WTI pricing is a fairy tale for US E&Ps.
What I mean by that is…no producer gets to realize WTI prices in selling their oil, and that shows up in their quarterly reporting. Investors can’t just average out the WTI price for a quarter and think that the company in whose stock they own will report cash flow or earnings off that number.
One small reason is differentials; which is the difference in pricing between various oil hubs around North America. Houston and Midland in south and east Texas have different prices than The Big Oil Hub at Cushing Oklahoma, where WTI is priced–as does Clearbrook in Minnesota.
But the largest reason is that…and I’ve said this before…there are no true oil producers in the US; many of them produce as much natgas or natgas liquids (ethane, propane, butane etc) that receive much lower pricing than oil. To me it’s one of the most open secrets in investing in the oil patch, but investors don’t ever seem to truly grasp how much gas is in shale oil. And that has a HUGE impact on “oil” companies’ cash flow and profits.
Earlier this month, I invited one of my research gurus, Nathan Weiss of Unit Economics to fly out to Vancouver from his office in Rhode Island to explain all this to our subscribers in person–and in under 15 minutes, with no big words.
I think this is so important for investors to grasp, that I have included his full presentation below:
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If you want to profit from oil, you want to find the “oiliest” stock you can, and preferably one with very low costs and netbacks, which is the industry term for profit per barrel. You want to find one that can grow–and grow fast–but still spend less than its cash flow.
I’ve done all that research for you. This stock is an energy investor’s dream. It’s the “oiliest” stock I see, with a management team who has built and sold several juniors before, and have wells that payback so fast they can grow production and cash flow per share faster than anybody else. The oil price doesn’t have to go up at all from here for this stock to have a great multi-year run right now.
Start profiting from Nathan’s comments right now–get the name and symbol of this stock right HERE.