Saturday, November 15, 2014

What Is Oil Shale ?

Much have been said about oil shale in the media lately. It is said oil shale is one big component that is causing the oil prices to slide. So what exactly is oil shale ?

IER (Institute of Energy Research) : Oil shale is a fine-grained sedimentary rock which is very rich in organic sedimentary material called “kerogen.”

The shale is heated to separate the kerogen from the rock and the resultant liquid is converted to superior quality jet fuel, diesel fuel, kerosene, and other high value products.

So oil shale isn't like the natural oil found in the ground or in the ocean!

The process explained in a diagram -

Source: Wall Street Journal

Locations of Oil Shales 

Oil shale is found in many parts of the world, as the map above shows, but too bad, Malaysia isn't one place where oil shale could be found.

The figures from 1- 9 show where the oil shale are found in abundance, with the USA being the number 1 having the most recoverable reserves.

OPEC vs Oil Shale Producers

OPEC and the oil shale producers have one common goal : to extract out the oil and make lots of money. However, if both were to extract in large amounts, an oversupply situation will happen and lead to low international oil prices.

OPEC will probably do nothing now to arrest the sliding oil prices - as lower international oil prices will kill off the oil shale producers FIRST because the oil shale extraction costs are much higher than most of OPEC & other crude oil producers countries costs (diagram below shows).

Note: NAm Shale in the diagram above is North America oil shale, costs $65/barrel to extract out.

Impact on O&G stocks on Bursa Malaysia

Expect an adverse impact on these O&G stocks share prices to continue as long as oil prices continue sliding towards $65/oil shale producers cost. Nobody knows for sure where the bottom is, too early to tell, perhaps when everyone have SOLD and give up. All of these O&G stocks are trading way below their 200 day MA and 50 day MA. 


Friday, October 31, 2014

The Correction Is Definitely Over !

Yup, it seems that way!

Market is up +12 points today with vol > 2 Bil ...10 trading days after the Day 1 rally attempt.

I was close on prediction on 2 occasions : -

1. Warning about an impending market correction back on Sept 25. Read here.

2. Calling an end to this market correction on Oct 25. Read here.

Ha ha ..

What's next ? I dunno yet, must have lost the crystal ball. Hopefully a market recovery till the end of the year and until the Chinese New Year .. -:)

Thursday, October 30, 2014

The NTA Debate

 A reader wrote to me some time back ...

"Hi there

I would like to enquire
 your opinion regarding PPHB & Mitrajaya. Currently they are trading at such a discount to their NTA. Are they a good buy now? Pls opine. Thanks."

The general thinking is that if the NTA per share > stock price, you may be in for a stock market bargain.

However, just like everything else in the stock market, looking at NTA may not get you much success. 

There are lots of stocks trading way above their NTA and a equal number trading way below their NTA. 

Some Issues With NTA

1) A company with more valuable (e.g. hard cash, property, land) asset is better.

2) High Receivables may indicate debtors might not want to pay me.

3) The company's inventories may be outdated.

4) Some business (e.g. service industry) where the important assets is not tangible e.g. its technology, brand name, people ......

5) Poor management or management which is not focus on the business.

6) Poor profits or profits that are volatile.

7) Company is in a high-risk business or cyclical business that is risky.

Other factors not related to the company may also affect the NTA valuations eg. poor stock market sentiment, not much publicity on the stock, etc.

Hope this helps ...


Disclaimer : This is my personal blog. Author will NOT be responsible for information errors, incompleteness or delays or for any actions taken in reliance on information contained herein. Examples in this blog are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The author assume no responsibility for your trading results. There is a high degree of risk in any form of trading and speculation. Trade at your own risk.




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