Fisher Investments on Energy is a fantastic book for investors entering the Energy space.
It breaks down the industry into its 5 main sub-sectors and covers the most important drivers in each segment.
A thread on the most important questions within each Energy sub-sector ... π§΅
It breaks down the industry into its 5 main sub-sectors and covers the most important drivers in each segment.
A thread on the most important questions within each Energy sub-sector ... π§΅
1/ INTEGRATED O&G, E&Ps, & REFINIERS
Revenue & Earnings:
β’ How is revenue divided between exploration and production, refining and marketing, or other divisions?
Production & Reserves:
β’ How is production split between oil, gas, or other products?
Hedging:
β’ Do you?
Revenue & Earnings:
β’ How is revenue divided between exploration and production, refining and marketing, or other divisions?
Production & Reserves:
β’ How is production split between oil, gas, or other products?
Hedging:
β’ Do you?
Reserve Replacement:
β’ What is the history of reserve replacement?
β’ How many years can it sustain production w/ current reserves?
E&P Costs:
β’ How do your costs compare w/ competitors?
β’ How high/low is opex versus competitors?
β’ Are you low/high cost producer?
β’ What is the history of reserve replacement?
β’ How many years can it sustain production w/ current reserves?
E&P Costs:
β’ How do your costs compare w/ competitors?
β’ How high/low is opex versus competitors?
β’ Are you low/high cost producer?
Geopolitical Risk:
β’ What is your geopolitical risk profile?
β’ Where are your assets located?
β’ Are the sites stable/unstable?
Gov't Ownership:
β’ Are you owned by your gov't?
β’ If so, how much do they own?
β’ How have they influenced your decisions in the past?
β’ What is your geopolitical risk profile?
β’ Where are your assets located?
β’ Are the sites stable/unstable?
Gov't Ownership:
β’ Are you owned by your gov't?
β’ If so, how much do they own?
β’ How have they influenced your decisions in the past?
Cash Flow Use:
β’ How are you spending FCF?
β’ Are you buying stock, paying dividends, or reducing debt?
Refining Complexity:
β’ How complex are your refiners?
β’ Does it do one kind of refining? Or more?
β’ How diversified are your oil sources?
β’ Supply concentration?
β’ How are you spending FCF?
β’ Are you buying stock, paying dividends, or reducing debt?
Refining Complexity:
β’ How complex are your refiners?
β’ Does it do one kind of refining? Or more?
β’ How diversified are your oil sources?
β’ Supply concentration?
2/ OIL & GAS STORAGE AND TRANSPORTATION
Revenue & Earnings:
β’ What % of your revs/earnings are regulated?
β’ What is split b/w production or trading assets?
β’ Which of the two (production/trading) is more important to the bottom line?
Revenue & Earnings:
β’ What % of your revs/earnings are regulated?
β’ What is split b/w production or trading assets?
β’ Which of the two (production/trading) is more important to the bottom line?
Competition:
β’ What is the competitive landscape?
β’ Do you operate in a region w/ significant barriers to entry?
β’ If so, what would it cost for a competitor to enter your space?
β’ Do you benefit from NIMBYism? If so, how confident are you in that?
β’ What is the competitive landscape?
β’ Do you operate in a region w/ significant barriers to entry?
β’ If so, what would it cost for a competitor to enter your space?
β’ Do you benefit from NIMBYism? If so, how confident are you in that?
Balance Sheet:
β’ Does your balance sheet allow for increased leverage?
β’ Would you be able to service your debt if margins/profits fell 10, 20, or 30%?
β’ What is the upper bound of leverage that you're comfortable operating within? And why is it that number?
β’ Does your balance sheet allow for increased leverage?
β’ Would you be able to service your debt if margins/profits fell 10, 20, or 30%?
β’ What is the upper bound of leverage that you're comfortable operating within? And why is it that number?
Regulation:
β’ Do you operate in a highly regulated region?
β’ What is your history with gaining regulatory approval?
