Unlocking the Data Vault

In This Issue: Unlocking the Data Vault The Mystery of Bottomless Reserves High Plains Lifters Breaking News – Keystone XL Bill Fails Just the other day, the Senate voted on a bill that would have forced President Obama to make a real decision on the Keystone XL Pipeline. It fell short by one vote. And while that may be bad news for TransCanada… it's good news for all the other pipeline companies in America. Because it simply means they'll be busier than ever. And I've found the six best. Get the profitable details here. Unlocking the Data Vault 12/09/2014 By Thomas Scarlett Seagate (NASDAQ: STX) may not be one of the best-known technology companies, but it has some of the strongest growth prospects. Founded in 1979, Seagate is a leading provider of hard drives and storage systems. From the videos, music and documents you share with friends and family on social networks, to servers that form the backbone of enterprise data centers and cloud-based computing, to desktop and notebook computers that fuel personal productivity, Seagate products help millions of people store, share and protect their valuable digital content. Seagate designs, manufactures, and sells electronic data storage products, including hard disk drives, solid state hybrid drives, and solid state drives, that are designed for enterprise servers, mainframes, and workstations; for desktop and notebook computers; and for various end user devices, such as digital video recorders, gaming consoles, personal data backup systems, portable external storage systems, and digital media systems, according to the company's web site. Seagate recently reported financial results for the first quarter of fiscal year 2015, which ended October 3, 2014. For the first quarter, the company reported revenue of approximately $3.8 billion, gross margin of 27.8%, net income of $381 million and earnings per share of $1.13. During the first quarter, the company generated approximately $602 million in operating cash flow, paid cash dividends of $140 million and repurchased approximately 3 million ordinary shares for $183 million. "We achieved strong financial results in the first fiscal quarter, driven by consistent execution and better-than-anticipated market demand for our PC and storage products," said Steve Luczo, Seagate's chairman and chief executive officer. The Ireland-based company is well positioned to leverage the burgeoning demand for cloud-based computing, which relies on a network of remote servers hosted on the Internet to store, manage, and process data, rather than a local server or a personal computer. The data analysis firm 451 Research reports that 62 percent of global companies who use cloud computing say their spending on the technology will rise in 2015. In addition, the global computing market will grow by at least 20 percent in 2015, rising to $100 billion in total market size, according to separate data from the technology data analysis firm, IDC. Seagate is already well positioned for the ongoing boom in computing services, especially in meeting increasing demand for enterprise server drives, more data storage for businesses, and external disk drives for individual technology users. Last year, Seagate shipped 56.6 million of its hard disk drives, behind industry leader Western Digital (at 63.1 device shipped.) Together, the two companies dominate the global hard disk drive market, combining for 85 percent of all devices sold on the market. Seagate has done a yeoman's drive of transitioning away from the personal computer market. It still holds a firm, second-place industry grip in the PC and laptop storage device market, but it has moved deftly into the solid state drive storage market, which are HDD versions of disk drives for smartphones and tablet computers. Seagate is thriving in another key area of the technology market – system security surveillance, a market that continues to see double-digit growth year after year. "There is a growing need to analyze and make use of video data, with a wide range of applications that include monitoring security for home and small business security, capturing data that allows cities to predict and improve traffic flows, reducing airport wait times — the possibilities are endless," notes Scott Horn, Seagate's vice president. "Our goal was to develop a simple, yet useful, guide to provide our customers with the support and information required to make smart choices that will affect the reliability and ultimately ROI of the system design." That Seagate did, with its brand new Video Surveillance Systems Solution Center. The product and services line, according to the company, provides customers with a full-bore resource center, "including a new Video Storage Selector and Surveillance Drive Selection Guide, as well as a number of surveillance articles and case studies to help arm customers with the knowledge to identify which Seagate video storage hard disk drive will best support their security system needs," the company says. The HDD-based technology is the seventh-generation of Seagate's video surveillance offerings, and should add to the company's bottom line as customers look for more sophisticated options in storing and accessing video analytics, improving data integrity and keeping systems in the field longer, at a lower cost of operation. Despite all its growth potential, Seagate's price-earnings ratio is just 15. The stock is a buy up to 75. Tom Scarlett is an investment analyst at Personal Finance. A Stunningly Easy Decision What do you get when you combine an aggressive $5 tech stock with an exploding $10 billion pocket of the Internet market? Simple: the chance to turn every $10,000 invested into $214,290. I'll show you how here. The Mystery of Bottomless Reserves 12/09/2014 