Hey CC lova. So... My comment regarding their Dev expenses doubling... SO WAY OFF BASE! (Oh wait a sec I'm being disingenuous). I just look at the 10Q. I'd wish you luck, but that would mean the price of gas would have to increase. Whinning, no... Declaring a position and defending it ... yes. How many shares are out there? Oh... 17M I think I'm just talking to a bunch of marketing yes men. I'll leave this goofy post and wait and see 6 months from now. The only reason I made these posts in the first place was because someone was wondering about it. Still waiting for someone to prove me wrong. Oh wait a sec someone said that a Saudi prince said.... And we know just how accurate, erudite and valorous Saudi princes are...
I have only recently bought into this. Do you expect we will get details explaining answers in regard to the 3 points you raise?
I agree with your observations. VOC is highly leveraged to the price of oil, without the going concern issues that many players in the industry now face - high debt and declining cash flow being a very toxic mix. That's not a problem with VOC.
There were more than a few perplexing issues though that arose this past quarter for VOC:
1. MBbls pumped declined 12.5% YoY. That's at a significantly higher rate than in the immediate past, and much higher than what we were told to expect during the offering. This needs some explanation and clarity in the filings.
2. Production and Property taxes were way off the charts this past quarter. They pumped significantly more oil and gas back in Q4 12 and Q4 13, and production and property taxes were only in the $400 - $600 K range then. Yet, this last quarter they were $2.2 M? That definitely needs explanation. It could be that there is significant pre-payment in that number and that taxes will fall appreciably in Q1 15. But the highly erratic pattern of payment is not making sense. And too, taxes as a percent of revenue have jumped from 7, to 8, up to 10% in '12, '13, '14. That's not making much sense. And that was a $1.5 M drag on the distribution this past quarter. So, it needs explanation.
3. Operating expenses. There are numerous related party issues there. The 20% owners, and founders, own the companies that service the VOC wells, drill the new wells.. Are there sufficient arms length transactions happening here to ensure that the 80% owner's are getting their fair share of the rapidly declining costs being offered up now in the oil services industry? That's needs to be an issue all shareholders focus on and question.
Still, if you want a bet on the upside to oil prices, there is no better out there than VOC
No debt, so that is one crucial concern not hanging over this. Worst case is you will miss out on some distributions, but if oil recovers, huge leverage to upside. If they maintain 10 cents, that is more than acceptable. The one thing I wish we could get to the bottom of is money being spent and what upside it offers going forward. We need more information from the operators on what is going on, along with what kind of savings are being extracted from service providers.
memeds2. You clearly need some help in reading and understanding financial statements. You should consider taking a few community college courses in accounting and investing. Your posts here have been so off base that it's embarrassing. In opposition to your claims that VOC had no cash, they had $1 M in reserve. In opposition to your post above that it looks like they retained some cash this past quarter, they did the opposite. They took $500 K from their $1 M reserve and will be distributing it to shareholders. And while you've been whining time and again here about what a bad investment this is, VOC has moved almost 10% higher. In addition, your clueless posts on development costs aren't worth the waste of our time to read. Just back away from your keyboard. Please stop posting here until you get a clue as to what's going on with this company. You are not adding any value here, just spewing misinformation.
Yeah, that is pretty good. According to the numbers they released for the divy, it is based on an average oil price of $79 a barrel. Looks like they are keeping some as a cash reserve as well, so if oil goes back up the next divy or two might get a little extra. One really scary thing though..... Dev expenses doubled to 6M plus from 3M plus. If oil doesn't go back up the next divy will be nadda... Hopefully, they can get a handle on dev expenses.
No. The cost to produce a barrel of oil in Saudi Arabia ***doesn't matter*** because it's not a business, it's the government. What matters is how much the government needs to sell it for to break even on their national budget. The Saudis still need to sell oil for $60 a barrel to ^break even^ on their national budget. THIS and not supply and demand / cost of production, is the greatest indicator on where the price of oil needs to average in the long term. Iran, Russia, Iraq, Venezuela all have the same issue. The U.S. is the only country that risks private industry and not the entire nation with low oil prices.
Saudis have built up cash reserves, they are currently doing what they did in the 80's. This cannot continue more than a year, not because of the oil industry in Saudi Arabia or other countries, but because of their GOVERNMENT budgets. The government break even points are much much higher and they lose lots of money every day that oil stays low. However, they are betting on being able to regain market share so that when oil goes back up they will be able to sell more than they are losing and come out on top.
When you Google the price of oil you should, you should do a corresponding search for world events. I think you'll find a lot of correlation. Oil is not Copper. Oil is politics.
