Beautiful Green Hedges / How do you say amazing bargain in Portugese? / Quantifying the impact of the Olympics on China's economy
August 26, 2008
– Comments (4) |
RELATED TICKERS: XTO
, PBR
Beautiful Green Hedges
No I'm not talking about the type of hedges that line your front yard, but rather a company that has hedged its production of natural gas beautifully over the years. As I have mentioned several times in the past, I am a shareholder of XTO. One of the first things that first attracted me to this company when I originally purchased it in real life and gave it the green thumb in CAPS back in early 2007 was its amazing hedging ability. XTO always seemed to be one step ahead of the market in placing its hedges, often enabling it to run circles around its competitors. It appears as though XTO is at it again.
With natural gas currently sitting at $8.20 (and this is only after a huge $0.43 spike today), the company recently announced that it has hedged more than 70% of its remaining 2008 production at an average of $10.10. Furthermore, it has hedged more than 40% of its 2009 production at an average of $12.31. Kudos to the company's CEO Bob Simpson for doing such an outstanding job at running this company. He's very well paid, but unlike many, many other CEOs he actually deserves it.
XTO Energy Updates Price Hedges
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How do you say amazing bargain in Portugese?
Petrobras is another company that I personally own in real life. I cannot believe how absurdly cheap this company's stock is right now. For whatever reason, be it fear of mid-game rule changes by the Brazilian government, scepticism that the high oil prices that we have seen over the past year are for real, or whatever PBR and PBR/A are an negócio surpreendente (that's supposedly Portugese for amazing bargain) right now.
Yesterday Credit Suisse reiterated its "Buy" rating for PBR, stating:
"PBR stock price only embeds the value of its SEC proven reserves in a US$87/bbl oil scenario. Presalt prospects, refining, gas and power and value upside to oil prices above US$87 are all for free."
WOW. This basically sums up how I feel about Petrobras’ current share price as well (though I personally own the "A" shares (PBRA) instead of the regular).
Jim Jubak (who never did return my e-mail the other day, but whose column I continue to read nonetheless) also did a favorable write-up on and purchased Petrobras for his personal portfolio this morning (see article: To mix oil and profits, think small)
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There has been a lot of talk on CAPS lately about the impact that the factories that the Chinese government shut down in an effort to clear the air prior to the Olympics has made the country's economy appear much weaker than it really is and has had a negative impact upon the price of oil, but I haven't seen any specific numbers about how much production capacity China actually shuttered during the games...until now.
Bloomberg published an excellent article on the subject yesterday titled "Blue Skies for Beijing Need Marathon Plan That May Slow Economy" (link). According to Goldman Sachs, China shut down factories in Beijing and areas surrounding it for two months. It estimates that these areas account for a whopping 26% of China's economic output and the slowdown there may have shaved as much as 3% off of the country's GDP.
I am not sure if all of the aforementioned factories have been restarted yet or if the Chinese government will wait until after the Paralympic Games, which are in China from September 6–17, to give them all the green light, but the exact timing of the restart doesn't matter all that much. What does matter is that China will resume its rapid growth and resource consumption in the near future...if it hasn't done so already.
Deej
Whose oil and gas plays include XTO, PBR/A, RIG, and one other nameless E&P
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