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Pipeline Companies (Part 1)

12/8/2014

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The place that oil and natural gas is normally found is usually not where it is needed or consumed so the problem has always been how it gets to the consumer. There are obviously numerous options but each option has a cost associated with it. The cheapest way to transport gases and liquids is through a pipe. The next cheapest way is by train. And the most expensive is by truck. Each has it's unique advantages and disadvantages but the most restrictive element for each of these is the transport network.
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Generally pipelines are constructed and enlarged based upon oil and natural gas field discoveries. They're generally expensive to construct and cheap to operate but they also take years to build. Most are built and leased to companies with long term commitments that have built in annual increases in "toll" payments. Fortunately for pipeline companies, the lease payments are not dependent upon the value of the commodity that is passing through the pipeline so the value of the pipeline companies doesn't vary with the price of the transported commodity but rather with the volume of the commodity passing through the pipe.

There are fifty companies listed in the oil and gas pipeline industry that are both located in the United States and pay at least a minimal dividend. This is too many companies to be included in one article so I will look at them in a series of articles that I'll lay out over the next few days and weeks. Below are the ten largest pipeline companies by market capitalization. At the bottom of this page I will include hot links for follow on articles.   



Data as of 7 December 2014

1. Kinder Morgan, Inc. (KMI) operates as a midstream and energy company in North America. It operates through Natural Gas Pipelines, CO2KMP, Products PipelinesKMP, TerminalsKMP, Kinder Morgan CanadaKMP, and Other segments. The company owns an interest in or operates approximately 80,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, gasoline, crude oil, carbon dioxide (CO2), and other products; and terminals store petroleum products and chemicals, and handle products, such as ethanol, coal, petroleum coke, and steel. The company was formerly known as Kinder Morgan Holdco LLC and changed its name to Kinder Morgan, Inc. in February 2011. Kinder Morgan, Inc. is headquartered in Houston, Texas. (Daily Chart) (Weekly Chart)

Price $41.12
1yr Target $44.38
Analysts 13
1yr Cap Gain 7.92%
Dividend $1.76
Yield 4.28%
1yr Est Tot Return 12.20%
Market Cap $42.28 Bil
Beta 0.68
EPS (ttm) $1.20
Payout Ratio 146.66%
EPS next yr $1.52
P/E 34.27
PEG 3.81
Forward P/E 27.05
Debt/Equity 3.02
ROA 1.60%
ROE 9.60%
ROI 6.60%
Sales $16.15 Bil
Income $1.23 Bil
Profit Margin 7.61%

2. The Williams Companies, Inc. (WMB) operates as an energy infrastructure company. The company's Williams Partners segment owns and operates natural gas pipeline system extending from Texas, Louisiana, Mississippi, and the offshore Gulf of Mexico through Alabama, Georgia, South Carolina, North Carolina, Virginia, Maryland, Delaware, Pennsylvania, and New Jersey to the New York City metropolitan area. This segment also owns and operates a natural gas pipeline system extending from the San Juan basin in northwestern New Mexico and southwestern Colorado through Colorado, Utah, Wyoming, Idaho, Oregon, and Washington to a point on the Canadian border near Sumas, Washington; gulfstream natural gas pipeline system extending from the Mobile Bay area in Alabama to markets in Florida; and constitution pipeline that connects its gathering system in Susquehanna County, Pennsylvania to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems. In addition, this segment gathers, treats, and processes natural gas; produces, fractionates, stores, markets, and transports natural gas liquids (NGL); and offers deepwater production handling and crude oil transportation services, as well as transports and stores natural gas to local natural gas distribution companies, municipal utilities, direct industrial users, electric power generators, and natural gas marketers and producers. Its Williams NGL & Petchem Services segment extracts, fractionates, treats, stores, and sells propane, propylene, normal butane, isobutane/butylene, and condensate to users in energy and petrochemical industries. The company's Access Midstream Partners segment offers gathering, treating, and compression services to other producers. As of August 26, 2014, it owned interests in or operates 15,000 miles of natural gas pipelines; 1,800 miles of NGL transportation pipelines; and approximately 10,000 miles of oil and gas gathering pipelines. The company was founded in 1908 and is headquartered in Tulsa, Oklahoma. (Daily Chart) (Weekly Chart)

Price $50.04
1yr Target $64.57
Analysts 14
1yr Cap Gain 29.03%
Dividend $2.28
Yield 4.55%
1yr Est Tot Return 33.58%
Market Cap $37.40 Bil
Beta 1.31
EPS (ttm) $2.56
Payout Ratio 89.06%
EPS next yr $1.45
P/E 19.55
PEG 3.16
Forward P/E 34.63
Debt/Equity 2.29
ROA 5.40%
ROE 28.80%
ROI 5.90%
Sales $7.16 Bil
Income $1.90 Bil
Profit Margin 26.53%

