Part of it is the shorts annihilating themselves, but I think the market liked the earning release!
There will be a lot more interest in LGCY asset sales with oil close to or above $40 with an upcoming OPEC meeting than there would have been at $35. Even a small asset sale should help the share price. I still see no incentive for the banks to force LGCY into bankruptcy. Their incentive is to wait and see. Diodia
I still believe what I posted before. There is no incentive for the banks to force LGCY into bankruptcy with the price of oil going up and the IEA report that the worst is over. The incentive is for them to wait and see what happens, not to force LGCY into bankruptcy at a time when they will be assured of getting the least for the assets. Once the redetermination is over, LGCY prices will improve. Diodia
if oil stays up here, I do not think Wells Fargo and the others will force LGCY into bankruptcy and there will be no need for a debt to equity swap or other drastic measure. It makes more sense for the banks to wait and see. Here's hoping. Diodia
Confference call continued:
Second lien debt possible - they have had enquiries about a second lien and feel they have that ability
They have discussed this debt exchange. Taxable for distributions did not receive, but LGCY has a lot of depletion and a good amount of shield for 2015. They need to do more analysis of this to see tax consequences.
32% of oil is hedged, realize $64.44 if oil is at $35
50% of gas is hedged. $3.38 realized if gas is at $2.15
Slightly below 25% is hedged in the second half.
Gas hedged through 2019
Could monetize the hedges if needed to.
So there is some wiggle room with hedges, capex, etc. It all depends on the price of oil and gas.
This is what I got, subject to correction.
cut LOE 23.5% during 2015, while maintaining production guidance of 18 M so did not achieve cost cuts by shutting in wells.
Beat drilling days by 39%, costs were 16% below estimates
LOE $11.59. Need to pay down debt to further lower costs
Drilled 12 JV wells, 1 Wolfcamp, 6 Sprayberry/Wolfcamp A. They suspended drilling in the less productive areas & had 1 underperforming well.
Had the 15 cent DCF to make the distribution but suspended distribution due to need to address debt. Suspending the distribution saves $ 50 M yearly
Began selling assets. Sold 15 M at end of 2015, assets that were not producing or not profitable.
Plan to sell $50 M assets in Q1, $50 M in Q2.
These properties generate little production and cash flow
Expect to be slightly cash flow positive in 2016 [are price assumptions realistic?]
Do not have contract or lease commitments
Amend credit agreement. 3.5 EBITDA but moves to 2.5 at Q4 Have 125 M available
Production in 2016 depends on oil and gas prices. They will not do well workovers if they are not profitable. They do not have a goal of maintaining production at any particular level. Only drill or workover if profitable
borrowing base redetermination ahead
Preferred will be taxed even if not distributed.
37 M capital budget which will maintain production roughly flat through Q4. If oil prices remain low or decline, could drop this even as far as $10 M
Roughly 97% of reserves are PDP as PUD are no longer economic
Not considering a sale of midstream, but would consider it in right circumstances.. They see the midstream as a big growth story as it has the capacity for much greater volume. Have good leads on adding volumes. Think they will be able to sell it for more if a sale becomes necessary after they have added volumes.
Feel good about the $725M number, but they cannot say anything for sure
Second lien debt possible - they
As I said yesterday, WMC should get to $12.50. I couldn't believe no one was buying afterhours yesterday when the dividend announcement was already out. I suppose we get some kind of consolidation at $12.50, but the volume today is convincing. Diodia
In retail investors' minds it was all debt and it was high yield, so it was all toxic. My stupid buys at $10.56, $10.37, and $10.08. I had the cash to buy a lot more but I was freaked out. I thought there must be some leak about a huge dividend cut. Then I said, but what about the whole loans, the hedges, etc., etc. But I did not have the nerve. Diodia
Retail investors, who are the ownership of REITs, could not figure out the difference between high yield bonds issued by companies like EXXI, which will go to zero because they cannot make enough money at $35 oil to repay their costs, let alone their debts, and mortgages. Mortgages are actually quite safe investments as long as banks do not issue them to janitors making $14,000 a year to buy $400,000 second homes to flip, as was done in 2007. Mortage book values fluctuate but mortgage default rates are normally very low and the mortgage has value after the default because the home still exists, unlike an oil company going bankrupt when oil is way below the break even cost. There is a huge difference between junk bonds and mortgages, but the investors could not see the difference.
