Energy Stocks Screening

Energy Prices forecast*

	2012	2013	2014	2015	2016	2017
Oil $/bbl (Brent)	112	109.5	101	99.5	96	92
Oil $/bbl (WTI)	94.2	98	94.4	93.1	89.5	85.5
Gas $/mcf	2.8	3.7	4	4.15	4.6	5

*The prices are in 2013 money

mcf - hundreds cubic feet.

The prices are a little bit  higher from the previous forecast, either because inflation projected to be much higher or demand stronger.

May 2014 major Energy Companies analysis:

Remaining Reserves	Gazprom*	Exxon Mobil	PetroChina	Shell	Chevron	BP	ENI	Total	Statoil	Rosneft
Oil, mmbbl	11,940	19,700	15,430	13,650	14,220	16,500	6,560	10,190	8,030	42,120
Gas, bcf	547,980	131,620	79,000	83,160	86,500	72,250	35,300	58,950	46,440	71,550
Total, mmboe	100,040	41,630	28,600	27,500	28,700	28,530	12,440	20,000	15,770	52,300
Production Oil, mmboe	990	2,200	2,560	1,540	1,730	2,014	830	1,170	960	4,190
Production Gas, mmscfd**	47,100	11.820	7,680	9,600	5,190	7,020	4,320	6,180	4,740	3,780
Production Total             '000 boe/d	8,830	4,170	3,830	3,150	2,600	3,100	1,550	2,200	1,750	4,860
Reserves, years	31	27	20.5	24	30	25	22	25	25	29
Market Capitalization, USD bn	89	430	222	246	235	150	94	161	93	69
Dividends paid in 2013, %	5.4	2.5	4.5	4.5	3.2	4.5	5.8	4.8	3.9	3.8
US/boe	0.89	10.3	7.8	8.9	8.2	5.25	7.6	8.05	5.90	1.31

* Gazprom has big exposure to one country only - Russia

** 6mscf -1boe

Activist Investors or whether Companies are ran for shareholders’ benefit?

Occasionally you could read about an activist investor taking battle against a company in aim to improve returns and have a better future.

There is increasingly more signs, that shareholder do not any control over what is happening with the companies.  American companies have stockpiled nearly a trillion dollars of cash offshore to avoid paying higher tax bills at home.

This underlines two simple truths:

-         It is very unlikely that this is done in shareholder’s interest.  Such strategies create unjustified risks associated with tax avoidance schemes and loss or reputation due to bad publicity. 

-         Inability and unwillingness of businesses to expand at home despite very favorable conditions.

Estimates are varying from source to source but by some estimates total cash reserves of US companies  kept overseas climbed to $1.64tn last year. That was $180bn or 12 per cent more than the year before.

The companies would not return cash in any way or form – stock buybacks, dividends, investing in the future growth.   Is it really in investors interests? Highly unlikely and yet they seemingly have no say.

Companies, particularly big ones are out of touch and reach.  At the same time governments are getting increasingly hostile towards individuals – raising income taxes and organizing witch hunt on foreign income.

Raising income taxes. The governments might want to argue, that, the main driver for rising taxes was a fall in the value of tax free allowances and tax credits relative to earnings. Increases in employee social security contributions also played a role in some cases. Aging population has some contributing effect as well.  Big Companies are immune and individuals have to carry the load by themselves by paying increasingly more towards the country budget.

The witch hunt on individuals. One of the most recent examples, is in the UK - currently HMRC  (local IRS) must demonstrate that individuals intended to evade tax on foreign income but in future the government wants to be able to bring criminal prosecutions against anyone found to have undeclared foreign income.  

While individuals maybe hiding billions in offshore accounts, big multinational companies are squirreled away trillions of dollars.  Governments made it possible for them. Shareholders seemingly quite content with the companies sitting on pile of cash doing nothing, more over there are no guarantees that the cash is actually secure.

I have some serious doubts that the individual investors, including activists have a measurable say on how the blue chips and other big companies are being ran.  The more troubling thought is that the companies do not believe in the US future and not investing in its growth, while an opportunity is seemingly there.

April 2014 update ($ 293,958 +$20,630 or +8%)

↑RUB is up towards USD, for my portfolio it is gain $ 340

↑ Vanguard energy ETF is up by $ 600

↑ Gazprom shares are up by $18,954

↑ Rosneft shares are up by $ 544

↑ Accumulated $4,000 USD as part of my annual savings goal.

Grand total additions: $ 24, 438

↓ EUR and GBP are down towards USD, for my portfolio it is loss $2,675

↓ Vanguard 500 Index is lost $300 or 2% since March 2014.

↓ Precious metals lost $ 833 or 6.5% since last month.

↓ Grand total losses: $ 3,808

Buying vs. Renting

Buying vs. Renting

After certain considerations I am coming back to review whether it worth buying a house or keep on renting.

Here is our current assumptions:

Desired house price – $ 450 K, current rental price for the home we live in -  $ 16.8 K ($ 1,400 a month).

Available saving for closing cost and down payment - $ 100 K, net annual money available to pay mortgage $36 K.

Mortgage – 6% interest rate, annual real estate price inflation (appreciation) – 4%.

Cost of buying (closing cost) will include – mortgage arrangement fee, moving in cost,  property buying tax, structural survey of the house – all together $ 20 K

We have accumulated deposit of $ 100 K, so after cost of buying (closing cost) the house we could pay $ 80 K, as downpayment or 18%.

One of the most important things to understand it how much you could afford to spend net (after tax) towards your mortgage. This will determine how much could borrow, comfortably. Of course, there is rule of thumb, when buying a property – to have 20% as downpayment and  amount of money a bank lend you is 3 times of your gross income (before tax).   We have been tracking our family budget for last 5 years, so do have pretty good idea how much do we spend and where the money are going to.

In our case we could comfortable put a side $3 K a month for mortgage (principal and interest) and some additional $ 200-250 a month to cover house and life insurance. 

Another factor to consider : depreciation and re-decoration.  People  frequently focus on how home prices are appreciating, but they forgot that those prices are for well maintained hoses.

Same as with the original example on the property owning, we set up periods:

-         Redecorating house  - every 10 years, this would cost about $ 40 K (new kitchen, equipment, central heating, windows, doors, etc…) or $4 K a year.

-         Replacing house – every 60 years . My estimate that out of $ 450 K , half of it is the prices of the house.

$240 K for 60 years - $ 4.2 K .

March 2014 update ($274,320 -$30,940 or -10%)

↑ Vanguard ETF gained 1,500 USD

↑ Vanguard VOO gained 900 USD

↑ Company shares gained 110 USD

↑ Accumulated $8,000 USD as part of my annual savings goal.

↑ Gold gained $530 USD

Grand total additions: $11,040

↓ Gazprom shares lost 39,650 USD

↓ Rosneft shares lost 1,930 USD

↓ GBP lost towards USD and EUR. My loss is 400 USD.

↓ Grand total losses: $41,980