3. Energy Transfer Equity, L.P. (ETE), through its subsidiaries, provides diversified energy-related services in the Unites States. The company sells natural gas to electric utilities, independent power plants, local distribution companies, industrial end-users, and other marketing companies. It owns and operates approximately 7,800 miles of natural gas transportation pipelines and 3 natural gas storage facilities located in the state of Texas; and approximately 12,800 miles of interstate natural gas pipeline. The company's midstream operations owns and operates approximately 6,700 miles of in service natural gas and natural gas liquid (NGL) gathering pipelines, 5 natural gas processing plants, 15 natural gas treating facilities, and 3 natural gas conditioning facilities. Its NGL transportation and services operations include 70% interest in the Lone Star joint venture that owns approximately 2,000 miles of NGL pipelines, 3 processing plants, 2 fractionation facilities, and NGL storage facilities with storage capacity of approximately 47 million barrels; and a 50% interest in the Liberty pipeline, an approximately 87-mile NGL pipeline. The company also sells gasoline and middle distillates at retail; operates convenience stores in 24 states; and gathers, purchases, stores, transports, markets, and sells crude oil and refined products. In addition, it provides natural gas compression services for customer specific systems; and treating services, such as carbon dioxide and hydrogen sulfide removal, natural gas cooling, and dehydration. Energy Transfer Equity, L.P. was founded in 2002 and is based in Dallas, Texas. (Daily Chart) (Weekly Chart)

Price $57.13
1yr Target $78.00
Analysts 9
1yr Cap Gain 36.53%
Dividend $1.66
Yield 2.90%
1yr Est Tot Return 39.43%
Market Cap $30.78 Bil
Beta 0.92
EPS (ttm) $0.54
Payout Ratio 307.40%
EPS next yr $1.97
P/E 105.80
PEG 3.61
Forward P/E 29.07
Debt/Equity 42.11
ROA 0.60%
ROE 38.00%
ROI 5.30%
Sales $54.82 Bil
Income $292.00 Mil
Profit Margin 0.53%

4. Spectra Energy Corp. (SE), through its subsidiaries, owns and operates a portfolio of natural gas-related energy assets in North America. The company's Spectra Energy Partners segment is engaged in the transmission, storage, and gathering of natural gas, as well as transportation and storage of crude oil and natural gas liquids (NGLs) for customers in various regions of the midwestern, northeastern, and southeastern United States and Canada. Its natural gas pipeline systems consist of approximately 21,000 miles of transmission pipelines; and storage capacity comprises 305 billion cubic feet (Bcf). Its Distribution segment offers natural gas storage, transmission, and distribution services for residential, commercial, and industrial customers in Canada. This segment has approximately 39,000 miles of main and service pipelines; storage capacity of approximately 160 Bcf; and transmission system of approximately 3,000 miles of high-pressure pipeline and mainline compressor stations. The company's Western Canada Transmission & Processing segment provides natural gas transmission, and gas gathering and processing services; and services to natural gas producers to remove impurities from the raw gas stream, including water, carbon dioxide, hydrogen sulfide, and other substances. It also extracts, fractionates, transports, stores, and markets NGLs for western Canadian producers and NGL customers. This segment serves local distribution companies, end-use industrial and commercial customers, marketers, and exploration and production companies. Its Field Services segment gathers, compresses, treats, processes, transports, stores, and sells natural gas; produces, fractionates, transports, stores, sells, markets, and trades in NGLs; and recovers and sells condensate. This segment owns or operates approximately 67,000 miles of gathering and transmission pipelines. The company is headquartered in Houston, Texas. (Daily Chart) (Weekly Chart)

Price $37.13
1yr Target $41.58
Analysts 12
1yr Cap Gain 11.98%
Dividend $1.48
Yield 3.98%
1yr Est Tot Return 15.96%
Market Cap $24.91 Bil
Beta 0.87
EPS (ttm) $1.49
Payout Ratio 99.32%
EPS next yr $1.59
P/E 24.92
PEG 4.98
Forward P/E 23.38
Debt/Equity 1.76
ROA 3.00%
ROE 11.80%
ROI 5.40%
Sales $5.87 Bil
Income $1.00 Bil
Profit Margin 17.03%