By Robert Rapier When I first went to work for ConocoPhillips (NYSE: COP), I worked on technology development. I had spent the previous seven years working in the chemical industry, and didn't know all that much about the oil industry. My first job at ConocoPhillips was helping with a gas-to-liquids process in which we took natural gas and converted it into diesel, in a process very similar to that in Shell's (NYSE: RDS-A) Pearl GTL plant in Qatar. I still didn't know a lot about the art and science of oil production, but during my first year of work there I noticed something that seemed peculiar. Looking through the company's annual report, I noticed that if I divided Conoco's proved oil reserves by its production rate (the R/P ratio), I came up with a value of only 10 years or so. This alarmed me a bit, so I asked some of my coworkers if this was normal. Nobody seemed to know for sure. If I look at the situation at ConocoPhillips today -- more than a decade after I first posed that question -- I read in the 2013 annual report that the company had 8.9 billion barrels of oil equivalent (BOE) and its production rate was 1.5 million BOE/day. Thus, the R/P has grown to 16.3 years. In fact, according to the 2014 BP Statistical Review of World Energy, the R/P ratio for the U.S. as a whole was 12.1 years at the end of 2013. Twenty years ago, the R/P ratio in the U.S. was only 9.6 years. Think about the implications of that. In 1993 the U.S. had enough proved reserves to produce at the then-current rate for 9.6 years. Not only did we continue to produce for 9.6 years, today's production rate is 17% higher than it was in 1993, and yet we now have enough oil to produce for 12.1 years at current rates. And the world as a whole has a R/P ratio of 53 years. In fact, if I go all the way back to 1965, U.S. proved reserves were 31 billion barrels. (Source: EIA). Between then and now -- a span of 49 years -- the U.S. produced 163 billion barrels of oil, and today our proved reserves are 44.2 billion barrels of oil. Globally proved reserves have grown steadily for more than three decades: How did this happen? It basically comes down to three things. The first is that obviously more oil was found. For example, in 1965 Alaska's Prudhoe Bay and its 25 billion barrels of oil had yet to be discovered. The second is that technologies for recovering oil from existing fields improved. Shell geophysicist M. King Hubbert is often credited with correctly predicting in a 1956 paper that U.S. oil production would peak in 1970. What many don't realize is that this was a secondary prediction. He actually predicted that U.S. oil production would peak in 1965, and qualified that prediction by stating that the peak could happen as late as 1970. But he was skeptical about the latter date because he said that would require the U.S. to find additional oil fields equivalent to "eight East Texas oil fields." But those oil fields continue to be "found" by applying new recovery technologies to producing fields and increasing the recovery percentage. The third factor comes down to the way proved reserves are defined. As I discussed in more detail in a recent issue of The Energy Letter, the U.S. Securities and Exchange Commission (SEC) requires that in order for reserves to be counted as "proved," the oil must be "estimated with reasonable certainty, from the analysis of geologic and engineering data, to be recoverable from well established or known reservoirs with the existing equipment and under the existing operating conditions." Undeveloped reserves can also be booked as proved provided the previous criteria are met and there is a development plan for drilling within five years. These three factors explain why oil production has far outstripped what expectations might have been given estimates of proved reserves in the past. Today's R/P ratio in the U.S. of 12.1 years is really a reflection of the oil development that is in the pipeline at current prices. In recent years, U.S. reserves have gone up as higher prices made shale oil economical to produce, and resulted in lots of shale oil reserves being added to the proved reserves tally. The reason that the world as a whole has a much larger R/P ratio is that other countries don't have to abide by SEC rules in accounting for their proved reserves. As a result, there is a lot more uncertainty about the global reserves figure. But it is safe to say that we will be using oil for decades to come, and when we do move on to something else there will still be plenty of crude left in the ground. This article originally appeared in the The Energy Letter column. Never miss an issue. Sign up to receive The Energy Letter by email. The Secret Is "In the Air" The most important frontier for cloud computing is literally the air all around us. True high-speed Internet over the airwaves has remained elusive, largely because of the limited amount of available bandwidth. At least until now. One major communications company has spent over $1 billion to purchase enough bandwidth to make cloud-computing possible from everywhere. Forget wires – this company doesn't need them. The new service opened November 3, 2014, to a select group of several thousand customers. In a few weeks, it will be available to tens of thousands. Two years from now, hundreds of thousands. Don't miss the future… Find out more now. High Plains Lifters 12/09/2014 By Robert Rapier Despite the recent carnage in the energy markets, some segments have continued to perform well. I have stated on many occasions that I am bullish on long-term natural gas prices, in large part because of liquefied natural gas (LNG) terminals that will begin exporting gas during the next five years. And natural gas prices have held up well during the sell-off. While oil prices