Spekulatius Posted March 10, 2020 Share Posted March 10, 2020 It's absolutely insane. PSX gone from 120 to 60-70's. Getting crushed partly due to the oil price plunge, but they are solely midstream? Might hurt volumes? Anyone with a thought here? I've been buying down on this level due to 1) they are midstream and should also benefit somewhat from the low price, 2) stellar mgmt and balance sheet, 3) buying back shares at a better price now, 4) if peers struggle they could might do a good buy? Yes, I studied I too and bought into the decline. A small lot at $90 and another at $80, then sold at $78.5 as things stopped making sense. Yes, PSX is well managed and to some extend insulated from lower crude prices. However, if shale dies in the US how can PSX make a living. Their midstream assets will be impaired to some extend, chemicals are in the gutter and in the end, if shale dies, many of their refineries won’t fare well either living on Imports, especially those highly currently profitable ones in the mid continent. PSX is part of the US energy infrastructure fabric and if the E&P dies, everyone else in this business will have a hard time too. I sold because I have no idea how it will shake out and the outlook for the whole sector looked so abysmal. I might go back in, but not too soon, I think. Link to comment Share on other sites More sharing options...
Okonomen Posted March 10, 2020 Share Posted March 10, 2020 It's absolutely insane. PSX gone from 120 to 60-70's. Getting crushed partly due to the oil price plunge, but they are solely midstream? Might hurt volumes? Anyone with a thought here? I've been buying down on this level due to 1) they are midstream and should also benefit somewhat from the low price, 2) stellar mgmt and balance sheet, 3) buying back shares at a better price now, 4) if peers struggle they could might do a good buy? Yes, I studied I too and bought into the decline. A small lot at $90 and another at $80, then sold at $78.5 as things stopped making sense. Yes, PSX is well managed and to some extend insulated from lower crude prices. However, if shale dies in the US how can PSX make a living. Their midstream assets will be impaired to some extend, chemicals are in the gutter and in the end, if shale dies, many of their refineries won’t fare well either living on Imports, especially those highly currently profitable ones in the mid continent. PSX is part of the US energy infrastructure fabric and if the E&P dies, everyone else in this business will have a hard time too. I sold because I have no idea how it will shake out and the outlook for the whole sector looked so abysmal. I might go back in, but not too soon, I think. Uncertainty is of course not always good, but nevertheless it is now one might make good buys. When everybody is in fear. Including you ;) Somehow I think the oil price will rebound sooner rather than later as the big nations have every incentive to join at the table. Nobody can live with these oil prices. Neither russia nor usa. But yeah I think my lesson so far is that even though PSX may be a great buy here (knock on wood), I will not invest in price takers in the future. However, my thesis on PSX would exactly be that even though they are price takers, they should have more steady earnings than peers due to their ownership of a big part of the midstream supply chain Link to comment Share on other sites More sharing options...
scorpioncapital Posted March 10, 2020 Share Posted March 10, 2020 Investing In psx is much safer and intelligent than in the more boom bust type exploration shale cos. While I admire Buffett, I do not think oxy is as conservative investment as psx. However if you think oil cannot stay here the biggest price gains would be in oxy vs psx. But if you are a conservative investor who likes the space now and wants a solid safe bet I would choose psx over oxy anyday. I wish I came to this conclusion sooner) Link to comment Share on other sites More sharing options...
Okonomen Posted March 10, 2020 Share Posted March 10, 2020 Investing In psx is much safer and intelligent than in the more boom bust type exploration shale cos. While I admire Buffett, I do not think oxy is as conservative investment as psx. However if you think oil cannot stay here the biggest price gains would be in oxy vs psx. But if you are a conservative investor who likes the space now and wants a solid safe bet I would choose psx over oxy anyday. I wish I came to this conclusion sooner) Completely agree. Would never ever buy into upstream. But if PSX was difficult to estimate earnings of in the past it will only get tougher atm with low oil prices and low demand. I'm no expert in PSX' various businesses but low oil prices should be good for refining and chemicals, but lower demand for fuels etc also takes a drag on output prices Link to comment Share on other sites More sharing options...
scorpioncapital Posted March 10, 2020 Share Posted March 10, 2020 Didn't buffet engineer a deal sometime ago to take back his shares in exchange for the chemical division of Phillips? Or maybe it was another situation? Link to comment Share on other sites More sharing options...
Mungerish Posted March 13, 2020 Share Posted March 13, 2020 Yes, he did. Not sure if Ted or Todd has bought some back recently. This looks very cheap to me and has a good yield. Trying to get up to speed on the what this oil price dislocation will do crack spreads. Before the Saudi/Russia thing the average price target was 110+...Not that I put much stock in that but they are not all biased buffoons. At $49 here and a 7.76% yield.... Link to comment Share on other sites More sharing options...
Okonomen Posted March 14, 2020 Share Posted March 14, 2020 Can anyone explain to me why the oil price plunge is so bad for PSX that the stock should go from 70 to 40? AFAIK the price plunge could potentially increase crack spread margins? Link to comment Share on other sites More sharing options...
peterHK Posted March 14, 2020 Share Posted March 14, 2020 Can anyone explain to me why the oil price plunge is so bad for PSX that the stock should go from 70 to 40? AFAIK the price plunge could potentially increase crack spread margins? Passive selling of all oil ETF's. Before the plunge, you have to remember distillate demand fell off a cliff because we aren't travelling. The net effect is probably not much, but you'll see refiners have OP'd E&P's by a fair margin. Link to comment Share on other sites More sharing options...
Spekulatius Posted March 14, 2020 Share Posted March 14, 2020 Can anyone explain to me why the oil price plunge is so bad for PSX that the stock should go from 70 to 40? AFAIK the price plunge could potentially increase crack spread margins? Passive selling of all oil ETF's. Before the plunge, you have to remember distillate demand fell off a cliff because we aren't travelling. The net effect is probably not much, but you'll see refiners have OP'd E&P's by a fair margin. Keep in mind they some basic chemical stocks haven’t fared much better than PSX. DOW and LYB for example have been almost cut in half. Link to comment Share on other sites More sharing options...
Okonomen Posted March 14, 2020 Share Posted March 14, 2020 Can anyone explain to me why the oil price plunge is so bad for PSX that the stock should go from 70 to 40? AFAIK the price plunge could potentially increase crack spread margins? Passive selling of all oil ETF's. Before the plunge, you have to remember distillate demand fell off a cliff because we aren't travelling. The net effect is probably not much, but you'll see refiners have OP'd E&P's by a fair margin. Define OP'd? afaik PSX should do much more stable fcf than E&P's thru cycles. Link to comment Share on other sites More sharing options...
scorpioncapital Posted March 14, 2020 Share Posted March 14, 2020 Looking at psx web page they still have a chemical division. Is the one they sold to Buffett somehow a different one ? Link to comment Share on other sites More sharing options...
Spekulatius Posted March 14, 2020 Share Posted March 14, 2020 Looking at psx web page they still have a chemical division. Is the one they sold to Buffett somehow a different one ? Yes, it’s a different one. PSX still owns a 50% stake in a JV with CVX producing Polyethylene. It has been a cash generator, but earnings have withered lately with worse to come. Link to comment Share on other sites More sharing options...
RadMan24 Posted March 16, 2020 Share Posted March 16, 2020 Meryl Witmer on PSX on Barron's: $10 earnings power normalized Great operator and capital allocation (CEO) Been buying at $55 Original call was at $33 when it was spun off years ago, which was a fabulous long term call. Phillips is definitely interesting at sub $50. Intrinsic value is somewhere north of $80 if I had to guess. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now