5. Energy Transfer Partners, L.P. (ETP) is engaged in the natural gas midstream, and intrastate transportation and storage businesses in the United States. The company's Midstream segment gathers, compresses, treats, blends, processes, and markets natural gas in various basins and shales in Texas, New Mexico, West Virginia, and Louisiana. This segment owns and operates approximately 6,700 miles of natural gas gathering pipelines. Its Intrastate Transportation and Storage segment transports natural gas from various natural gas producing areas, as well as through its ET fuel system and HPL system. This segment has approximately 7,800 miles of natural gas transportation pipelines and 3 natural gas storage facilities in Texas. The company's Interstate Transportation and Storage segment provides natural gas transportation and storage services; owns and operates approximately 12,800 miles of interstate natural gas pipeline; and has interests various natural gas pipelines. The company's Natural Gas Liquid (NGL) Transportation and Services segment transports mixed NGLs and other hydrocarbons; stores mixed NGLs, NGL products, and petrochemical products; and separates mixed NGL streams into purity products. This segment owns and operates various NGL pipelines, as well as NGL storage facilities with aggregate storage capacity of approximately 47 million barrels. Its Investment in Sunoco Logistics segment gathers, purchases, markets, and sells crude oil primarily in the mid-continent United States; and owns and operates approximately 2,500 miles of refined products pipelines in the United States. The company's Retail Marketing segment sells gasoline and middle distillates at retail; and operates convenience stores. Energy Transfer Partners, L.P. was founded in 2002 and is based in Dallas, Texas. (Daily Chart) (Weekly Chart)

Price $64.52
1yr Target $73.92
Analysts 12
1yr Cap Gain 14.56%
Dividend $3.90
Yield 6.04%
1yr Est Tot Return 20.60%
Market Cap $22.76 Bil
Beta 0.88
EPS (ttm) $0.14
Payout Ratio 2,785.71%
EPS next yr $3.26
P/E 460.86
PEG 17.07
Forward P/E 19.80
Debt/Equity 1.56
ROA 0.10%
ROE 0.60%
ROI 5.40%
Sales $50.91 Bil
Income $8.00 Mil
Profit Margin 0.01%

6. Plains All American Pipeline, L.P. (PAA), together with its subsidiaries, is engaged in transporting, storing, terminating  and marketing crude oil, natural gas liquids (NGL), natural gas, and refined products in the United States and Canada. The company operates in three segments: Transportation, Facilities, and Supply and Logistics. The Transportation segment transports crude oil and NGL through pipelines, gathering systems, trucks, and barges. As of December 31, 2013, this segment owned and leased 16,900 miles of active crude oil, and NGL and gathering systems; 24 million barrels of active and above-ground tank capacity; 744 trailers; and 130 transport and storage barges, as well as 62 transport tugs. The Facilities segment provides storage, terminalling, and throughput services for crude oil, refined products, and NGL and natural gas; and NGL fractionation and isomerization, and natural gas and condensate processing services. As of December 31, 2013, this segment owned and operated approximately 74 million barrels of crude oil and refined products storage capacity; 23 million barrels of NGL storage capacity; 97 billion cubic feet of natural gas storage working capacity; 17 billion cubic feet of base gas; 11 natural gas processing plants; 1 condensate stabilization facility; 7 fractionation plants; 24 crude oil and NGL rail terminals; and 1,250 miles of active pipelines. The Supply and Logistics segment purchases crude oil at the wellhead, pipeline, and terminal and rail facilities; cargos at their load port and various other locations in transit; NGL from producers, refiners, processors, and other marketers. This segment also stores inventory and NGL; resells or exchanges crude oil and NGL; and transports crude oil and NGL on trucks, barges, railcars, pipelines, and ocean-going vessels. As of December 31, 2013, this segment owned 843 trucks and 982 trailers, and 7,400 crude oil and NGL railcars. The company was founded in 1998 and is headquartered in Houston, Texas. (Daily Chart) (Weekly Chart)

Price $50.42
1yr Target $63.71
Analysts 21
1yr Cap Gain 26.35%
Dividend $2.64
Yield 5.23%
1yr Est Tot Return 31.58%
Market Cap $18.76 Bil
Beta 0.55
EPS (ttm) $2.27
Payout Ratio 116.29%
EPS next yr $2.66
P/E 22.21
PEG 15.87
Forward P/E 18.97
Debt/Equity 1.11
ROA 5.20%
ROE 14.50%
ROI 10.70%
Sales $44.64 Bil
Income $826.00 Mil
Profit Margin 1.85%

