A few words about this Rapid Roundup of energy names before I start reeling them off (or as many as I can reasonably do).
My request for stock names was answered with more than 100 e-mails from subscribers. I cannot tell you how heartening it is for me to receive such enthusiastic interest in my work. Mostly when I check my e-mails and comments they are limited to trolling or taunting, an expected hazard, but still no fun. The quantity and quality of your responses gave me great pleasure and I thank you. I cannot mention your names in this column, but please know I greatly appreciate each one of your requests.
First, the macro situation.
Energy continues to see a rally from ridiculously low numbers, but despite some drops in U.S. (and OPEC!) production, there are still stockpile gluts everywhere that should limit the upside, at least for now.
If you haven't begun accumulating long-term names, any down day in oil would provide a chance to start. But if you're trading, I think that gains accumulated when oil was in the $20s should be taken.
Now, let's get to some names and let's start by trying to bite off two big subsectors in one go.
I've made clear that the dropping production inside the U.S., combined with lower-for-longer oil and gas prices make the growth potential in the midterm for pipelines difficult and therefore their distributions suspect. I put faith in only one of these in the last six months -- Kinder Morgan (KMI) -- and you all know how that worked out. I won't do it again, there are better places to invest. In one case, I'll make a quick judgment because it's a microcosm for what's currently wrong with the subsector: Energy Transfer Equity (ETE). Like other pipelines, the debt load is huge, there's no cash on hand and despite their great subordinate companies (Sunoco, LNG, ETP), I'm not at all convinced about long-term stability of the distribution (which is what all of these are ultimately about). Now, if that wasn't enough to convince, throw in the Williams merger (Williams Companies (WMB), Williams Partners (WPZ)). ETE definitely overpaid, the cash kicker adds another $6 billion in debt and they've needed a secondary anyway -- at the worst possible time. It's definitely going to strip distributions at ETP to save its bond status and no matter what they say, bailing on the Williams deal would be a godsend for them. Had enough? I know I have. No thank you, with a capital NO.
I've gone from thinking that the cycle in oil would recover completely by the end of 2017 to now at least wondering whether we'll see my famed call of $150 a barrel oil by the start of 2018. That's made the deepwater players, including Transocean (RIG), Seadrill (SDRL), Noble (NE), Diamond Offshore (DO) and Atwood Oceanics (ATW) in for a longer down cycle than I originally might have hoped. In fact, now I think that at least one of these, if not two, must go bankrupt before the rig glut will clear enough for the cycle to recover fully. Who will it be? And who will survive? I may tackle that in the future, having taken a shot with Seadrill and gotten punished for it (but happily able to recoup some of the losses on the short-covering rally to $7 recently). For now, there's no need. As with the pipes, I'm staying clear. The value will make itself known further along in the cycle and we have other, better fish to fry right now. Which leads to ...
The E+P Players
Occidental (OXY) -- Not normally in my hit parade, but I've been deeply impressed by this name recently and anyone who has begun accumulating it as one of the likely solid survivors of the crude bust has done a great job in finding it. It's on my first page screen now.
Whiting (WLL) -- The Bakken has clearly reached peak production, which is shocking in itself, but lends us to even more carefully consider who in that shale play we should even bother to look at for the long haul and it ain't them (nor Gastar (GST) for the one guy who asked!) My one dedicated Bakken play (outside of Hess (HES)) is now Continental (CLR).
Conoco (COP) -- Since the dividend cut, I like it better than Chevron (CVX), despite its bigger run and still believe it is most at risk for its own capital raise of some kind. Exxon (XOM) raised using bonds and a cut in the stock buybacks and remains the strongest of the megacaps.
Marathon (MRO) -- NO
Weatherford (WFT) -- I've been steering clear of this name, waiting for it to do a secondary since 2010 and, of course, it chose the worst possible time to finally dilute. I'll continue to steer clear despite Goldman's upgrade.
Chesapeake (CHK) -- Aubrey McClendon's life and tragic death has been a strange mirror into this company he built. If the crude bust needs one very big name to go out before this market finally clears, it could likely be Chesapeake. Day trade only.
I've run out of words long before I ran out of names, but hope I've touched on a few of the ones for which you've asked. I promise to make this a regular column feature, certainly every few weeks at least.
Thanks again for your responses.