First of all men’s suits are back in force. Everyone is wearing a suit. My big takeway besides men’s haberdashery is that every single company presenting (and there are a lot of them- just about every oil and gas company you never heard of plus a few majors like APA, APC, Petrobras, etc.) is talking about how they have aggressively switched away from drilling for natural gas to oily liquids. Everyone is bragging about how fast they are making the transition. Considering it is currently against the law to export raw crude from the U.S, there will undoubtedly be a glut of U.S. crude in the near future. The U.S is currently a net exporter of refined oil and with the difficulty and economics of building a new refinery, it’s doubtful they will be able to export themselves out of this potential oversupply. Trade idea long Brent, short WTI. Or just short WTI
You have to be impressed with the ability of this country to find oil, build infrastructure to ship it out via rail, pipeline, or truck. I’m more bullish on the drillers and infrastructure plays than I was before coming here and less bullish on the heavily skewed domestic oil companies. There is no doubt we will be importing less and less crude oil. Whether that is a significant enough of a number to curb the price of crude remains to be seen since it’s an international market and developing nations like India and China will have more cars on the road for sure in the future.
Most interesting note was the CSLA analyst who is very bullish on natural gas. Since I’m a contrarian by nature, I found his presentation very interesting although partially unintelligible as he mumbled through half of it. I think his projection for natural gas was a slide into this shoulder season and then assuming a normal winter, sharp rise to the $3-4 range in 2013 and $4-6 in 2014. He went through a few slides showing how inventory was getting drawn down. Just anecdotally listening to these companies all race to leave natural gas makes me far more bullish than anything an analyst could say. He metioned no company names but afterwards I chatted with him and asked him what his favorite names leveraged to natural gas were and he said, Range Resources and Cimarex. I missed the Range presentation but I think you can go to the Enercom web site and get it. The Cimarex presentation was the most impressive one yet not because of their powerpoint but because the new CEO gave a very heartfelt and well-spoken eulogy for the recently passed away founder, Nick Morelli.
Last but certainly not least is the idea that what’s bad for oil prices is very good for airline profits. Coincidentally while at the conference, UAL management bought a slug of their company’s stock following up on the heals of Delta Airlines’s CFO purchase of 50,000 shares last week. It’s probably just coincidence but if oil does go down in value, the airlines would likely rally. We like to buy stocks insiders are buying anyway. It’s just ironic that while at Enercom, the two stocks I bought were DAL and UAL.