7. Magellan Midstream Partners, L.P. (MMP) is engaged in the transportation, storage, and distribution of refined petroleum products and crude oil in the United States. It operates in three segments: Refined Products, Crude Oil, and Marine Storage. The company operates refined products pipeline that transports gasoline, distillates, aviation fuels, and liquefied petroleum gases for independent and integrated oil companies, wholesalers, retailers, railroads, airlines, and regional farm cooperatives; and provides ancillary services, including ethanol and biodiesel loading and unloading, additive injection, custom blending, terminalling, laboratory testing, and data services. It also owns and operates crude oil pipelines and storage facilities; and marine terminals located along coastal waterways that provide distribution, storage, blending, inventory management, and additive injection services for refiners and other end-users of petroleum products. As of December 31, 2013, the company had interest 9,500-mile refined products pipeline system with 53 terminals, 27 independent terminals not connected to its pipeline system, and 1,100-mile ammonia pipeline system that transports and distributes ammonia from Texas and Oklahoma to various distribution points; approximately 1,100 miles of crude oil pipelines and storage facilities with an aggregate storage capacity of approximately 18 million barrels; and marine terminals with an aggregate storage capacity of approximately 27 million barrels. Magellan GP, LLC serves as the general partner of Magellan Midstream Partners, L.P. The company was founded in 2000 and is headquartered in Tulsa, Oklahoma. (Daily Chart) (Weekly Chart)

Price $80.92
1yr Target $90.42
Analysts 13
1yr Cap Gain 11.73%
Dividend $2.67
Yield 3.29%
1yr Est Tot Return 15.02%
Market Cap $18.37 Bil
Beta 0.52
EPS (ttm) $3.42
Payout Ratio 78.07%
EPS next yr $3.58
P/E 23.66
PEG 1.53
Forward P/E 22.60
Debt/Equity 1.65
ROA 15.20%
ROE 44.60%
ROI 16.20%
Sales $2.21 Bil
Income $777.40 Mil
Profit Margin 35.15%

8. Spectra Energy Partners, LP (SEP) operates as an investment arm of Spectra Energy Corp. Spectra Energy Partners, LP, through its subsidiaries, engages in the transportation of natural gas through interstate pipeline systems, and the storage of natural gas in underground facilities in the United States. As of December 31, 2007, it owned and operated 100% of the approximately 1,400-mile East Tennessee interstate natural gas transportation system that extends from central Tennessee eastward into southwest Virginia and northern North Carolina, and southward into northern Georgia; and a liquefied natural gas storage facility in Kingsport, Tennessee with working gas storage capacity of approximately 1.1 billion cubic feet (Bcf) and re-gasification capability of 150 million cubic feet per day. The company also owned a 24.5% interest in the approximate 700-mile Gulfstream interstate natural gas transportation system, which extends from Pascagoula, Mississippi, and Mobile, Alabama across the Gulf of Mexico and into Florida; a 50% interest in Market Hub, which owns and operates 2 salt cavern natural gas storage facilities, the Egan storage facility with gas capacity of approximately 20 Bcf, and the Moss Bluff storage facility with working gas capacity of 15 Bcf. The company transports and stores natural gas for local gas distribution companies, municipal utilities, interstate and intrastate pipelines, direct industrial users, electric power generators, marketers, and producers. Spectra Energy Partners (DE) GP, LP, operates as the general partner to Spectra Energy Partners, LP. The company is based in Houston, Texas. (Daily Chart) (Weekly Chart)

Price $56.43
1yr Target $55.86
Analysts 14
1yr Cap Gain -1.02%
Dividend $2.31
Yield 4.09%
1yr Est Tot Return 3.07%
Market Cap $16.67 Bil
Beta 0.44
EPS (ttm) $5.76
Payout Ratio 40.10%
EPS next yr $2.82
P/E 9.80
PEG N/A
Forward P/E 19.98
Debt/Equity 0.58
ROA 8.40%
ROE 14.00%
ROI 8.30%
Sales $3.30 Bil
Income $1.43 Bil
Profit Margin 43.33%

9. Plains GP Holdings, L.P. (PAGP), through its 22.1% limited partner interest in Plains AAP, L.P., is engaged in the transportation, storage, terminating  and marketing of crude oil, refined products, natural gas liquids (NGL), and natural gas in the United States and Canada. The company operates through three segments: Transportation, Facilities, and Supply and Logistics. The Transportation segment is involved in transporting crude oil and NGL on pipelines, gathering systems, trucks, and barges. As of December 31, 2013, this segment had owned and leased assets comprising 16,900 miles of active crude oil and NGL pipelines and gathering systems; 24 million barrels of active, above-ground tank capacity; 744 trailers; and 130 transport and storage barges, as well as 62 transport tugs. The Facilities segment provides storage, terminalling, and throughput services for crude oil, refined products, NGL, and natural gas; NGL fractionation and isomerization services; and natural gas and condensate processing services. As of December 31, 2013, this segment owned and operated approximately 74 million barrels of crude oil and refined products storage capacity; 23 million barrels of NGL storage capacity; 97 billion cubic feet of natural gas storage working capacity; 17 billion cubic feet of base gas; 11 natural gas processing plants; 1 condensate stabilization facility; 7 fractionation plants; 24 crude oil and NGL rail terminals; and 1,250 miles of active pipelines. The Supply and Logistics segment is involved in merchant-related activities, such as purchase of crude oil, cargos, NGL; storage of inventory and NGL; and resell or exchange, and transport of crude oil and NGL. As of December 31, 2013, it owned 12 million barrels of crude oil and NGL line fill; 843 trucks and 982 trailers; and 7,400 crude oil and NGL railcars. PAA GP Holdings LLC operates as a general partner of the company. Plains GP Holdings, L.P. was founded in 2013 and is based in Houston, Texas. (Daily Chart) (Weekly Chart)

