#071 Oil and Gas This Week Podcast: Oil and Gas MLPs – Safe Bet or Broken Business Model?

Time for another First Friday Q&A.; We take your questions on oil and gas MLPs, enterprise risk assessments, surviving the downturn, and more.

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#071: Oil and Gas MLPs – Safe Bet or Broken Business Model?

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Questions

Chris Krieps, Group Executive Roper Technologies

I have two questions, one on economics and one of curiosity.

I read a couple reports from the Oil and Gas Industry for June 2016 and there is some data around Production, Demand and Storage that I wonder if you can shed some light on.

Generally, most feel demand will outstrip supply in mid 2017, +/- a quarter. Storage is at record highs and there will be an additional 800 million barrels added from 2015 to 2016 called “Extra Oil”. I like this term because there is always some storage but this is truly above and beyond.

That “Extra Oil” would take 18 months to deplete starting in mid 2017. That means 2019 until oil storage is back to reasonable levels barring any major new supplies coming on line or dropping off.

So why would oil price recover in 2016 or 17? Here is my curiosity.

The report discuss Rig counts and feet of hole. In the USA, for onshore, there will be 181 million feet of Hole drilled.

What happens to all the drill cuttings for 181 million feet at the average hole diameter? This is not an environmental concern because I see the amount of processing that it has to go through but physically, where do you stack up that much dirt and rock?

Levi Williamson, Midwest Divisional Director Miller Howard Investments

Mark,

Great show. Really appreciate all that you guys do. Question for you.

Given the recent Capex cuts that we have seen come from some in the MLP space, what can we expect from a future cashflow perspective with respects to MLPs that aren’t currently cutting Capex?

Do we have a sense for the future impact of cashflows (current distributions) and cashflow growth (distribution growth)?

I guess in addition, you hear a lot in the market (Wall Street analysts) who claim that the business model is broken. I would be curious to see your opinion as someone who has been in the space for quite some time and with that you might adhere to the mantra, “The cure for low oil prices is low oil prices.”

Regards,

Levi Williamson

Stephen Smythe Jr, Sales at Omni Water Solutions

Hey Mark,

Big fan of the show on Oil and Gas Careers. Listen to it every week.

I didn’t know you are from Louisiana. I’m originally from Lafayette. Geaux Cajuns!

Anyway, the reason for my message is I am one of the many folks in this industry that have been laid off. I worked for a respectable service company in well completions and interve...