GNE - Genesis Energy

[Jinx]

With oil continuing to fall for the foreseeable future, how much of a negative impact will this have on GNE?
Perhaps a silly question, sorry if so!

[Snoopy]

With oil continuing to fall for the foreseeable future, how much of a negative impact will this have on GNE?
Perhaps a silly question, sorry if so!

Not a silly question at all Jinx. In fact it is a question I have been wrestling with for some time. I can't answer you exactly. But here is what I have discovered so far.

1/ GNE’s policy is to hedge (oil) 50-75% of 12 month forward exposure (on rolling basis) and 25-50% of 12-24 month forward exposure. So whatever happens on the market today will have a significantly delayed effect on the price that Genesis gets.
2/ The Kupe field operators have been running hard pumping out oil when the price is high. But the real 'value product' that comes out of Kupe is gas. You can't elect to 'only extract gas' or 'only extract oil'. Most gas from Kupe I believe is used locally for sale as gas or to generate electrical power. So how hard the field pumps is largely dependent on the local energy market. And that is heavily tied into the local electricity market.
3/ The oil from Kupe is benchmarked in value by the international oil prices. But the quality of the oil is not 'average'. So I believe the price obtained is higher than the benchmark quoted prices.

So it all is far more complicated than you think. Probably not the answer you wanted :-(

SNOOPY

[Jinx]

So it all is far more complicated than you think. Probably not the answer you wanted :-(

SNOOPY

Not at all, if I wanted a straight foward answer I wouldn't be here! Thanks for insight, will continue to research.

[Traderx]

Hi all, happy new year!

Despite the doom and gloom in oil-land weighing on GNE's share price, just think of it as your personal fuel hedge i.e most of us are benefiting at the pump.

One good piece of news - GNE continues to hold is ground in the retail market (hopefully at reasonable prices), customer numbers now circa 5300 up off recent lows with another circa net 300 gain in the slow month of December

http://www.emi.ea.govt.nz/

Interesting to see commentary recently on Tiwai economics still looking reasonable and lower kiwi in last few days continuing that theme, this strengthens GNE's hand in the negotiation over the Rankine future which presumably is ongoing.

Looking forward to results and comment in Feb

Disc - very small long

[xafalcon]

A good result for GNE

https://nzx.com/companies/GNE/announcements/276899

This is presumably where MRP's customers have switched to......

[sb9]

A good result for GNE

https://nzx.com/companies/GNE/announcements/276899

This is presumably where MRP's customers have switched to......

Agreed, some impressive numbers!!!

[Beagle]

Nice to see them using up some of that coal stockpile profitably. Very good customer numbers too. I hold for dividend income.

[trader_jackson]

Forsyth released a research note on the whole sector recently, in short, they like GNE with a $2.09 price target on it and a expected half year DPS annoucement of 8.5c per share (the use of coal on the ground is releasing working capital, boosting GNE’s operating cash flows), and also anticipate GNE can continue to increase their dividend payment (in contrast to what some have thought). They also estimate that GNE will have repaid ~$50m of debt during 1H16, which is always nice

Not sure if I should put this on the GNE forum or BRL form...
What I found particularly interesting is the note "GNE needs to start thinking about buying more coal given its exposure to providing cover under its swaption contract during a dry year"... they believe they will need more coal in 4 months or so... and now that solid energy is gone, could Bathurst potentially capitalize on this?

Look forward to people's thoughts (or if they know of any other brokers who have updated their analysis yet)

[Traderx]

GNE results out this morning.

Points of interest will be Div policy given improving cashflows & balance sheet position noted above. Any mention of HLY rankine unit retention "negotiations", and particularly retail margins/cost to serve, they've been holding market share very well - have they been paying for it or is it more sustainable?

I'd love them to talk about Castle Hill development but sadly I think that is on the back burner. It would be great to get some more idea of the future vision of this company in a post Kupe, high cost of carbon world. But probably people are more interested in the short term divvys (which are and will be very nice).

[xafalcon]

I think the future oil & gas revenue reduction will likely be the main driver of market sentiment for GNE. In NZD terms, oil has halved in price over the past 18 months. Gas prices have reduced, but I don't have a firm number. I have heard figures of 25%

It would take a very impressive increase in electricity customers to overcome this headwind