Will BP (BP) be a buyer or a seller? Now that the overhang is officially over, the company can begin the process of becoming a major oil company again without being a pariah and a company that a deal couldn't really be done with.
This is worth watching. With tremendous assets and no hidden liabilities, BP could be bought buy a company like Chevron (CVX) -- $60 billion bigger -- or start picking up assets in Iran or just decide to go all in where it is already the biggest in the continental U.S. and double down here.
No matter what, I don't think it can stay still. I think Bob Dudley, who has the patience of Job by the way, is a brilliant operator. You just haven't had a chance to see him operate.
A combination of Occidental (OXY) and BP or Marathon (MRO) and BP -- big reasons why we own them for Action Alerts PLUS -- could be ideal, especially given that despite a small increase in the rig count (up 12, no doubt a function of oil staying above $60 for a few weeks) production will be down in this country beginning this quarter. That's another driving force for more rigs, too, as cash flow will decline steeply if more isn't drilled to meet the needs for sold oil in the futures going forward.
Now, the charts all say oil is finished. You can lay out oil and the stocks from now to kingdom come and the gains that were made-- juicy gains -- from all of those secondaries have since evaporated.
I think the main thing to focus on is that the hobbled are at last going to go under at the same time that there are two new markets opening up for natural gas, the Rockies Express Pipeline, or REX, which comes on this month, and the Mexican pipelines, where Mexico has turned thirsty nat gas buyer as its production has slowed to a crawl. Then don't forget, Cheniere is about to come on line this half, which means another big chunk of natural gas is going to be sent overseas.
Watch these trends. They are really important. As coal plants, with 40 years life max from the day they were built when Jimmy Carter called us the Saudi Arabia of coal, are now being retired en masse, natural gas will take up the slack. The REX pipeline will be bringing cheap nat gas from the Marcellus and Utica as the fuel to replace coal (thanks RBN, the go-to guide on all things oil and gas for that tip) out west. The Cheniere export plan is huge even from the get-go. Mexico came out of nowhere as a client. Remember they used to export to us a few years ago.
To put it altogether there will be much more demand in this country for natural gas at this time next year than there is now, so the oil and gas companies need to drill to meet that demand. New development for certain.
So, you have an acquisitive BP, you have growing demand, but you have bad charts. Right now all anyone cares about is the latter.
Maybe the former will matter this half. I think to not bet that way is stupid, but because the oil stocks have gone down and all anyone wants is the next Fitbit (FIT), I expect our trust to build bigger positions and take losses ... until they don't.
