| MARKET ROUNDUP | |
| Dow | -9.44 to 16,560.54 |
| S&P 500 | -3.17 to 1,933.75 |
| Nasdaq | -11.85 to 4,389.48 |
| 10-YR Yield | +0.022 to 2.442% |
| Gold | +$0.50 to $1,311 |
| Crude Oil | -$0.82 to $97.26 |
Pittsburgh International Airport isn’t seeing the traffic it once did. Instead of 600 daily arrivals and departures, it’s down to around 300. Many of its 75 gates sit idle. And as the New York Times notes, the olden days where double-decker 747s jetted off to London or Frankfurt from PIT’s runways are long gone.
But in this fascinating story, the Times says PIT may have found its salvation.
Energy! Specifically, natural gas that’s trapped in the Marcellus Shale producing region thousands of feet beneath the airport’s runways!
Like other energy companies are doing throughout the Marcellus, Consol Energy (CNX, Weiss Ratings: B) is drilling a new set of pads and wells to capture the gas and related liquids under PIT. It will “frack” the shale to extract the gas, then feed it into a series of pipelines to bring it to market.
Consol estimates there’s enough gas under the airport to power all of Pennsylvania for a year and a half. Local officials expect related royalty payments will total several hundred million dollars over the next couple of decades. That should help the indebted airport offset the loss of revenue from reduced retail sales, slumping gate demand, and other traditional sources.
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| The Pittsburgh International Airport has a future, thanks a lot to the American energy renaissance. |
Yet the story of Pittsburgh International’s salvation is just one of the thousands of hopeful stories tied to the American domestic energy renaissance. The business of drilling, transporting, storing, and refining oil, gasoline, natural gas, and gas liquids — right here in our backyard — is creating jobs, wealth and promise for the future on a scale few would’ve imagined just a few short years ago.
Legitimate questions about the environmental impact of this boom can and should be raised. And the debate about whether oil and gas, rather than alternative energy sources like wind and solar, are the best ways to meet America’s energy needs will continue for a long time to come. But all in all, I think the PIT story is yet another hopeful sign for this country — and for energy investors!
| “The PIT story is yet another hopeful sign for this country — and for energy investors.” |
So what do you think? Is Consol Energy’s interest in drilling under the Pittsburgh tarmac a good thing? What does it say about the American energy industry? Have you had wells drilled near your property, and if so, what did you think about the experience? Sound off right here.
| OUR READERS SPEAK |
Master limited partnerships (MLPs) are handing investors a fantastic mix of high yield, strong growth and handsome capital gains. That’s one reason why I’ve been beating the drum for MLPs for a while.
Mark’s column yesterday on the $44 billion series of transactions that Kinder Morgan Inc. (KMI, Weiss Ratings: B) launched in the sector delved into them even more. That, in turn, spurred some interesting discussion at the website.
Reader Joan said: “I have held KMI in IRAs and several other MLPs in a taxable account for some time. They have provided a nice income stream, and some, including my Buckeye Partners (BPL, Weiss Ratings: C+),Magellan Midstream Partners (MMP, Weiss Ratings: A), and Golar LNG Partners (GMLP, Weiss Ratings: A-) have provided some nice capital gains, despite some recent pullbacks.
“I let my accountant grapple with the tax reporting, but he seems to cope okay. For some it may be easier to use some of the ETFs. One risk is of course a change in the tax code but I don’t see it happening any time soon.”
Reader James added: “I didn’t have Kinder Morgan, but I have five other MLPs in my portfolio including El Paso Pipeline Partners (EPB, Weiss Ratings: C+). They all have done well, and have yields of 4.33 percent to 12.29 percent. That is a pretty good income stream.”
Finally, Reader Dennis B. said: “I have invested in MLPs for more than 20 years … I currently own five MLPs, all in the oil industry. I have made unbelievable profits over the years, and intend to continue making judicious investments in them. Not all MLPs are worthwhile, but a bit of research will reveal those that have investment merit.”
Thanks all around for the feedback! All of the companies you mentioned are solid names in the MLP sector, and they have certainly delivered nice profits. So I’d encourage other investors to look into them, and appreciate your suggestions.
Or for my favorite MLPs, you can check out the Safe Money Report model portfolio. If you’re already a subscriber, you know that one of the names in there briefly touched an all-time high after the Kinder news came out.
