What to do about Concho Resources (CXO)?

Answering the question depends on weighing the negative global macroeconomic trends versus positive company specific developments. I think that exercise fits a lot of stocks these days. Company or sector specific good news is having a hard time getting a hearing amidst the headline fear from Greece, Spain, and China.

The financial results Concho Resources announced for the first quarter on May 2 had a flaw or two. But the fundamental oil exploration and production results provided exactly the solid stuff that investors own this stock for.

Adjusted earnings climbed to $1.05 a share from 79 cents a share in the first quarter of 2011. That was 11 cents a share below Wall Street estimates. Net income on a GAAP (Generally Accepted Accounting Principles) basis was just 30 cents a share, however, as the company took a big $126 million loss on commodity derivatives. That was almost $100 more than the company’ loss on similar derivatives in the first quarter of 2011. Revenue climbed by almost 41% to $508 million. That was above the $485 million Wall Street consensus.

In contrast to those financials, Concho Resources’ production record in the quarter was spotless. Read more

Buy Schlumberger (SLB) in my Jubak’s Picks portfolio

Thanks to the euro debt crisis and worries that a slowing China will reduce global demand for oil, I’ve finally got my buying target for Schlumberger (SLB). (How’s that for positive thinking? Lemons into lemonade, I hope.)

I wrote in an April 20 post http://jubakpicks.com/2012/04/23/very-solid-earnings-from-schlumberger-slb-but-im-still-waiting-for-my-price/that at a price of $64 to $65 the stock would be discounting the current weakness in North American oil and gas exploration and drilling. Yesterday, May 17, the stock closed at $64.75. Today, as of 2:30 New York time, shares are trading at $64.49. Seems like a good price to me. So I’m adding the stock to my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/  today.

Back on April 20 Schlumberger reported earnings of 98 cents a share. Revenue climbed by 21.7% from the first quarter of 2011.  International margins climbed to 19.1%, well above the 18% that Wall Street had expected. International margins are extremely important to Schlumberger. The most internationally oriented of all the oil service companies, Schlumberger gets two-thirds of its revenue from outside North America.

Which isn’t to say that North America isn’t important—33% of revenue is still a lot of revenue. And that’s where the problem lies for Schlumberger and all oil service companies at the moment. Read more

Unless you compare the results to those of ExxonMobil (XOM), Chevron (CVX), and BP (BP) in the first quarter, you may not realize exactly how unusual Statoil (STO in New York and STL.NO in Oslo) first quarter report was on May 8.

In their quarterly statements ExxonMobil, Chevron and BP all reported lower production in the first quarter. That’s a reflection of how tough it’s become for the big international majors to find new reserves big enough to move their numbers.

Statoil, however, reported a 12% increase in production from the first quarter of 2011. The company started production at new projects in Brazil, Angola, and the Norwegian sector of the North Sea. Enhanced production technologies, the company added, boosted production from its mature Norwegian fields. (In addition in the quarter Statoil made three big oil and gas discoveries in Norway, Brazil, and Tanzania.)

The bottom line result of this increase in production was record first quarter earnings of $10.1 billion, a 14% increase from the first quarter of 2011, on a 34% increase in revenue.

All this good news came with a bit of a warning, of course. Read more

Schlumberger (SLB) CEO Paal Kibsgaard delivered a decidedly mixed message at the Howard Weill Energy Conference on March 26.

I’d score his presentation two big pluses for investors in Schlumberger and one big minus.

You might think that would wind up giving the big oilfield services provider a positive score, but in this case the market clearly thinks that two minus one is a negative number. The stock has tumbled to $69.96 on March 27 from $79.85 on February 24—a 12.4% decline in a period of a little more than a month during which the Standard & Poor’s 500 Stock Index went up 3.4%.

Let me give you the plusses and minuses and then you can do your own addition. Read more

Talk is cheap. Especially when you’re in the middle of an oil price war.

So Saudi Arabia’s oil minister Ali al-Naimi, certainly didn’t expect global oil markets to send the price of crude tumbling just because he said “I think high prices are unjustified today” in a March 20 press conference in Qatar.

That’s why he paired talk with action—or at least with talk of the actions that the Saudi’s had taken. Saudi Arabia had an extra 2.5 million barrels a day of production capacity that it could bring on line; Saudi oil storage reserves around the world were full; and a newly hired fleet of super tankers were on their way to the United States.

But Ali al-Naimi must have been disappointed in the market’s reaction to this salvo. On the day the price of Brent crude, the European benchmark, fell just $1.59 a barrel, or 1.3%, to close at $124.12. Brent crude is up, as of the close on March 20, by 15% in 2012.

One day’s battle doesn’t decide a war, certainly, but the Saudis have pulled out their big guns and they didn’t make much of an impression.

Is there anything Saudi Arabia, or the governments of Europe and the United States, can do to stop oil from moving higher? Or have the speculators won a free hand to drive up oil prices—and the price of gasoline–until the day they decide to take their profits?

Let’s start by looking at what the Saudis did and why those actions didn’t impress the global oil market. Read more