You make a whole lot of assumptions. I know that it costs the Saudi's less than $17.00 to make a barrel of oil. If oil stays at $48 the Saudi's still make out like bandits. Oil is only part of Russia's economy. Venezuela, I just don't know and don't care (it's Venezuela). I think the prudent thing to do is wait for the next 10Q. If you google for the price of a barrel over the years you'll find no real happen stance as to why oil is the price it is. I wouldn't expect a divy from VOC anytime soon. As the trust expires in 2030? with no return of doe whatsoever, the divy is all it's got!!!! Will see soon enough what happens in 6 months and in 12. Me, I do not think oil is going to bump itself back up to $70. A few weeks ago I thought it couldn't go below $50. Now it's at $45!!!!
What makes me so sure oil isn't going to stay low?
Iran, Russia, Venezuela.
These economies will collapse with oil permanently below 70 a barrel. Could oil stay low for a year...sure it could. Could it stay this low for 10 years? No,not even Saudi Arabia could handle $40 oil for ten years.
My point is this, if it takes 5 years for oil to return to $80 a barrel and VoC to $10 a unit (from 5) that is still an average return of 15% a year compounded annually. If any average investor averaged 15% a year they would be super happy.
This excludes two things: A, that VoC ceases to exist; and B, that there might be also 0 dividends for 5 years. If there are ANY dividends then it makes the average return higher. If VOC dissolves then its worth nothing, of course.
Oil, cannot and will not stay below $70 a barrel for +12 months. Geopolitics will not let that happen. I mean seriously, you don't think China is going to start filling storage tanks to take advantage of the cheap prices? You don't think Iran is going to throw a fit now that the sanctions actually hurt their economy?
You ran "numbers" and I respect that, but oil is not copper. Oil is 90% of the GDP of several unstable countries. Copper is not. Copper could go back to 0.60, but oil can't because governments collapse. Copper fluctuates on supply and demand. Oil fluctuates on supply and demand, but is also influenced by politics.
You're focused on the dividend because this is a royalty stock. It makes sense, but it is still slightly shortsighted. If you wanted to say..."hey I think this is a great buy, but it will be a better buy after they announce the next Div. because all the income investors will want out"...then you may have a point.
Also, lets say the dividend gets cut 50% from October...that's a big deal. It's still 18.5c which in four distributions is still 14.8% of a $5 unit price. Let's say it gets cut by 75% that's still 9.25c or 7.4%. A 7.4% Div is not a bad return...
What makes you so sure oil isn't going to stay this low? The only thing that may happen is that the shale folks may bust. Also, the last 10Q implied the trust had no back up doe (IE cash reserves "0"!!!) It used to be said that "no intelligent person would believe the world to be round... You got any numbers and analytics to back up your position (IE a hyperbole fictitious example to show my point. If the shale producers go belly up then oil production as a whole goes down "X" %, and thus will cause the rest of the market to go up "Y" percent. If OPEC decides to put a cap on production of "A%" then the market should respond by going up "B%"... Yada yada yada...) For all I know your gut may be right. I've kinda learned not to take things completely by chance if I don't have too.
Were you aware of VOC's open statement saying that development costs are not going to be low for the next quarter or so? I've put quite a bit of thought and math into this post and showed my work. Honestly, I still don't know if I would invest in this even at $3.50, I think the only thing I know for sure that I would do is investigate VOC and oil further. I'd at least wait for the next 10Q coming out and seeing what that says! If they can't control their dev costs then:
When oil's at ninty VOC's divy if funn
Now that oil's at $48 VOC is dunn.....
I appreciate your response, but I'm not sure you entirely understood my position. Yes, buying at 3.50 is better than buying at $5. However, from the position of someone who doesn't have the time or the stomach to sit and watch the market everyday $5 is still a great price. Here's why:
People investing for retirement (not in retirement) don't care about the return this year, we're looking at long term results. In the long term oil CANNOT stay at it's current lows much more than a year. Governments will collapse and companies will go out of business. When the media talks about low oil being here to stay they mean for 3-6 months. The projected yearly averages for oil price are around $55 dollars a barrel. That's the yearly average, which means year end prices will still be $65 dollars a barrel and climbing.
Markets are cyclical, not because of magic, but because of economic factors which prevent permanent swings in one direction. The Saudi prince was right, oil over 100 a barrel will be tough now that shale drilling can start up so fast. However, oil below $70 dollars a barrel is too low for governments to function. The market will balance itself around $80 a barrel. It may take a year or 18 months, but it will happen.
