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Was Buffett Right About Energy In 2020?

Every time Berkshire Hathaway founder and CEO Warren Buffett buys or sells a stock, the investing world tends to sit up and take notice. That’s mainly because the Oracle of Omaha has a better investing track record than your average hedge fund, managing to outperform the S&P 500 in 37 of the past 55 years, or about two-thirds of the time.

Buffett made his foray into the energy sector 18 years ago when Berkshire bought a $500 million stake in PetroChina Co. (NYSE:PTR) before selling it five years later for a $3.5B profit.

His energy track record after PetroChina has, however, been a mixed bag. His next big purchase, ConocoPhillips (NYSE:COP) in 2008, ended up losing Berkshire Hathaway Inc. (NYSE:BRK.B) several billions of dollars.

His biggest hit so far has been his 2009 investment in Burlington Northern Railroad for $44 billion. BNSF is a railroad behemoth that used to transport crude from the Bakken to refiners and still transports enough coal to generate 10% of the electricity consumed in the United States since the purchase. Berkshire has collected nearly $20 billion dollars in dividends from Burlington Northern Railroad, annual revenues have increased by 80%, and earnings have more than doubled.

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Source; Oil Price /

Image Credit: DonkeyHotey/Flickr

3D-Printing

How 3D Printing Will Reshape The Oil And Gas Industry

Multiple new technologies are present now that’s why the oil and gas industry is suffering in 2020. 3D printing is the latest fad to gain traction in space. Additive manufacturing has been extremely useful during the Covid-19 pandemic. It is delivering vital PPE to frontline workers across the globe. But now, the ever-evolving technology is also useable in innovative ways across the energy sector.

Earlier this year, we saw several companies relying on 3D printing to supply hard-to-get parts because of global pandemic restrictions and delays in delivery. This takes the reliance away from third-party companies as well as the need to ship parts from other countries. Further, the more parts that can be in-house, the better the inventory processes of the company.

To effectively manufacture additives, companies must create a digital inventory. The idea is to make a database of all the parts we need. Their design and how they can be makeable with a 3D printer. This helps companies prepare for any spare parts they might suddenly need.

The Process

3D printing continues to be a costly process. It is particularly useable for basic parts such as pipes, nuts, and bolts. It’s fantastic for when you’re in a bind and parts are impossible to get your hands on.

By 2025, 3D Printing in the oil and gas sector is expected to be worth $32 billion according to recent reports. Although 3D printing only accounts for 0.1 percent of the global manufacturing market at present, increased adoption of the technology suggests that it could be worth as much as $60 billion by 2030.

3D printing has already been adopted by the automotive and aerospace industries. Now, the energy sector is looking to 3D printers for manufacturing processes, to supply vital components at the drop of a hat.

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If you have further questions about the topic of 3D printing and its impact on the oil and gas industry, contact us here.

oil-gas-spending

Will OPEC+ Increase Oil Production In January?

OPEC+ is discussing the possibility of starting to raise its collective oil production from January, the Wall Street Journal reported, citing unnamed sources familiar with the discussions.

The extended oil cartel is meeting today to continue debates on the future of its oil production cut deal after it failed to reach an agreement on Tuesday. According to Reuters, most observers were unanimous that OPEC+ will continue with the current rate of cuts—7.7 million bpd—which were originally supposed to be in effect until the end of this year, to be followed by a relaxation of 2 million bpd beginning in January.

Russian business daily Vedomosti reported yesterday that Moscow would rather boost production from January by a modest 500,000 bpd, and The Wall Street Journal’s sources also mentioned this figure. In that, Vedomosti said, Russia’s position was shared by the UAE.

According to the WSJ sources, an increase in production of half a million barrels daily would be the compromise necessary to move the deal forward after internal divisions in OPEC+ cast a shadow over its future.

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Source: Oil Price

oil-and-gas

U.S. Oil Production Is On The Rise Again

Crude oil production, including lease condensate, in the United States rose in September to 10.860 million barrels per day on average, according to the Energy Information Administration’s monthly report released on Monday. September’s oil production was up 286,000 barrels per day on average compared to the month prior, but still down significantly—1.635 million bpd—from September 2019.