Price $26.39
1yr Target $32.65
Analysts 20
1yr Cap Gain 23.72%
Dividend $0.76
Yield 2.87%
1yr Est Tot Return 26.59%
Market Cap $16.23 Bil
Beta N/A
EPS (ttm) $0.42
Payout Ratio 180.95%
EPS next yr $0.63
P/E 62.83
PEG N/A
Forward P/E 41.62
Debt/Equity 8.79
ROA 0.30%
ROE 5.50%
ROI 17.30%
Sales $44.64 Bil
Income $57.00 Mil
Profit Margin 0.12%

10. Western Gas Equity Partners, LP (WGP) is engaged in gathering, processing, compressing, treating, and transporting natural gas, condensate, natural gas liquids, and crude oil in the United States. It owns assets located in East, West, and South Texas; the Rocky Mountains covering Colorado, Utah, and Wyoming; north-central Pennsylvania; and the Mid-Continent comprising Kansas and Oklahoma. The company is headquartered in The Woodlands, Texas. Western Gas Equity Partners, LP operates as a subsidiary of Western Gas Resources Inc. (Daily Chart) (Weekly Chart)

Price $62.55
1yr Target $70.60
Analysts 10
1yr Cap Gain 12.86%
Dividend $1.17
Yield 1.87%
1yr Est Tot Return 14.73%
Market Cap $13.69 Bil
Beta N/A
EPS (ttm) $0.98
Payout Ratio 119.38%
EPS next yr $1.39
P/E 63.83
PEG 3.27
Forward P/E 44.94
Debt/Equity 2.22
ROA 4.40%
ROE 21.40%
ROI 12.00%
Sales $1.23 Bil
Income $214.50 Mil
Profit Margin 17.39%

Part 2          Part 3          Part 4          Part 5

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Slim Pickens

12/5/2014

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It's nice when all your stocks are going up and up and up again. Each day brings a new high in the markets and an increase in your portfolio. It's a nice feeling. You're well on your way in obtaining that financial freedom and security you've always wanted. But you're not quite there yet. 

Those stocks you bought when they were cheap are now suddenly expensive, and the other stocks you're following are also getting expensive. So what do you do with any new money that becomes available? I maintain my standards and invest only in those companies that increase their dividends and have an estimated total return of over 10% during the next year. That means my pool of available candidates starts to get slimmer and slimmer. As the market continues to rise, this pool continues to shrink.

Of the 70 companies or so that I track on a daily basis, I'm now down to eleven companies that fit my criteria. Below is a list of those companies and they're the companies whose securities I will be buying in the days and weeks ahead (as long as they continue to fit my criteria). 

Company
Las Vegas Sands

ABM
Chevron
Flowers Foods
Comcast
Dover 
General Electric
Aflac
Ecolab
Ford Motors
Emerson Electric
1 yr Cap Gain
24.22%
17.56%
15.68%
13.78%
14.17%
13.34%
11.81%
11.69%
11.72%
8.86%
8.22%

Dividend Yield
3.39%
2.28%
3.81%
2.79%
1.60%
2.11%
3.37%
2.62%
1.00%
3.16%
2.91%


Total 1yr Return
27.61%
19.84%
19.49%
16.57%
15.77%
15.45%
15.18%
14.32%
12.73%
12.02%
11.14%


While I'm not the smartest guy I know and my list isn't as exhaustive as other's, it does provide me with some interesting information. When my list of stocks that fit my criteria begins to contract, I begin to realize that there are fewer and fewer companies currently worth investing in. That's usually because the companies on my list are overbought and overpriced. To me that also implies that the whole market is starting to be overbought and overpriced and its time to become conservative.  

Other investors that invest similarly also recognize this concept and they also end up investing in fewer and fewer stocks. When that happens, the market is topping. And when the buyers stop buying, the sellers start to take control of the market.
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Is This The Pullback?