In the case of WMC, it was compounded by the press blaring about 25% redemptions at Legg Mason's "Western Assets Management" fund by which they meant the Western Asset Managment Short Duration high yield fund. How I wish I could have figured this out, but I just saw WMC dropping on monster volume and I stressed out buying shares below $10.50. Maybe we will get another chance on some other piece of looney investor confusion. Diodia
It breaks my heart that I did not buy more in the low $10s and that I did some selling at $11 and $11.25 but I did not know there was a Western Asset junk fund which the financial press would refer to as "Western Asset" and that investors would get confused and stampede out. At least I bought some back after hours last night and this morning. What a golden opportunity near $10. At least I have quite a bit of WMC and I only sold what I bought during the dip. What a chance we had! Diodia
The tragedy is that huge drop to just above $10 was just because investors confused WMC with the Western Asset Managment Short Duration high yield fund. I was racking my brain to figure out what all that high volume panicky selling could be but that they thought it was a junk fund never dawned on me. So I did buy all the way down to $10.08 but timidly and I sold some today. How I wish I had bought more and held on to it. WMC should go to $12.50. Diodia
Is this really gracieblackbelt? A two word post without explanation is very unlike her. Normally she gives a rationale for her actions. Four weeks ago she said "i'm guessing $15.75 or so BV, and a $.63 div at least."
Many, many thanks jack for your posts. It is thanks to you that I loaded up below $14.50 and again below $14. You made detailed arguments, both big picture and company specific. This will make a big difference for me. Diodia
You are correct that there is a lot of data showing that PV-10 is effective. The allegations made in the SeekingAlpha article were all false. The PVCT patents are not about to expire and the company never used stock pumping services or newsletters. It is all a pack of lies. Getting a BTD denial is not a big deal and happens all the time.
The real problem is Adam Feuerstein, Nate Michaud's chat room, and PumpStopper at SeekingAlpha, and they are a huge problem. They will be stomping all over the stock on Monday, and there will be another article on SeekingAlpha saying that PVCT s worthless and going to zero. The stock is going to get crushed.
I listened to the Conference Call and reviewed the data one more time, and I think if you have a very strong stomach and are willing to be quite patient, you can invest on Tuesday, probably around $1 or below. I feel that in the end it will be approved. But that may be after a Phase 3 trial and a secondary to pay for it! Diodia
Any hope resides in the bridging study, and the fact that they have the cash to do it.
What Wachter says are the positives from the denial letter:
FDA said that they saw indication of drug activity--the drug is doing something to the tumors
They said recurrent melanoma is life-threatening, and is an appropriate disease for BTD
PVCT may submit a new request
Wachter says the agency has helped PVCT define endpoints vastly different from PFS.
Also has given good guidance on endpoints and types of patients to enroll
Negatives (which I find somewhat scary):
pain turns out to be really difficult to measure
most melanoma patients in earlier stages of disease do not have significant pain
He does not have a good way to assess pain & does not want to rely on patient self-report
I thought that correlating pain, infection, bleeding with tumor shrinkage in melanoma patients would be easy. Now it looks harder than I thought.
I am also worried about Culpepper's optimism. I believe he bought stock and exuded good cheer and confidence because he really thought they would get BTD. But they did not have the data, and I think Wachter was worried all along, but no one listened to him.
The biggest negative is Adam Feuerstein who is not going to let up. Diodia
I really think that if they had disclosed the letter, this would not have been that big of a deal, and could have been partially fixed with an ASCO announcment of the parameters of a new bridging study and the good clinical data in the ASCO presentations. I could believe Wachter on not receiving the email just because it was so crazy not to disclose it, and it is not as if they waited to disclose it until they had some kind of plan or path forward, because they gave us no path forward or details of the trial today. But why not disclose it when they got the paper letter on May 21?
There are some positives, mainly the cash in the bank, ASCO is coming, and the fact that they now say they are committed to giving the FDA what it wants: correlation of OR with pain, bleeding, and infection. On the negative side, Wachter said many melanoma patients do not experience pain until very late stages, plus that pain is hard to measure. I do not know about infection and bleeding, but I wonder how common they are. Adam Feuerstein is out there and will be relentless. The stock should get crushed on Monday, as many have predicted.
What they did right was to publish the FDA letter and to hold the conference call. Wachter says they have good guidance from the FDA on endpoints and the types of patients they should enroll. Culpepper seemed confident--but who knows-- on their connections with oncologists being sufficient to recruit patients. Next week will not be fun. Diodia
I don't see fraud, but PVCT has opened itself up to accusations of untrustworthiness at the very time that AF and PumpStopper are making these accusations that they are "fraudsters" and fly by night. The BTD denial was perfectly survivable--lots of drug companies get denied BTD. Denying receipt of the letter is really going to cost them, and the shorts are going to hammer on this. Plus they will be sued about it. I cannot imagine what they thought they were doing. Diodia