The increase in September over August was mostly due to offshore oil production off the Gulf of Mexico, which saw a 315,000 bpd increase to 1.510 million bpd. This compares to 1.917 million bpd in September 2019.

North Dakota’s oil production also increased in September to 1.215 million bpd, for an increase of 61,000 bpd.

Meanwhile, Texas—which accounts for the largest portion of oil production by far – saw declines in its September crude oil production, to 4.628 million bpd from 4.688 million bpd. Texas’ oil production is 563,000 bpd lower than the same month last year.

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Source: Oil Price

Saudi Arabia Oil

Total And Exxon Renegotiate A Major Gas Sharing Deal

Supermajors ExxonMobil and Total are renegotiating a natural gas resource sharing deal for their respective liquefied natural gas (LNG) projects offshore Mozambique, Reuters reports, citing sources with knowledge of the talks.

Exxon and Total are leading the Rovuma LNG and the Mozambique LNG projects, respectively, and are looking to renegotiate a 2015 deal on using resources from the basins that would supply gas to their respective projects. Both oil majors, who are looking to cut project costs, want to use the resources from a shared field first because they are cheaper to extract.

The 2015 deal stipulates that Exxon and Total extract a total of 24 trillion cubic feet of natural gas from the “straddling” reserves in a 50/50 share in the first phases of their projects.

“They want to use the cheapest gas first – which is the straddling resources,” one of Reuters’ sources said.

The renegotiation of the gas extraction deal also involves the government of Mozambique, which has to sign off on any new resource-sharing deal, the sources told Reuters.

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Source: Oil Price

Morgan Stanley

Oil Stocks Are Finally Bouncing Back

This year has been a true rollercoaster ride for the U.S. oil and gas market, but it is increasingly looking to end on a high note.

The sector is up nearly 16% over the past 10 days alone as the world moves closer to vanquishing one of mankind’s biggest threats in modern history.

The outlook keeps getting better for the oil and gas bulls.

Here are three key reasons why the bulls are likely to have the upper hand going forward.

#1. Covid-19 vaccines The oil and gas industry has been deeply out of favor over the past few years, thanks to huge supply/demand imbalances that only got much worse after Covid-19 struck. Indeed, trying to call a bottom on the bear market has largely been a fool’s errand as one step forward (OPEC production cuts) was immediately met by several steps backward (massive demand destruction due to global lockdowns).

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Source: Oil Price

venezuela

Why Biden’s Approach To Venezuela Is So Important For Oil Markets

In a hard-fought campaign Democrat Joe Biden won the November 2020 U.S. presidential race beating incumbent Donald Trump. There were considerable fears in the run-up to the election that a Biden victory would put a damper on oil prices but, along with the boost given by news of a COVID-19 vaccine, the opposite has occurred. This has been a boon for many South American countries where petroleum production is an important economic driver. Biden’s ascension to the top job marks an end to the hardline policy taken by the Trump White House toward Venezuela and its attempts to oust autocratic socialist leader Nicolás Maduro.

Trump’s aggressive sanctions, which cut Venezuela off from global energy and capital markets as well as the veiled threat of military intervention appear to have failed. Essentially, that policy forced Maduro to turn initially to China, then Russia and finally Iran for assistance to prop-up his position and receive strategic financial, economic, political and military lifelines. It permitted Moscow to bolster its influence in Latin America and gain control over Venezuela’s vast oil reserves, which at 300 billion barrels are the world’s largest. In exchange for debt relief, loans and military advisers Moscow gained access to Venezuela’s all-important economic engine and some of the country’s most valuable oil assets. These include ownership of interests in some of Venezuela’s most productive oil projects and a 49.9% lien, from an oil backed loan, over PDVSA’s Citgo refining business, which many analysts regard to be the crown jewel of the state-owned oil company’s assets. To mitigate the impact of U.S. sanctions on Russian government controlled but publicly listed energy company Rosneft, which initially was responsible for the oil backed loans to Caracas, a Kremlin owned company purchased all Venezuelan assets earlier this year.

