It Would Be Insane To Own Oil Stocks Today (AMLP, BP, CVX, XOM, LNG)

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[00:00:04] Doug McIntyre: So what’s happened to oil, I’m gonna go back roughly a year and crude is at 80 bucks, give or take a buck.

[00:00:12] Lee Jackson: This is 75 in January.

[00:00:15] Doug McIntyre: Better point, depending on the day, it, it sort of dances around 60. Right? there is a point at which, and it depends on the company where you don’t want to drill.

[00:00:31] Doug McIntyre: If you’re Exxon (NYSE: XOM), there’s a number.

[00:00:34] Lee Jackson: They are at that point in the Permian. I think

[00:00:37] Doug McIntyre: They’re probably at that point in the Permian. That may be that they’ve got some wells that have been producing for 20 years where, the cost of running out Well, are negligible. Yeah. Are negligible.

[00:00:48] Doug McIntyre: But one of the things you’re seeing is, is I don’t wanna own an oil stock now.

[00:00:55] Lee Jackson: The only oil stocks, and I wrote about this recently, the only oil stocks [00:01:00] I think that make really any sense until prices get sorted out are the limited partnerships because the, those who transport and store oil, and I wrote about it recently because their contracts are already set in and, and already in place, and the spot price of benchmark oil, whether it’s West Texas Intermediate or Brent, really is not a huge issue to them.

[00:01:24] Lee Jackson: It wouldn’t be if it was long term, but, the, the ups and downs of oil don’t really affect MLPs. And even if you buy the Alerian MLP ETF (NYSEARCA: AMLP), which has 13 of the top companies, it pays an 8% dividend. It pays it quarterly and you don’t get the dreaded K1. So I that I’m with you. I mean, Chevron’s (NYSE: CVX) numbers not good.

[00:01:51] Lee Jackson: Exxon’s numbers were better because they increased production, but again, that’s a, a cost killer or, a profit killer, a [00:02:00] margin killer. So, yeah. I’d be really reluctant on integrated MPs and more constructive on midstream MLPs.

[00:02:10] Doug McIntyre: So what do you like?

[00:02:12] Lee Jackson: What do you like? I think that Energy Transfer (NYSE: ET), which is simple, ET is a great stock to own. Plus, they have LNG (NYSE: LNG) processing in Louisiana, which is gonna be huge as we export. So I think, Energy Transfer is big. I think another good one is the partnership that was put together, by Hess (NYSE: HESM), which is simple, HESM, and that’s Hess Midstream.

[00:02:39] Lee Jackson: Now, Hess owns part of that, not all of it. They own about 38% of it. And so Chevron at one point when they finally get done buying Hess will own a piece of it, but that’s good. MPLX (NYSE: MPLX), which was put together by marathon, pays about an 8% dividend. And again, these are all pipeline [00:03:00] storage, transportation, things of that nature where those contracts are in place.

[00:03:04] Lee Jackson: And it’s not like, Chevron or Exxon can come back and say, okay, you have to lower your price. We got a contract. So I think for the time being, I think you’re right, I’d be very careful with exploration production and more, positive on MLPs.

[00:03:18] Doug McIntyre: If, if I were somebody who liked to short, I would be short Exxon and Chevron. Right now, they’ve already dropped. Yeah, I can see. I can look, I can see oil at 55. And if it goes down 50 bucks

[00:03:31] Lee Jackson: in 30 or 40 days. Yeah. If,

[00:03:33] Doug McIntyre: if you see that the big oils are gonna drop some more and it’s not a bad time. If you’ve got a, even if they’re down, you may want to ask yourself, are they gonna go down further?

[00:03:46] Doug McIntyre: But I don’t mind the idea of shorting those at all right now. I think that they’ve got further to fall, because I think crudes got further to fall. I think it’s got further to fall because demand is gonna slack. And if there’s a recession, and I think that [00:04:00] there’s some countries that are gonna keep pumping.

[00:04:02] Doug McIntyre: I mean the United States,

[00:04:04] Lee Jackson: well, OPEC Plus has said they’re gonna keep pumping, they’re gonna increase production,

[00:04:08] Doug McIntyre: Yep. So you’ve got, depending on what happens to sanctions on Russian crude And Iran. As far as I’m concerned, you’re gonna see $55 oil and I would trade stocks accordingly.

[00:04:22] Lee Jackson: Yeah, absolutely. Be real careful with the big integrated because, and the thing is that all of the big fund managers are along all those, so when they start to peel ’em off, if they do, I mean, and again, Exxon’s numbers, were, were okay. Chevron’s not very good. So, it’ll be interesting to see what the other big integrated producers do.

[00:04:42] Lee Jackson: And also it’ll be interesting to see how BP (NYSE: BP), Shell, and the big European Total, how they’ve come out and if they’re hitting the same kind of roadblocks that we’re hitting. So, yeah, I’d be careful. Be careful with the oil,

[00:04:56] Doug McIntyre: Yeah. On, on a note having to do with this, which isn’t [00:05:00] buying stock or not, there’s a good chance that you could get a bit of help for the economy because there’s a pretty good chance I can see gas prices.

[00:05:11] Doug McIntyre: If you take the national average of a regular tank of gas going down to 2.75 and the consumer. during the first part of Ukraine, the Ukraine invasion gas briefly hit five bucks. It was four bucks for quite a while. I can see it at two 50 nationwide, and I can see that starting in the summer, which is, is when people drive heavily.

[00:05:40] Doug McIntyre: So if American consumer’s gonna get a bit of help, oh yeah, it’s gonna be gas, it’s gonna be gas prices coming down.

[00:05:49] Lee Jackson: Well, and this is where, the administration and the economy is catching a little bit of a break, is to get some costs coming down. like even though it was somewhat of a misnomer in the [00:06:00] big picture, but egg prices, I was at the store the other day.

[00:06:02] Lee Jackson: They’re back to where they. And, oil here in the south is already below that figure. It’s 2 42 at local gas stations here. If they could get that kinda relief in the Midwest and the West Coast and East Coast, I, I think that would be huge for the consumer.

[00:06:20] Doug McIntyre: Yeah. It also, although they’re not a huge amount part of the economy, it, it’s decent good news for the airlines, although I know they hedge, but it’s still net net if you’re the airlines, you want to have inexpensive jet fuel and it’s good news.

[00:06:36] Doug McIntyre: Net net for the petrochemical guys.

[00:06:38] Lee Jackson: Oh yeah, absolutely. It’s really good. So I think that will be something that can help the economy. And to be frank with you, it gives the administration something to hang their hat on and say, Hey, hey, look, we’re not the guys that had all the inflation. We’re trying to bring the inflation down.

[00:06:52] Lee Jackson: So that, that, that’s a huge positive. It really is. And,

[00:06:56] Doug McIntyre: and Bill, as Billy Bob Thornton said in the TV show, [00:07:00] Landman, there is oil in everything. Your toothbrush, your Nikes, your, your hairspray. So everything that is a hidden, hidden part of the economy that most people don’t see. And that is, is that you’ve got petrochemicals, you’ve got oil in everything.

[00:07:21] Doug McIntyre: Yeah. So if oil comes down, there’s this sort of invisible effect across many, many products.

[00:07:28] Lee Jackson: Yep. That’s true. Because input pricing would, would drop for a million things.

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