have declined by a third in the past 12 months, natural gas prices are within 5% of their value a year ago. The ongoing shale gas boom continues to push U.S. natural gas production to new records: But this natural gas needs to get to market, and that's where it pays to have natural gas pipelines in the right locations. Two of the top five MLPs by market returns year-to-date (YTD) are natural gas pipeline companies.TC PipeLines (NYSE: TCP) is an affiliate of TransCanada(NYSE: TRP, TSE: TRP), and has a total YTD return of 65%. TCP has investments in more than 5,500 miles of regulated interstate natural gas pipelines with a combined capacity of 8.9 billion cubic feet per day (bcf/d), accounting for 8% of the U.S. daily gas shipments volume. Revenues from these assets are derived almost entirely from fee-based contracts. TCP Pipelines' assets. Source: TCP website. TC PipeLines has stakes in the following assets: 46.45% of Great Lakes, a 2,115-mile pipeline that connects with the TransCanada Mainline at the Canadian border near Emerson, Manitoba, Canada and St. Clair, Michigan, near Detroit. Great Lakes is a bi-directional pipeline that can receive and deliver natural gas at multiple points along its system. TransCanada owns the remaining 53.55% of Great Lakes; 50% of Northern Border, a 1,408-mile pipeline that connects from the Canadian border near Port of Morgan, Montana to a terminus near North Hayden, Indiana, south of Chicago. Northern Border is capable of receiving natural gas from Canada, the Williston Basin and Rocky Mountain Basin. ONEOK Partners (NYSE: OKS) owns the remaining 50% of Northern Border; 70% of GTN, a 1,353-mile pipeline that extends between an interconnection near Kingsgate, British Columbia at the Canadian border to a point near Malin, Oregon at the California border and delivers natural gas to the Pacific Northwest and to California. TransCanada owns the remaining 30% of GTN; 100% of Bison, a 303-mile pipeline that extends from a location near Gillette, Wyoming to Northern Border's pipeline system in North Dakota. Bison transports natural gas from the Powder River Basin to Midwest markets. TransCanada owns the remaining 30% of Bison; 100% of North Baja, an 86-mile pipeline that extends between an interconnection with the El Paso Natural Gas Company pipeline near Ehrenberg, Arizona and an interconnection with a natural gas pipeline near Ogilby, California on the Mexican border. North Baja is a bi-directional pipeline; 100% of Tuscarora, a 305-mile pipeline that extends between the GTN pipeline near Malin, Oregon to its terminus near Reno, Nevada and delivers natural gas in northeastern California and northwestern Nevada. For the most recent quarter, the partnership reported net income of $31 million, down $6 million from the same period a year ago primarily due to the cost of acquiring the 30% of Bison that it didn't already own. The cash distribution rose from $0.81/unit a year ago to $0.84/unit, which translates into a 4.6% annualized yield at the current price. Another gas pipeline partnership among the top five year-to-date MLP performers is Tallgrass Energy Partners (NYSE: TEP). Tallgrass provides natural gas transportation and storage services for customers in the Rocky Mountain and Midwest regions of the US. The partnership launched in May 2013, and unlike many of the MLP IPOs of recent years, units traded pretty flat for the first four months. After notching a modest gain in 2013, the unit price caught fire, and Tallgrass been one of the brightest spots this year among MLPs with a total return of 64% YTD. Tallgrass assets include: Tallgrass Interstate Gas Transmission (TIGT) Pipeline, a FERC-regulated natural gas transportation and storage system with 4,645 miles of gas transportation pipelines serving Wyoming, Colorado, Kansas, Missouri and Nebraska with natural gas primarily coming from the Denver-Julesburg Basin and the Niobrara and Mississippi Lime shale formations. The TIGT System also includes the Huntsman natural gas storage facility in Nebraska; Trailblazer Pipeline system, a 439-mile interstate pipeline with a capacity of up to 862 million cubic feet per day (MMcf/d) that transports natural gas from southeastern Wyoming to interconnections with the Natural Gas Pipeline Company of America and Northern Natural Gas Company pipeline systems in Nebraska; Natural gas processing plants in Casper and Douglas, Wyoming with a combined processing capacity of approximately 190 MMcf/d; A natural gas treating plant in West Frenchie Draw, Wyoming. For the third quarter of 2014, Tallgrass reported adjusted EBITDA of $23.7 million, a 37% increase over the third quarter of 2013. The partnership declared a quarterly cash distribution of $0.41 per common unit, which translates to a 4.2% annualized yield at the current price. This amount was 42.6% over TEP's minimum quarterly distribution, and the $3.2 million in distributable cash flow represented a coverage ratio of 1.15. This article originally appeared in the MLP Investing Insider column. Never miss an issue. Sign up to receive MLP Investing Insider by email. Escape to Profits This market can't keep going up forever. Obamanomics' failures will strangle our economy and slow the recovery even more. But 6 oscure escape routes can protect your money from the coming collapse. Discover them here. You are receiving this email at benjamart.ss.stock@blogger.com as part of your subscription to Investing Daily's Stocks To Watch, published by Investing Daily. To ensure delivery directly to your inbox, please add postoffice@investingdaily.com to your address book today. Email Preferences | About Us | Premium Services | Contact Us | Privacy Policy Copyright 2014 Investing Daily. All rights reserved. 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