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Source: Oil Price

Best 3 Stocks to Buy Now

Oil and Gas Discoveries Resilient In 2020 Despite Pandemic

There have been delays in drilling campaigns and reduced exploration budgets due to COVID-19. With that, the volume of oil and gas discoveries globally is set to reach 10 billion barrels of oil equivalent (boe) this year. This will avoid a repeat of the multi-decade low during the previous crisis in 2016. This is what Rystad Energy said in a new analysis on Monday.

In 2016, just 7.7 billion boe were discovered globally.

Between January and October this year, a total of 73 discoveries of oil and gas resources were announced. This is the combination of resources exceeding 8 billion boe, the energy research company said.

Wildcats planned for the final two months of 2020 could yield more resources. This will raise this year’s total discovered volumes to around 10 billion boe. Palzor Shenga, a senior upstream analyst at Rystad Energy, said.

Of the discoveries announced through October, 36 were onshore and 37 were offshore. The gas accounts for 46 percent of the total discovered resources.

The leader in total discovered volumes this year is Russia. This is where gas discoveries prevail. Also, this is by Suriname with mostly oil discoveries. The United Arab Emirates (UAE) with all discoveries consisting of gas.

Among the companies with the highest resources discovered, Russia’s gas giant Gazprom leads, followed by Total and Apache, which found around 960 million boe and 700 million boe, respectively, mainly thanks to three major discoveries in Block 58 offshore Suriname, Rystad Energy said.

In 2019, oil and gas explorers discovered 12.2 billion boe, the highest volume since 2015, Rystad said earlier this year.

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If you have further inquiries related to the latest Oil and Gas Discoveries, stay connected with us at Rangerland.

Source: Oil Price

rights-an-oil-royalty-owner

The 6 Hottest Energy Tech Stocks For 2021

Two of the hottest sectors in the ESG revolution right now are hydrogen and absolutely anything that ties into the $5 trillion global transportation industry.

Investors are piling into hydrogen – a potential solution for a clean energy future – and it’s now predicted to become an $11-trillion marketplace by 2050.

It simultaneously compliments and competes with the explosively growing EV sector, where Tesla (NASDAQ:TSLA) is predicted to be on track to become a $1-trillion company, or even $2 trillion, by some estimations, up from its current $400 billion.

The profound transportation revolution that’s unfolding at the moment has so many verticals, it’s dizzying.

From a mad scramble to get out more vehicles and steal market share, to battery battles, the race for the best charging solution, carbon-offset ride-sharing and landmark EV car subscription services…. a lot is at stake floating around this huge space.

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Source: Oil Price

1031 Exchange Warehouses

How to 1031 Exchange Warehouses into Mineral Rights & Royalties

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All across the country, warehouses lie on the outskirts of towns, cities, and rural areas. Warehouses are extremely functional for storing materials for companies, artists, communities, emergency materials, and so much more. Essentially, if something needs to be stored, there is a warehouse somewhere waiting for it.

Knowing this, many developers and investors choose to buy, build, and sell warehouses as high priced pieces of land and property. Selling a warehouse anywhere in the world often comes with a huge capital gain, and therefore many taxes.

With a 1031 exchange, capital gains taxes can be avoided when selling warehouses and purchasing another property. Today, mineral rights and royalties can be purchased after the sale of a warehouse using a 1031 exchange. With this in mind, capital gains taxes are avoided, and a new potential income stream is born.
In this article, we will detail the steps to take when selling a warehouse, and using a 1031 exchange to secure mineral rights and royalties.

How to Sell A Warehouse

If you google “how to sell a warehouse,” unfortunately, most of the results are designed to help people trying to sell a warehouse in Grand Theft Auto 5. Digging a little deeper, it is actually easier to sell a warehouse than you might imagine.

