Those historical cap rates are a little frightening.. Especially since it appears era of free money is over... Looking forward to VET review... I have position in low 6's but many different opinions about VET future. Debt load? Are assets in NA and Europe to your liking or not-please let us know...Thanks Paul
I think I will take Eric's advice and wait until Q3 is in on this one. What I know is that there are aspects of the history of the company and also European behavior that have me skeptical and ultimately are likely to keep me away. But my sense is that their main assets today are good ones.
Good find on the historic cap rates! I need to re-read my 1958 copy of "How I turned $1,000 into a million in Real Estate in my Spare Time" by William Nickerson to see if it mentions cap rates. A friend whose father read that book in the early 1980s and made millions on Seattle apartments recommended it in 2003, but unfortunately by the time I was able to scrape together a down payment after my first job, cap rates were already really low.
Thank you for the research on VET. I recently looked at the portfolio holdings of Goehring & Rozencwajg (https://www.gr-funds.com) and was surprised to see Natural Gas producers Range Resources (RRC) with a 6.13% weight (as of April 30th) and EQT at 3.74%. EQT just hit an all-time high and RRC is back to 2017 levels. I saw a few investors on Twitter who had been shorting XLE or XOP against their tech holdings, and it looks like the Iran conflict forced them to cover, propelling constituents like RRC and EQT to highs. VET is a bargain by comparison, but will likely remain under pressure through tax loss selling since the terms of their divestments this year exclude sales in June. (Wyoming divestment will be effective 1/1/2025 so will exclude all revenue for 2025, while the Saskatchewan divestment has incentives for prices higher prices starting July.)
Yes rising natural gas prices have also helped push up producer stocks. I fear that you will be disappointed in what I can provide on VET; you seem to have quite a good grasp on what is going on.
It is probably better to wait to publish something until after VET's Q3 financials are released which reflect the impact of the US divestment since it's going to be messy through December tax-loss selling.
In the meantime, you could take a look at VNOM, the royalty subsidiary of FANG, since VNOM is acquiring STR. Royalties are much easier to analyze and are the safest way to invest in oil & gas for retires. VNOM hasn't rallied like the rest of XOP, possibly due to hedging by owners of STR. VNOM rallied a lot in 2024 due to index inclusion and hopes for the Endeavor drop-down, allowing them to issue a lot of stock to de-leverage. STR had too much debt so the combination will have a decent debt ratio. See https://www.viperenergy.com/static-files/7859f4c4-d818-4189-9a71-f85ba90c0972
Thanks for the good wishes. The smoke is going elsewhere at the moment and the air quality has been OK the past few days. Now we get heat, but not as bad as the East coast.
Those historical cap rates are a little frightening.. Especially since it appears era of free money is over... Looking forward to VET review... I have position in low 6's but many different opinions about VET future. Debt load? Are assets in NA and Europe to your liking or not-please let us know...Thanks Paul
As to the historical cap rates, I agree. This issue is why i haven't been drinking any kool-aid about REITs being undervalued.
I think I will take Eric's advice and wait until Q3 is in on this one. What I know is that there are aspects of the history of the company and also European behavior that have me skeptical and ultimately are likely to keep me away. But my sense is that their main assets today are good ones.
I always enjoy reading your musings. I really look forward to the ELS analysis. It's an interesting space.
Good find on the historic cap rates! I need to re-read my 1958 copy of "How I turned $1,000 into a million in Real Estate in my Spare Time" by William Nickerson to see if it mentions cap rates. A friend whose father read that book in the early 1980s and made millions on Seattle apartments recommended it in 2003, but unfortunately by the time I was able to scrape together a down payment after my first job, cap rates were already really low.
Thank you for the research on VET. I recently looked at the portfolio holdings of Goehring & Rozencwajg (https://www.gr-funds.com) and was surprised to see Natural Gas producers Range Resources (RRC) with a 6.13% weight (as of April 30th) and EQT at 3.74%. EQT just hit an all-time high and RRC is back to 2017 levels. I saw a few investors on Twitter who had been shorting XLE or XOP against their tech holdings, and it looks like the Iran conflict forced them to cover, propelling constituents like RRC and EQT to highs. VET is a bargain by comparison, but will likely remain under pressure through tax loss selling since the terms of their divestments this year exclude sales in June. (Wyoming divestment will be effective 1/1/2025 so will exclude all revenue for 2025, while the Saskatchewan divestment has incentives for prices higher prices starting July.)
Yes rising natural gas prices have also helped push up producer stocks. I fear that you will be disappointed in what I can provide on VET; you seem to have quite a good grasp on what is going on.
It is probably better to wait to publish something until after VET's Q3 financials are released which reflect the impact of the US divestment since it's going to be messy through December tax-loss selling.
In the meantime, you could take a look at VNOM, the royalty subsidiary of FANG, since VNOM is acquiring STR. Royalties are much easier to analyze and are the safest way to invest in oil & gas for retires. VNOM hasn't rallied like the rest of XOP, possibly due to hedging by owners of STR. VNOM rallied a lot in 2024 due to index inclusion and hopes for the Endeavor drop-down, allowing them to issue a lot of stock to de-leverage. STR had too much debt so the combination will have a decent debt ratio. See https://www.viperenergy.com/static-files/7859f4c4-d818-4189-9a71-f85ba90c0972
I am interested in ELS, so thanks for putting it in the queue.
The pink sky at dawn is pretty cool—thanks for that too! I hope the air has been ok and that you haven’t been affected by drifting wildfire smoke.
Thanks for the good wishes. The smoke is going elsewhere at the moment and the air quality has been OK the past few days. Now we get heat, but not as bad as the East coast.
I am glad the smoke is going elsewhere. We have had are share over the past few years and it is no fun. Thanks again.