Finally, on the subject of gas prices, Reader Rene weighed in by saying: “Just travelled Colorado, Idaho, Wyoming, Nevada and California and the lowest price we experienced was in Colorado, $3.459, highest $3.789 in Nevada. Wondering what states contribute to such a low national average?”
Glad you asked, Rene. The Energy Information Administration provides a treasure trove of data on retail gas prices, as well as virtually every other energy-related topic. You can find data on gasoline prices here. If you search by state, you’ll see that Texas ($3.362) and Minnesota ($3.425) were recently showing the cheapest retail gas prices.
Any other thoughts on gasoline? MLPs? Share ’em here.
| OTHER DEVELOPMENTS OF THE DAY |
 One of the most closely watched job market reports at the Federal Reserve these days is the “JOLTS” report. It tracks the total amount of job openings in the U.S., the rate at which Americans are leaving their jobs because they believe there are better opportunities elsewhere, and more.
And boy, were the June figures strong! The U.S. economy had 4.671 million job openings in June. Not only was that much higher than 4.577 million in May … and the forecast for a reading of 4.6 million … but it was also the best reading going all the way back to February 2001!
Do you see why I keep saying the Fed is ridiculously “off-sides” with policy?
The risk is that Russia uses the convoy as a pretext to launch a full-scale invasion of eastern Ukraine, especially now that its proxy fighters have been experiencing a series of defeats.
Reminder: You can let me know what you think by putting your comments here.
Until next time,
Mike Larson
P.S. Wealthy investors are surprisingly picky about the companies they invest in — demanding the very best in order to preserve their capital and make it grow. Simply put: They have patience. Would you like to know what else separates them from average investors? Then click here for Bill Hall’s FREE report.
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 15 comments }
On the subject of gasoline prices. Today in Evans, Ga (just outside Augusta GA) Murphy Oil has gas at $3.199. I have been told it is even a penny or two cheaper just across the border in South Carolina.
I worked for a gas drilling co. Back in the late 70s and early 80s and they worked hard at drilling for natural gas. But when they struck oil underneath the gas the government came in and prohibited them from taking oil that they had legally found. Of course there is oil in the earth thats where the gas comes from and yes its underneeth us. Write your congressmen. Its getting to the point that it wont matter anyway there is to much money and greed and you have to worry about flying. You cant drink oil. Try going 9 days without water and get back to me if your able
Of course a positive thing. In addition, similar to North Dakota, gas flare can be harnessed to resupply energy needed to run the well.
That I would demand to protect environment of beautiful Northern PA.
Please address the issue of taxes when you recommend MLPs. I held, for several years,
then sold, KMP and had a huge tax bill because the so-called income was actually return
on investment and anything after that was taxed as ordinary income. I had to come up with $10,000 to pay the additional taxes. Note that my taxes are prepared by an EA who
knows what’s she’s doing.
Fracking (injecting under high pressure sand and water into a formation to open it so that hydrocarbons will flow) is nothing new to Texas..it has been in use since about 1950 and has long been recognized as THE Way to extract hydrocarbons from tight sand formations…the game changer was the perfection of horizontal (directional) drilling…my small ranch is located in the eastern part of Texas in the area covered by the Haynesville shale …during the “boom” in 2009-2012 one could see dozens of drilling rigs lighting up the sky at night all around my ranch…Yes I have a drill site on my land in fact there are drill sites all around me…each gas unit is spaced about 640 acres plus or minus 10%..some units contain multipul wells drilled from the same pad.. my and my neighbors well water is sweet and my grass green with fat cows grazing…with the added bonus of a royalty check once a month in the mail….
Excellent Idea, I’m glad to see the airport and jobs being saved through this even though I never fly to or from there
they don’t tell the inside story though…forget the pollution of the air, water and land….let us talk about the cash promised..
these leases usually entail 12 to 14 percent of net gas proceeds…the key word is “Net”…. all costs of drilling and maintenance come off the top…
One guy leased out 100 acres and get a check after deductions of less than a hundred bucks per month…
Add to this the loss of control of your property..all access roads needed to build and maintain this drilling are controlled by the drillers. If they happen to make a road over your watering hole, your animals no longer have water to drink,,,but would lose it soon enough with the fracturing fluid reaches the aqua-fern.