Now, the only way VOC is a bad bet is if it dissolves because it couldn't weather the current lows. That is a real possibility, but...they have no debt, and you wanted to buy it at 3.50 so you're not worried about its collapse anyway. In 3 years VOC will be trading around $10 a unit. In 3 years that is a 100% return on a $5 a unit price....that's a great return. Is 3.50 better, sure, and after the next distribution report there is a good chance we might get there. However, that doesn't make $5 bad in the long term.
No intelligent person thinks oil will stay at less than your "break even" point for the entire year. It will rebound, not to 100+, but to 80 and within 18 months. VOC will follow.
You haven't been doing your homework. I too have thought about buying this stock, so I did my own analytics. Last quarter I determines that the "break even" point for this energy trust would have been $52 a barrel. RIGHT NOW OIL IS TRADING AT $45!!!!!! There was room for improvement in that their development costs were about a little over a third of their costs at this time. Yea, this stock would be awesome if oil ever shot back up to $80 a barrel. BUT YOU DO NOT KNOW IF AND WHEN THAT WILL OCCUR! In the mean time I am not thinking about touching this thing until it is $3.50. Check out the last 10Q yourself.
This trust was trading at $15 a unit this summer. It has gone down mirroring the price of oil. The price of a unit has gone down because the dividend distribution goes down. *IF* there are distributions the price of a unit will be such that the distribution = a % of a unit people think is worth their time and money.
Assuming the trust does not dissolve: The price of oil wont stay this low forever. Maybe 6 months, maybe a year, but either A, shale production will dry up and new wells will be cost prohibitive or something will happen somewhere in the world that disrupts the supply. $80 a barrel oil is the spot where everyone is equal parts comfortable/uncomfortable.
Whether it goes lower in the mean time or not, isn't $5 a unit a decent price for this trust at $80 a barrel? If I put my money in now, and 3 years from now this trust is $10 a unit with a 10% div. Am I not getting 100% on my initial investment with 20% a year in Div? As a regular guy, am I happy with a 120% return after 3 years?
"additional costs" without knowing the details means something but we don't know the magnitude or context. It could be a onetime cost of relative insignificance given the stock price collapse. We can count on one thing, the cost of oilfield services is going down by a large percentage.
just off the wire...
Shale Producers in U.S. Cut Rigs Loose Early Amid Oil Slump
By Lynn Doan Jan 8, 2015 3:23 PM CT 0 Comments Email Print
U.S. oil producers are bailing out of long-term contracts for drilling rigs as crude prices sink below $50, another signal that the nation’s shale boom is slowing.
Yesterday, Helmerich & Payne Inc. (HP), the biggest rig operator in the U.S., said it had received early termination notices for four contracts. Today, a second contract driller, Pioneer Energy Services Corp. (PES), said four rigs had been canceled early. Producers may cut short another 50 to 60 agreements, according to Bloomberg Intelligence analyst Andrew Cosgrove.
Companies are paying to cancel rigs rather than keep drilling in the face of a 55 percent plunge in prices. Mounting rig cutbacks imperil the unprecedented boom in U.S. output that’s contributed to a global glut of oil and helped sustain a price war among the world’s largest suppliers.
“This is just the beginning,” R.T. Dukes, an upstream analyst at Wood Mackenzie Ltd., said by telephone from Houston today. “Even the best of the best who continue drilling have balance sheet constraints when you get oil this low. It might make sense to just terminate these contracts and not do anything and wait for a better day.”
U.S. benchmark West Texas Intermediate oil rose 14 cents to settle at $48.79 a barrel on the New York Mercantile Exchange today.
Past cost have been all over the map so yes prediction is pretty hard but since VOC said just a few weeks ago that they would incur additional expenses due to Kurten Woodbine Unit then I guess that we are not going to see a lot of relief from the expense side.
Oilfield costs are plunging. Already rigs are being offered at a 40% discount to what they were last summer. All other oilfield costs will be falling as well. It is hard to understand what effect this will have on the very near-term picture but using past costs and current oil price paints the wrong picture. There will be a big cut in costs and we should see a margin here that will allow some level of distributions, the question is how much. Will take some time for the dust to settle.
I think last quarter they had an average selling price of $96 a barrel. So now we are nearly half of that. The other problem is that their expenses will not go down in half and in fact they are saying they will have higher expenses. The whole thing doesn't look good. Plunging income and rising expenses. So according to my quick math, At $96 a barrel oil, VOC made 18 million and had just over 9 million in expenses. If the price of oil gets cut in half which it essentially is at $50 a barrel then income goes down to 9 million and even if expenses are flat we have no money for distributions. Not sure what the average selling price for oil is for this quarter but it is tough for VOC to make money at this price point for oil.