β’ Do you operate in a favorable regulatory environment?
β’ Are there regulatory hurdles in the short-to-medium term that you are worried about?
β’ Do you operate in a highly regulated region?
β’ What is your history with gaining regulatory approval?
β’ Do you operate in a favorable regulatory environment?
β’ Are there regulatory hurdles in the short-to-medium term that you are worried about?
Interest Rates:
β’ How sensitive are you to rising interest rates?
β’ Are rising/falling rates good or bad for your firm? Why?
Distributions:
β’ Do you have a long history of paying dividends?
β’ Have you ever canceled your dividend? If so, why?
Taxes:
β’ MLP or nah?
β’ How sensitive are you to rising interest rates?
β’ Are rising/falling rates good or bad for your firm? Why?
Distributions:
β’ Do you have a long history of paying dividends?
β’ Have you ever canceled your dividend? If so, why?
Taxes:
β’ MLP or nah?
3/ COAL & CONSUMABLE FUELS
Supply/Demand:
β’ What is the supply/demand balance?
β’ How have prices been affected by the current supply/demand?
Production Growth:
β’ What's your production growth history?
β’ What's your strategy for growing production? Organic or M&A?
Supply/Demand:
β’ What is the supply/demand balance?
β’ How have prices been affected by the current supply/demand?
Production Growth:
β’ What's your production growth history?
β’ What's your strategy for growing production? Organic or M&A?
Geographic Breakdown:
β’ Which regions do you generate sales?
β’ Exporter or do you mainly supply your own country?
β’ Any trade problems/restrictions you have to honor?
Production Costs:
β’ What are your costs relative to peers?
β’ What factors drive your costs?
β’ Which regions do you generate sales?
β’ Exporter or do you mainly supply your own country?
β’ Any trade problems/restrictions you have to honor?
Production Costs:
β’ What are your costs relative to peers?
β’ What factors drive your costs?
Vertical Integration:
β’ Are you vertically integrated? If not, is that your plan eventually?
β’ To what degree are you reliant on other firms in your operations?
β’ How has your view on vertical integration changed over time?
β’ Are you vertically integrated? If not, is that your plan eventually?
β’ To what degree are you reliant on other firms in your operations?
β’ How has your view on vertical integration changed over time?
Transportation:
β’ How do you deliver your coal to end users?
β’ Any transportation bottlenecks? If so, how have you responded in past?
Legislative Risks:
β’ What are your CO2 emissions risks?
β’ Could legislative risk jeopardize terminal value?
β’ How do you deliver your coal to end users?
β’ Any transportation bottlenecks? If so, how have you responded in past?
Legislative Risks:
β’ What are your CO2 emissions risks?
β’ Could legislative risk jeopardize terminal value?
4/ OIL & GAS DRILLING
Rig Types:
β’ What's your rig type breakdown (offshore, onshore, shallow, deep water)?
β’ Do your rigs drill primarily for natural gas or oil?
Contract Types:
β’ What contracts do you use (day rates, etc.)?
β’ How long are contracts?
Rig Types:
β’ What's your rig type breakdown (offshore, onshore, shallow, deep water)?
β’ Do your rigs drill primarily for natural gas or oil?
Contract Types:
β’ What contracts do you use (day rates, etc.)?
β’ How long are contracts?
Dayrates:
β’ What are the trends in dayrates (higher/lower)?
β’ Is there potential for dayrate expansion?
Contract Length:
β’ When do your contracts expire?
β’ How many rigs are set to come off in the next 12 months?
β’ ST or LT contracts? What's the % mix?
β’ What are the trends in dayrates (higher/lower)?
β’ Is there potential for dayrate expansion?
Contract Length:
β’ When do your contracts expire?
β’ How many rigs are set to come off in the next 12 months?
β’ ST or LT contracts? What's the % mix?
Rig Quality:
β’ High or low quality rigs?
β’ Do E&Ps pay a premium for your rigs?
β’ Maintenance vs. Repair capex?