Although the target market is a bit different, selling a warehouse is very similar to selling any other property. There are many online marketplaces designed specifically for property sales, many of which have filters for those looking specifically for warehouse space.

Determining the Value of A Warehouse

Whereas many warehouse owners lease sections of their space to multiple owners, the outright sale of a warehouse usually comes at a hefty sum. With this in mind, a warehouse is essentially the sum of all its physical and fiscal parts.

The value of a warehouse is determined by:

  • Warehouse Size
  • Warehouse Conditions
  • Property Size and Conditions
  • Access (Driveways, Garages, etc)
  • Current Tenants (if applicable)
  • Warehouse Type (Designed for cars, shipping, etc.)
  • And more
  • Thankfully, most warehouse properties across the country have publically available records of their value. Even if you are unable to see a property’s history for yourself, there is always the option to match the price value of your warehouse with similar properties in your area.

Taxes Paid on the Selling Warehouses

Before you cash that check, remember that there are considerable taxes to be paid after selling a warehouse. As the gross payout increases, so does the amount of money that you are equally required to pay local and national governments.

Depending on location, the following are usually paid on the sale of a warehouse:

  • Federal Income Taxes
  • Capital Gains Taxes (Long or Short Term)
  • Local Sales Taxes
  • State Taxes
  • Depreciation Recapture Taxes
  • And More

With a large price tag, capital gains taxes can be expected. However, as we mentioned above, a 1031 exchange can be used to avoid capital gains taxes on the sale of a warehouse.

Selling Warehouses with a 1031 Exchange

With a 1031 exchange, taxpayers can “trade-up” warehouses for a new property of equal or greater value in order to completely eliminate capital gains taxes. Deadlines must be met and paperwork must be processed, so we highly recommended working with a 1031 exchange intermediary to ensure a successful amendment to your taxes.

Warehouse Like-Kind Properties

Under the gaze of the IRS, most properties can be considered “like-kind” to warehouses. In a 1031 exchange, taxpayers can purchase any of the following after the sale of a warehouse for an elimination of capital gains taxes:

  • Other Commercial Buildings
  • Mineral Rights and Royalties
  • Homes and Apartment Buildings
  • Strip Malls and Stores
  • Trailer Parks
  • Golf Courses
  • And more

Warehouses 1031 Exchange Timeline

After you sell a warehouse, you are not given a whole lot of time to roll around in your money if you’d like to use a 1031 exchange. The IRS mandates that at least one reasonable property must be identified for purchase within 45 days of the sale.

Of course, this first property does not necessarily have to be the one used in the exchange. Up to 3 properties can be identified regardless of value and one must be purchased within 180 days of the sale for the 1031 exchange to be valid. With this in mind, it is always advised to have a rough idea of what you’ll be reinvesting in before the sale of your warehouse is finalized.

Why Purchase Mineral Rights and Royalties?

Mineral rights and royalties are usually not the first property that comes to mind when using a 1031 exchange in the sale of a warehouse. However, in the United States, mineral rights and royalties can be an extremely valuable part of any investment portfolio.

If you’re not familiar here’s how it works:

  • The acquisition of mineral rights allows you to own all or a portion of the subsurface of a property.
  • The land is leased to an oil and gas company that extracts and sells the land’s natural resources.
  • You receive mineral royalty payments as a fixed percentage of the sales designated by your mineral rights ownership.

How to Maximize Your 1031 Exchange with Mineral Rights

If you are planning to use an intermediary with your 1031 exchange, you have the opportunity to work with a specialist in any industry you choose to reinvest in. For mineral rights and royalties, industry jargon, complicated contracts, and lack of transparency can cause headaches for first-time investors. With this in mind, working with a specialist is always recommended.

Conclusion

Whether it was built to be sold or has already served its purpose, selling a warehouse is a big deal for property owners. With today’s laws and opportunities, using a 1031 exchange to purchase mineral rights after the sale of a warehouse is a great way to intelligently reinvest your income to avoid taxes and maximize ROI.

If you have further questions related to 1031 exchange warehouses,