Higher oil prices alone is not enough to boost SD shares, remember, SD's oil production is hedged-out just below $100/bbl. What we really need to see is higher consumption rates and fewer sources of new proven reserves. The fundamental just don't support speculating that higher long-term oil prices are here to stay. Let me put it this way, crude is more likely to see a $90/bbl price before it sees $115/bbl. Granted, all hell could break loose in the Middle East and disrupt supply and distribution of crude, but that is not a wager I want to rely on.
Oil futures climbed higher Wednesday after a U.S. government report said crude supplies dropped much more than expected last week. The Energy Information Administration reported a 9.9 million-barrel decline in crude stockpiles for the week ended July 5. Analysts polled by Platts were looking for a 3.8 million-barrel decline. The American Petroleum Institute late Tuesday had reported a 9 million-barrel drop. Gasoline supplies also fell by 2.6 million barrels, while distillate stockpiles increased by 3 million barrels, the EIA said. Gasoline stockpiles were expected to rise by 1.2 million barrels, while forecasts called for an increase of 1.4 million barrels for distillates. Following the latest data, August crude CLQ3 +2.19% traded at $105.42 a barrel, up $1.89, or 1.8%. It was trading around $105.04 shortly before the report.
The only way out of this is a buyout by someone who has a pile of cash to put to work. We should not wait for two years of Q by Q results. Oil at 120 will great for XOM, but not SD, unless the euphoria leads to buyouts and mergers.
We have sold all our oil at +-90 bucks. We probably have sold more than all our oil, like SDT did. The Miss can't keep up there due to rapid depletion. Any rise above 100 will be deducted fom the bottom line dollar for dollar. I really don't know how hedging economics works, but you can bet SD doesn't either.
From last earnings,
•Hedged production through the remainder of 2013: •86% (9.5 MMBbls) of estimated oil production hedged at $99 per barrel
•56% (43 Bcf) of estimated natural gas production hedged at $4.10 per MMBtu
The hedging guys at SD did a fairly good job with their hedging it looks like. There may be a slight upside for 2013 due to the recent oil move but as you can see its natural gas that is not hedged and will matter more for 2013. But for 2014, this oil move will give the SD hedgers an opportunity to lock in prices in $100+ range. The reduction in interest payments should be material as well.
Good point,...I've been complaining for months about the oil and has sector at large not catching a bid despite WTI and Brent prices that are healthy for the sector. I noticed in the last 2 days a lack of sellers in many of the oil stocks I own (SDCJF, IONAF, CENJF, XCO). They have all gone higher - once the larger volume comes in,. I expect a big pop! FWIW
I'm blaming the low p/s on the risk factor. No one knows what the market is going to do and there are tons of dollars on the sidelines. When the reward is worth the risk money will come back into oil and gas. This is just one factor out of many, but it is the only thing that makes sense to me. Most of our companies are in good shape. Oil is up to $105 today so maybe the reward is worth the risk to a few more investors.