The Case Of The Vanishing Money And Attempted Murder Of U.S. Coal

Adam Feik - Contributor - Energies

Don’t look now! It’s a frightening scenario for investors with a stake in US coal.

Even as we speak, money is disintegrating. No one seems safe. It’s like a mass murderer is on the loose. Investors in both stocks and bonds of US coal companies are suffering profusely. Someone please! Stop the bleeding!

On Tuesday, Bloomberg reported this horrifying reality: “Two months after Peabody Energy Corp. raised $1 billion from the junk-bond market, buyers have lost 18 percent in market value as a slump in coal prices worsened.”

Bonds! People who bought Peabody’s 10% bonds have lost 18%! Continue reading "The Case Of The Vanishing Money And Attempted Murder Of U.S. Coal"

What's a "YieldCo"? (Hint: It's Green)

Adam Feik - Contributor - Energies

Quick: Name as many energy stocks as you can that fit these criteria:

  • Better than 12% annualized total returns over the past 5 years
  • Positive returns over the last 12 months
  • Greater than 3% dividend yield
  • Currently trading 5% or more below its own 52-week high

There aren't very many. A handful of NYSE-listed pipeline companies make the cut, including these: Continue reading "What's a "YieldCo"? (Hint: It's Green)"

In Search of the Most Efficient Energy & Commodity ETFs

Adam Feik - Contributor - Energies

I wrote last week about the best oil ETFs. In the process, I discovered an interesting feature of the PowerShares DB Oil ETF (DBO), of which I had not previously been aware.

Specifically, as I described, other oil ETFs have a practice of automatically rolling into the next month’s oil futures contract when the current month contract expires – even if doing so will cause some price decay, as in “contango,” when the next month’s contract is higher priced than the current months (which commonly happens due to storage costs incurred by the party holding the physical commodity, etc). DBO, on the other hand, designed their ETF to NOT automatically roll into the next month’s futures contract, specifically to address that problem of decay, or “negative roll yield.” Instead, PowerShares uses what it calls an “Optimum Yield” formula to automatically roll into the most attractive near-month futures contract (of the next 13 months). In so doing, DBO thereby claims to optimize the fund’s “roll yield” (whether markets are in a state of contango or the opposite condition, known as backwardation). Continue reading "In Search of the Most Efficient Energy & Commodity ETFs"

What’s the Best ETF for Playing an Oil Price Rebound?

Adam Feik - Contributor - Energies

A lot of investors seem very interested in bottom-fishing in the oil and energy realm these days. Perhaps that fact by itself ought to give everyone a little pause. It certainly does me!

The attraction, of course, is that oil's big crash from its June 2014 peak has made for a lot of "lower prices." Obviously, we all like to "buy low," when possible. Plus, almost everyone agrees oil isn't going away anytime soon. I don't dispute any of that.

On the contrary, as I've cited before (see my January 22nd blog, for example), the oil industry must find a bunch of new oil each year – about 5% of its current productive reserves – just to keep up with demand. About 4% of the 5% increase is required merely to replace depletion. The other 1% is to meet demand growth. Another way of stating the same thing is that by 2020, the industry will need to find about 30 million bbl/day of new oil supplies (compared to today's production of about 93 million barrels per day).

Furthermore, to reiterate a few more key points from that Jan. 21st blog, emerging countries are poised to continue increasing their demand for oil and energy as they expand the world's "2nd great industrial revolution." This is not a small deal or a short-term flash in the pan, as emerging countries are home to about 6 billion of the world's 7 billion people. In addition, the world's population is set to increase by 2 billion by 2040, and much of the increase will occur in emerging countries. Continue reading "What’s the Best ETF for Playing an Oil Price Rebound?"

Middle Eastern politics begin to affect oil prices again

Adam Feik - Contributor - Energies

For months, the big story behind plummeting oil & gas prices has been the U.S. and Canadian on-shore shale boom. The resulting supply glut has caused WTI crude to fall from about $107 on June 20th, to a low of about $45 recently. Meanwhile, Saudi Arabia and OPEC have held firm to their Thanksgiving weekend decision to continue pumping at a steady rate. Finally, lackluster demand from emerging countries like China hasn't had enough kick to cause prices to rebound significantly.

So… OPEC countries have been the "steady" ones in all this.

In recent days, however, focus has turned to the Middle East (of all places). Can you imagine? Middle Eastern geopolitics affecting oil prices? It's been awhile since the Mid-East has been the center of attention. Continue reading "Middle Eastern politics begin to affect oil prices again"