12/2/2014

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On 16 November I noted that the DJIA was flattening out and possibly rolling over. Today it looks like the roll over might just be starting. I don't have a crystal ball so I can't predict with any certainty that the market will rise or fall by any amount, but looking at the chart below it really looks like it's extended and it wants to pull back and consolidate. I'm still expecting a Santa Claus Rally this year but it looks like there may be a pullback before that rally starts. 

Notice on the chart that the RSI is in overbought territory and beginning to fall, and the MACD and MACD Histogram are falling below their signal line. I'm becoming very cautious and looking for a pullback in the DJIA to its nearest support level near 17,300 again. Failing to hold support at that level, the next support levels are at 16,950 and 16,300. 


A look at the chart of the S&P500 shows similar results.


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Integrated Oil Companies

12/1/2014

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It's always a good time to own oil companies but sometimes when they're on sale it also a great time to be buying these companies. With oil currently in free fall, this may just be the perfect time to be accumulating shares in the oil companies. You just may have to be a little selective about which companies to buy. 
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In an era in which the fracking of oil wells and horizontal drilling has become pretty commonplace, the availability of oil is no longer the oil industry's biggest problem. The industry's number one oil problem today is maintaining market share in an extremely competitive environment as new oil wells are bought on line and new oil is brought to market. This is no more truer anywhere than it is in the US oil market. As anyone can easily see in the chart to the left, the world apparently woke up to this realization this past summer and the price of oil hasn't been the same since. 
Most of this new oil has been found within the territorial boundaries of the United States and Canada and that has put a lot of pressure on foreign oil producers to lower their prices to maintain their market share. Those countries in the Middle East that have lower costs of production are being forced to reduce their prices below the costs of bringing oil to market in the US (which has higher costs of production) in order to force the US oil exploration and production companies to cap off their oil wells until prices stabilize. Their intent is to reduce the availability of oil to stabilize and eventually raise the price per barrel (a simple example of the supply and demand theory). But those wells aren't going anywhere and can easily be uncapped at any time once the price increases again. 

The ongoing price cuts currently occurring are beginning to reduce the profit margins for the OPEC members and it is effecting their ability to pay their bills and balance their budgets. With these countries having fixed financial commitments, the shrinking profit margins are forcing them to produce and sell even more, which will put additional pressure on the price to oil. The overall result for American consumers has been lower gas prices at the pumps. It's something all of us notice everyday as we travel past our local gas stations. 

While this strategy may or may not make sense to most investors, the result has been that exploration and production oil companies that haven't hedged their future product sales are now beginning to cap those oil wells that have high production costs. This will begin to limit new drilling in areas that would result in a high cost of production. That action will soon begin to hurt the exploration and production oil and gas companies as they figure out how to cover their fixed costs. But for those companies that buy and process oil, their costs of production have fallen with the drop in the price of oil. This will eventually increase their profit margins going forward. These are the companies in the oil refining and chemicals businesses.   

A quick look at the stock charts of selective upstream, midstream and downstream oil companies will show any investor that the price of oil affects each of these areas differently.  This also makes it critical to buy the right one and hold it only as long as that portion of the oil business is booming. The advantage of investing in the integrated oil companies is that they operate in all three areas of the oil industry and therefore they take advantage of both higher and lower oil prices. They also operate worldwide so they're not necessarily affected by any individual country's economy. And by their size alone they can take advantage of the effects of volume in their processes. 

The demand for oil, however, is not going to go away any time soon and I don't think the oil producing countries are going to flood the market with oil indefinitely. As the flow of oil begins to slow and the price stabilizes companies will adapt and additional oil wells will be drilled. The major integrated oil and gas companies will start to operate at top capacity once again. The best of these companies will take advantage of this volatility in the oil economy and the integrated oil companies are best suited to take advantage of this.   

Below is a quick look at the largest six companies in the Major Integrated Oil and Gas Industry to see which companies are worthy of additional research. This is the first step for me when buying shares of any company. The second step is always looking at the price chart technical indicators to determine a price basis for accumulation. The final step is to determine if selling cash secured options and covered calls is a financial benefit I can take advantage of by owning shares of the company. Being able to accomplish all three of these things is the real trifecta of investing.