The traffic, road destruction are just part of the problem. The jobs created go to Texas and Oklahoma workers who need a place to stay hence housing costs in our area have risen to a point that no one can afford to live here anymore. Add to that the crime rates of these foreign laborers that they bring with them (most without green cards) are importing drugs that have become a major heroin problem in this state.
The fracturing liquid is unknown and even the EPA has no right to know under the 2005 energy bill by Cheney (Haliburton loop hole). These drillers are taken things like kerosene, benzene and other deadly chemicals into the wells to blow up the shale rock to extract the gas. The fluid remains in these casings of steel and cement. The largest chemical in this fluid is salt and we all know how salt water corrodes steel and destroys cement.
There has not been any studies of these casings of steel and cement on how long they last. The only ones that have been are off shore hydraulic wells that fail at a rate of 50 percent after 15 years. If that is the same on land, then once the gas is gone in about 10 years, all that deadly chemicals will begin to seep into the fresh water of the state. At this same time, roughly there are 20,000 wells in south west pa…once this stuff reaches the surface, it will be up to the landowner to clean it up if possible…we are heading to the worst pollution disaster in this nation’s history….and the politicians care not about it…
In about the time this happens in 2025 or so, the world’s population will be 8 billion large with about 2.5 billion without fresh drinking water (forgot where I read it but was at a government site)…. PA has one thing in abundance, fresh water…but when this fracking mess materializes, we will lose our water that would be more expensive than gasoline at that time…..nice government planning, huh?
We are all saddened by Robin Williams death. Depression is literally a killer. I believe at least some of the mass killers the media loves to dote on are depressed and decide to take others with them when they go – they don’t care who. Robin deserves credit for going alone.
af
I bought gasoline with ethanol (I think it’s 15%ethanol) for $3.24.9 a gallon about a week ago). Some say the ethanol raises food prices, but I say tell that to the farmers whose corn is @$3.66 a bushel, down from $6 plus earlier.
I’ve owned KMR in my self-directed part of 401K for about a year. It’s the LLC of Kinder Morgan. They pay dividends in shares of stock instead of $’s per share like KMI or KMR. Yesterday’s increase in share price was around $17. Nice pop! Combine that with the fact you can find gasoline prices in the Dallas-Fort Worth metroplex of $3.17/gallon almost everywhere.
What this country needs is a Good .05 cent cigar and a 5th grader to run it!!!!!
Read http://truthfrequencyradio.com/environmentalists-blamed-for-bursting-fracking-bubble/
I hope in Mike’s analysis he is reading the non-industry-based financial data and reporting as well as industry-based (like sugar in the blood stream, it crowds out the healthy stuff!)
Excerpt:
It’s fairly clear that the fracking bubble will burst soon—almost certainly within the decade. Ourongoing analysis at Post Carbon Institute documents the high per-well decline rates (a typical well’s production drops 70 percent during the first year), the high variability of production potential within geological formations being tapped and the dwindling number of remaining drilling sites in the few “sweet spots†that offer vaguely profitable drilling potential. Meanwhile, as the Energy Information Administration (EIA) has recently documented, the balance sheets of fracking companies are loaded with debt while surprisingly short on profits from sales of product—with real profits coming mostly from sales of assets (drilling leases).
I Will Love To Maney And Financial ok ok ok ok
When all the trees have been cut down
When all the animals have been hunted
When all the waters are polluted
When all the air is unsafe to breathe
Only then will you know…..
You can not eat money
Cree Prophecy
Another article that indicates the unhealthy propaganda of shale economics:
http://srsroccoreport.com/condition-red-fracking-is-destroying-oil-gas-companies-balance-sheets/condition-red-fracking-is-destroying-oil-gas-companies-balance-sheets/
Excerpt:
Based on data compiled from quarterly reports, for the year ending March 31, 2014, cash from operations for 127 major oil and natural gas companies totaled $568 billion, and major uses of cash totaled $677 billion, a difference of almost $110 billion.
To fill this $110 billion hole that they’d dug in just one year, these 127 oil and gas companies went out and increased their net debt by $106 billion. But that wasn’t enough. To raise more cash, they also sold $73 billion in assets. It left them with more cash (borrowed cash, that is) on the balance sheet than before, which pleased analysts, and it left them with a pile of additional debt and fewer assets to generate revenues with in order to service this debt.
It has been going on for years. In 2010, the hole left behind by fracking was only $18 billion. During each of the last three years, the gap was over $100 billion.