The Water Products group, which consists of Mueller, Anvil and Industrial Products segments, manufactures water infrastructure and flow control products. The Natural Resources segment consists of coal mining and methane gas operations. Walter markets and supervises the construction of detached, single-family residential homes, primarily in the southern United States, through the Homebuilding segment. The Financing segment provides mortgage financing on such homes and purchases mortgages originated by others. The Other segment includes the manufacturing of foundry and furnace coke, slag fiber and specialty chemicals, as well as the Company's land division.
We are looking at Walter primarily for its coal and gas operations but water products is also doing well. Dragging WLT lower was the BTU warning and worries over its housing division. Strong support is $40 but like the others we want to see some buyers appear before we make an entry.
PBR - Petroleo Brasileiro
Petroleo Brasileiro S.A. - Petrobras (Petrobras) is a mixed-capital enterprise of which a majority of voting capital must be owned by the Brazilian Government. The Company is engaged in a range of oil and gas activities, which include segments such as exploration and production, refining, transportation and marketing and distribution. The Company operates 95 platforms for production (72 fixed and 23 floating), 16 refineries, 30.318 kilometers of pipeline and 6,154 filling stations spread across the national territory. In addition, to its position in Brazil, Petrobras is present in 15 countries, such as Angola, Argentina, Bolivia, Chile, Colombia, Ecuador, the United States, Iran, Mexico, Nigeria, Paraguay, Peru, Tanzania, Uruguay and Venezuela. It also operates backup support of offices in New York, Tokyo, China and Singapore.
Petrobras has decent support at $85 and again at $80. I would like to see $80 again but we will monitor any drop for a hint of rebound. Try not to catch the knife.
SUN - Sunoco
Sunoco, Inc. (Sunoco), operates through its subsidiaries, as a petroleum refiner and marketer, and chemicals manufacturer with interests in logistics and cokemaking. The Company's petroleum refining and marketing operations include the manufacturing and marketing of a range of petroleum products, including fuels, lubricants and petrochemicals. Sunoco's chemical operations include the manufacturing, distribution and marketing of commodity and intermediate petrochemicals. The petroleum refining and marketing, and chemicals and logistics operations are conducted principally in the eastern half of the United States. Sunoco's cokemaking operations are conducted in Virginia, Indiana and Ohio. The Company operates in five business segments: Refining and Supply, Retail Marketing, Chemicals, Logistics and Coke.
SUN dipped to $63 last week before spiking back to more than $70 on acquisition news. Earnings are August 3rd. I would like to see them back at $60-$62 again but earnings will probably thwart that outlook.
FTO - Frontier Oil
Frontier Oil Corporation (Frontier) is an independent energy company engaged in crude oil refining and wholesale marketing of refined petroleum products. The Company operates refineries (the Refineries) located in Cheyenne, Wyoming, and El Dorado, Kansas, with a total annual average crude oil capacity of 162,000 barrels per day (bpd). Both of the Refineries are complex refineries, capable of processing heavier, less expensive types of crude oil, while producing gasoline, diesel fuel and other high-margin refined products. Frontier purchases crude oil to be refined and markets refined petroleum products, including various grades of gasoline, diesel, jet fuel, asphalt and other by-products. The Company focuses its marketing efforts in the Rocky Mountain region, which includes the states of Colorado, Wyoming, Montana and Utah, and in the Plains States region, which includes the states of Kansas, Oklahoma, Nebraska, Iowa, Missouri, North Dakota and South Dakota.
FTO has support at $30 and that would be my initial target with risk to $25.
HOC - Holly Corp
Holly Corporation is an independent petroleum refiner, which produces value light products, such as gasoline, diesel fuel and jet fuel. The Company owned and operated three refineries consisting of a petroleum refinery in Artesia, New Mexico that is operated in conjunction with crude oil distillation and vacuum distillation and other facilities (Navajo Refinery), refineries in Woods Cross, Utah (Wood Cross Refinery) and Great Falls, Montana (Montana Refinery). Holly Corporation has partnership interests in Holly Energy Partners, L.P., which acquires, owns and operates all of the refined product pipeline and terminally assets that support its refining and marketing operations in west Texas, New Mexico, Utah and Arizona, and a 70% interest in Rio Grande Pipeline Company. The Company deconsolidated HEP effective July 1, 2005. On March 2, 2006, the Company has entered into a definitive agreement with Connacher Oil and Gas Limited for the sale of the Montana Refinery.
Holly has support at $46 and I would
take an entry there with risk to $40.
However, we will wait for the next dip in oil prices to see if we might do