Rig Location:
β’ Where are rigs?
β’ Supply/demand dynamics in locations?
β’ Want to expand or stay in one region?
β’ Can you easily move rigs?
β’ High or low quality rigs?
β’ Do E&Ps pay a premium for your rigs?
β’ Maintenance vs. Repair capex?
Rig Location:
β’ Where are rigs?
β’ Supply/demand dynamics in locations?
β’ Want to expand or stay in one region?
β’ Can you easily move rigs?
Rig Utilization:
β’ What % of your rigs are operating?
β’ What's been the utilization rate trend? Growing, slowing, etc.?
Rig Growth Strategy:
β’ Do you want to grow rig counts?
β’ If so, how are you financing that growth?
β’ Where would you add rigs and why?
β’ What % of your rigs are operating?
β’ What's been the utilization rate trend? Growing, slowing, etc.?
Rig Growth Strategy:
β’ Do you want to grow rig counts?
β’ If so, how are you financing that growth?
β’ Where would you add rigs and why?
Rig Fleet Age:
β’ What is the average age of your fleet?
β’ Are you adding younger rigs?
β’ Will you need to retire rigs soon?
Opex/Maintenance Costs:
β’ How are your opex costs vs. peers?
β’ How will you mitigate cost inflation?
β’ What is the average age of your fleet?
β’ Are you adding younger rigs?
β’ Will you need to retire rigs soon?
Opex/Maintenance Costs:
β’ How are your opex costs vs. peers?
β’ How will you mitigate cost inflation?
5/ OIL & GAS EQUIPMENT AND SERVICES
Revenue & Earnings:
β’ What is your split b/w product vs. services revenue and earnings?
β’ Do you rely on spot market or long term contracts?
β’ Do you sell mostly older products or newer products? How has that trended over time?
Revenue & Earnings:
β’ What is your split b/w product vs. services revenue and earnings?
β’ Do you rely on spot market or long term contracts?
β’ Do you sell mostly older products or newer products? How has that trended over time?
Supply/Demand Dynamics:
β’ What drives demand for your products/services?
β’ What is competitive landscape for products/services?
Tech/Innovation:
β’ Do you possess any proprietary tech?
β’ Do you continually release new products? If so, how has that trended over time?
β’ What drives demand for your products/services?
β’ What is competitive landscape for products/services?
Tech/Innovation:
β’ Do you possess any proprietary tech?
β’ Do you continually release new products? If so, how has that trended over time?
Geographic Breakdown:
β’ Do you focus on one region or expand geographically?
β’ Do your core competencies jive with that strategy?
Market Share / Pricing Power:
β’ What is your market share for core biz?
β’ Do you have pricing power over competitors?
β’ Do you focus on one region or expand geographically?
β’ Do your core competencies jive with that strategy?
Market Share / Pricing Power:
β’ What is your market share for core biz?
β’ Do you have pricing power over competitors?
Project Execution:
β’ Do you execute projects on time and on budget?
β’ Do you put cost contingencies in contracts?
β’ Have projects been disrupted in the past?
Backlog:
β’ How strong is your backlog?
β’ Is it rising/falling?
β’ Do peers have larger/smaller backlogs?
β’ Do you execute projects on time and on budget?
β’ Do you put cost contingencies in contracts?
β’ Have projects been disrupted in the past?
Backlog:
β’ How strong is your backlog?
β’ Is it rising/falling?
β’ Do peers have larger/smaller backlogs?
CONCLUSION
I hope you guys enjoyed this mega-thread on the most important questions to ask when analyzing each of the 5 main Energy sub-sectors.
If you enjoyed this thread, please like, RT, share w/ friends, and follow me!
Also, check out more here π
macro-ops.com
I hope you guys enjoyed this mega-thread on the most important questions to ask when analyzing each of the 5 main Energy sub-sectors.
If you enjoyed this thread, please like, RT, share w/ friends, and follow me!
Also, check out more here π
macro-ops.com
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