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Exxon Mobil Corporation (XOM) explores and produces crude oil and natural gas worldwide. As of December 31, 2013, the company had approximately 37,661 gross and 31,823 net operating wells. The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene, polypropylene plastics, and specialty products; and transports and sells crude oil, natural gas, and petroleum products. In addition, the company has interests in electric power generation facilities. It operates in the United States, Canada/South America, Europe, Africa, Asia, and Australia/Oceania. Exxon Mobil Corporation was founded in 1870 and is headquartered in Irving, Texas. (Daily Chart) (Weekly Chart)

Price $90.54
1yr Target $101.00
Analysts 18
1yr Cap Gain 11.55%
Dividend $2.76
Yield 3.04%
1yr Est Tot Return
14.59%
Market Cap $383.39 Bil
Beta 0.90
EPS (ttm) $7.95
Payout Ratio 34.71%
EPS next yr $6.82
P/E 11.39
PEG 2.85
Forward P/E 13.28
Debt/Equity 0.12
ROA 9.70%
ROE 19.30%
ROI 8.20%
Sales $417.50 Bil
Income $34.30 Bil
Profit Margin 8.21%

Royal Dutch Shell plc (RDS-A) operates as an independent oil and gas company worldwide. The company explores for and extracts crude oil, natural gas, and natural gas liquids. It also converts natural gas to liquids to provide fuels and other products; markets and trades natural gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy. In addition, the company is engaged in manufacturing, supplying, and shipping crude oil; selling fuels, lubricants, bitumen, and liquefied petroleum gas (LPG) for home, transport, and industrial use; converting crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, lubricants, bitumen, sulphur, and LPG; producing and marketing petrochemicals, such as the raw materials for plastics, coatings, and detergents for industrial customers; and alternative energy business. Further, it trades hydrocarbons and other energy-related products; governs the marketing and trading of gas and power; provides shipping services; and produces base chemicals comprising ethylene, propylene, and aromatics, as well as intermediate chemicals, such as styrene monomer, propylene oxide, solvents, detergent alcohols, ethylene oxide, and ethylene glycol. The company holds interests in approximately 30 refineries; 1,500 storage tanks; and 150 distribution facilities. It sells differentiated fuels under the Shell V-Power brand. Royal Dutch Shell plc is headquartered in The Hague, the Netherlands. (Daily Chart) (Weekly Chart)

Price $66.41
1yr Target $ ---
Analysts  ---
1yr Cap Gain --- %
Dividend $2.92
Yield 4.39%
1yr Est Tot Return
--- %

Market Cap $216.20 Bil
Beta 1.27
EPS (ttm) $5.09
Payout Ratio 57.36%
EPS next yr $6.81
P/E 13.05
PEG 1.50
Forward P/E 9.75
Debt/Equity 0.24
ROA 4.40%
ROE 8.80%
ROI 4.40%
Sales $437.97 Bil
Income $16.06 Bil
Profit Margin 3.66%

PetroChina Company Limited (PTR) produces and sells oil and gas in the People’s Republic of China. The company operates in four segments: Exploration and Production, Refining and Chemicals, Marketing, and Natural Gas and Pipeline. The Exploration and Production segment is involved in the exploration, development, production, and marketing of crude oil and natural gas. The Refining and Chemicals segment refines crude oil and petroleum products; and produces and markets primary petrochemical products, derivative petrochemical products, and other chemical products. The Marketing segment is engaged in marketing refined products, as well as trading business. The Natural Gas and Pipeline segment is involved in the transmission of natural gas, crude oil, and refined oil products. It also operates a network of service stations. The company operates oil and gas pipelines of 71,020 km consisting of 43,872 km of natural gas pipelines, 17,614 km of crude oil pipelines, and 9,534 km of refined product pipelines. PetroChina Company Limited was founded in 1988 and is based in Beijing, the People’s Republic of China. PetroChina Company Limited is a subsidiary of China National Petroleum Corporation. (Daily Chart) (Weekly Chart)
Price $107.02
1yr Target $145.08
Analysts 3
1yr Cap Gain 35.56%
Dividend $4.85
Yield 4.53%
1yr Est Tot Return
40.09%

Market Cap $237.96 Bil
Beta 0.89
EPS (ttm) $12.42
Payout Ratio 39.04%
EPS next yr $11.46
P/E 8.62
PEG 1.06
Forward P/E 9.34
Debt/Equity 0.44
ROA 8.10%
ROE 16.70%
ROI 9.40%
Sales $379.28 Bil
Income $21.22 Bil
Profit Margin 5.59%

Chevron Corporation (CVX), through its subsidiaries, is engaged in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company operates in two segments, Upstream and Downstream. The Upstream segment is involved in the exploration, development, and production of crude oil and natural gas; liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and processing, transportation, storage, and marketing of natural gas, as well as holds interest in a gas-to-liquids project. The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil and refined products; transporting crude oil and refined products through pipeline, marine vessel, motor equipment, and rail car; and manufacturing and marketing commodity petrochemicals and fuel and lubricant additives, as well as plastics for industrial uses. Chevron Corporation is also involved in coal and molybdenum mining operations; cash management and debt financing activities; insurance operations; real estate activities; and energy services, and alternative fuels and technology businesses. The company was formerly known as ChevronTexaco Corporation and changed its name to Chevron Corporation in 2005. Chevron Corporation was founded in 1879 and is headquartered in San Ramon, California. (Daily Chart) (Weekly Chart)

Price $108.87
1yr Target $132.02
Analysts 21
1yr Cap Gain 21.26%
Dividend $4.28
Yield 3.93%
1yr Est Tot Return
25.19%

Market Cap $206.81 Bil
Beta 1.15
EPS (ttm) $10.86
Payout Ratio 39.41%
EPS next yr $9.45
P/E 10.02
PEG 1.74
Forward P/E 11.52
Debt/Equity 0.16
ROA 8.00%
ROE 13.60%
ROI 7.90%
Sales $212.28 Bil
Income $20.70 Bil
Profit Margin 9.75%

TOTAL S.A. (TOT), together with its subsidiaries, operates as an oil and gas company worldwide. The company operates in three segments: Upstream, Refining & Chemicals, and Marketing & Services. The Upstream segment is engaged in the exploration, development, and production of oil and gas; shipping, trading, and marketing natural gas, liquefied natural gas, liquefied petroleum gas (LPG), and electricity, as well as power generation and trading activities; and coal production and marketing activities. As of December 31, 2013, the company’s combined proved reserves of oil and gas were 11,526 Mboe. The Refining & Chemicals segment is involved in refining, marketing, trading, and shipping crude oil and petroleum products. This segment also produces petrochemicals, including base petrochemicals (olefins and aromatics) and polymer derivatives (polyethylene, polypropylene, and polystyrene); and specialty chemicals, such as elastomer processing, and adhesives, as well as electroplating chemistry. In addition, it holds interests in 21 refineries located in Europe, the United States, the French West Indies, Africa, the Middle East, and China. The Marketing & Services segment produces and markets a range of specialty products, such as lubricants, LPG, jet fuel, special fluids, bitumen, heavy fuel, and marine fuels; and develops renewable energies. TOTAL S.A. was founded in 1924 and is headquartered in Paris, France. (Daily Chart) (Weekly Chart)

Price $55.63
1yr Target $69.90
Analysts 6
1yr Cap Gain 25.65%
Dividend $2.57
Yield 4.61%
1yr Est Tot Return
30.26%

Market Cap $133.39 Bil
Beta 1.43
EPS (ttm) $5.32
Payout Ratio 48.30%
EPS next yr $5.70
P/E 10.46
PEG 1.97
Forward P/E 9.77
Debt/Equity 0.55
ROA 5.00%
ROE 11.90%
ROI 6.10%
Sales $224.05 Bil
Income $12.14 Bil
Profit Margin 5.41%

BP p.l.c. (BP) provides fuel for transportation, energy for heat and light, lubricants to engines, and petrochemicals products worldwide. The company’s Upstream segment is engaged in the oil and natural gas exploration, field development, and production; midstream transportation, and storage and processing; and marketing and trade of natural gas, including liquefied natural gas (LNG), and power and natural gas liquids (NGL). It also owns and manages crude oil and natural gas pipelines; processing facilities and export terminals; and LNG processing facilities and transportation, as well as NGL extraction business. The company's Downstream segment is involved in the refining, manufacture, marketing, transportation, supply, and trade of crude oil; petroleum; petrochemicals products comprising purified terephthalic acid, paraxylene, acetic acid, and olefins and derivatives, as well as provides related services to wholesale and retail customers. This segment also sells refined petroleum products, such as gasoline, diesel, aviation fuel, and liquefied petroleum gas (LPG). This segment offers lubricants under Castrol, BP, and Aral brand names to automotive, industrial, marine, aviation, and energy markets. BP p.l.c. is also involved in alternative energy business, as well as offers shipping and treasury services. The company was founded in 1889 and is headquartered in London, the United Kingdom. (Daily Chart) (Weekly Chart)

Price $39.32
1yr Target $49.92
Analysts 9
1yr Cap Gain 26.95%
Dividend $2.40
Yield 6.10%
1yr Est Tot Return
33.05%

Market Cap $120.57 Bil
Beta 1.94
EPS (ttm) $2.98
Payout Ratio 80.53%
EPS next yr $4.03
P/E 13.19
PEG 1.59
Forward P/E 9.77
Debt/Equity 0.43
ROA 3.00%
ROE 7.20%
ROI 4.40%
Sales $373.29 Bil
Income $9.23 Bil
Profit Margin 2.47%

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    I am an Individual Investor with specific interest in long term growth and then enhancing my returns with income from dividends and derivatives. I don't recommend stocks to anyone (it's a good way to lose friends) and no one reading this should misinterpret my blog as a recommendation for any type of investment. I am writing this solely for myself and my kids.


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