I calc they have 80% coverage this year for what its worth on flat production and no cost cutting.......so that gets u to $2 as a starting point but i suspect they will provide more room than 1X so expect $1.5-$1.80......LGCY div was cut to $1.30 by CS so thats the reason why they nosed dived more and VNR is better run in my book and everyone knows it. If its $1.50 at $13 its trading at 11.5% yield so I dont think there is that much downside from here esp given we are at bottom of commodity cycle in all likelihood.
no kidding expect it to go down in line with its peers......the unfortunate thing is by next year $75 Oil and $4 NGAS coverage would be 1X on current rate....so mgt has a tough decision to make......buy one should expect a cut of 30-50% anyway
Yet the coldest weather coming next 2 weeks....even colders vs last yr....the spin is supply but no one has gotten demand right and Feb and March temp wise will be well below norm. Again relative to warm winter of 12/13 inv is in same shape yet prices are 25% below then....again the spin is inv is above last yr and thats all that matters.....BS its all price manipulation.......
"In petroleum, we have moved quickly in response to lower prices and will
reduce the number of rigs we operate in our onshore U.S. business by
approximately 40% by the end of this financial year," said BHP Chief
Executive Andrew Mackenzie. The asset write-downs in this division relate to
the sale of oil assets in North Louisiana and gas assets in the Permian
Basin in Texas.
Oh should have noted that 2015 production growth is what JPM has assumed not what mgt says......and its 4Q14 vs 2015...which is also important in that production when measured seq for the industry is already flattish vs 4Q into 1Q and the EIA in their projections confirms this too..beyond 1Q its flat to down for industry following EIA numbers.....which foots with rig count
My Friend goto to CLR Jan 2015 corporate presentation...then browse to page 7.......CLR is the Bakken and the Bakken and Permian is all of the incremental oil production the past 3 years....so tell me what u see? Well at $50 at under 20% IRR the Bakken and most of SCOOP play is barely economical thus why CLRs 2015 production is expected to be FLAT! up 5% overall! So all of you dont tell me we need $40 oil to clear the market cause that is complete BS...And i should note the rig count in Bakken is going get smashed in 2Q to 10 rigs from 18!...thats the evidence u need that $50 oil isnt sustainable period cause as I said no one will grow production. Idiot futures traders playing games thats whats going on. As I said you need $60-$80 oil by end of 2015 or there demand will exceed supply by 4Q15......
Bi i have been writing about the glut hype for weeks that relegated to US only.....a situation similar existed in 2012 thats didnt result in crash but a correction.....the difference.... the call for deflation to spur EU QE is much greater thus maybe the end game on entire commodity crash...on 1/22 EU will take action and oil is showing small signs of bottoming....no coincidence as is the dollar rally.
This is from oilprice website...click interview section for all of it.....he thinks we need even higher prices to restore drilling over 80....off shore for sure, but my point is 60-80 is darn conservative....
The price of oil will recover. Opinions that it will remain low for a long time do not take into account that all producers need about $100/barrel. The big exporting nations need this price to balance their fiscal budgets. The deep-water, shale and heavy oil producers need $100 oil to make a small profit on their expensive projects. If oil price stays at $80 or lower, only conventional producers will be able to stay in business by ignoring the cost of social overhead to support their regimes. If this happens, global supply will fall and the price will increase above $80/barrel. Only a global economic collapse would permit low oil prices to persist for very long.
So I dont think mgt is going cut the divy this early. Most important is mgt and many industry insiders recognize 48 oil wont spur production growth infact will result in declines....its not sustainable and thus why even the biased EIA thinks prices recover to 70 by yrs end. Simply put between well depletion and rig count reductions by mid yr the mkt will get rebalanced and the price will normalize to the price where production no longer gets cut. That price if u been reading is 60-80 not 50. So if mgt understands this why would they slash the divy unless they were forced to if they know that price....the global mkt is balanced its only the US thats slightly over supplied so unless the mkt remains so and mgt thinks it will then they will adjust the divy....
I have read the SA article kn vnr as well as many sell side reports and analyzed the numbers as well.....i think much of the analysis is correctin that 70 oil roughly is needed to avoid the divy being cut. Further 3.5 ngas too...with very cold weather towards Jan end and many sell side analyst looking for $4 ngas in 2016 im less concerned there. One thing over looked is most likey between cost cutting and trimming the 50-60m in growth cap ex most of the near term coverage shortfall could be made up. Mgt eluded to this last qrt much to their credit....these guys are pretty good to suggest that then. Further none of the analysis assumes acq which no doubt woulld lower vnrs leverage if units are used thus buying more time and more accretive acq. Mgt repeated this as an option at several conferences.
I think Bis comment holds true as Debt/EBITDA will cut off that credit line........i think the entire distribution
We are revising our outlook on Legacy Reserves L.P. to negative from stable
and affirming our 'B+' corporate credit rating, given our view that leverage
could exceed levels we view as appropriate for the rating over the next two
years. We now expect FFO/debt to approach 12% and debt/EBITDA to near 5x
unless the company reins in capital spending, cuts distributions, or improves
I agree BI LGCY will probably cut distribution by 50-75% and soon plus that liquidity they say they have wont be their either once EBITDA drops in 1Q..i cant believe they went to UBS this week to speak too.
within it if you go to website by 4Q15 the market will return to a balanced supply and demand state......even though they have not fully discounted the carnage in US supply to come in 2H15 into 2016....the rig count at 1PM which will show another whopper decrease will clearly show this as i think the number will be 65 ish
he most tangible price effects are on the supply front. Upstream spending plans have been the first casualty of the market's rout. Companies have been taking an axe to their budgets, postponing or cancelling new projects, while trying to squeeze the most out of producing fields. For the most part the supply effects will not be felt immediately, but further down the road, through project delays and faster decline rates. Nevertheless, expectations of non-OPEC supply growth for 2015 have already been downgraded, with growth for the year adjusted downwards by 350 kb/d since last month's Report and more steeply so for 2H15.
FROM SLB EPS release...notice the reference to well decline rates..if rigs stay flat or as they are now plunging what do u think will happen to supply?
During the quarter, the forecasts for global GDP softened somewhat while growth is still expected to be 3% in 2015, confirming that the global economic recovery is intact. As a result, demand for oil continues to increase but significantly higher marketed supply has led to a dramatic fall in oil price. As E&P investment falls in response, decline rates will impact oil production capacity, while sharply lower E&P activity will delay supply additions. At the same time, markets for natural gas remain comfortably supplied in North America, while new LNG capacity additions in Asia and weaker demand in Europe are putting pressure on prices in these regions.
Look im not going to argue VNR should have better hedges given where current prices are. But what most fail to see that unless oil returns to over 70 production will decline later in 2015-16 period. Go read articles on oilprice website that makes that point. On sell side they are slowly getting it as well. I asked the head ofmthe EIA which has set expectations thats prd will rise this yr despite rig count plunge. The dope didnt know at what price was needed for production to resume growing.....finally he admitted its not close to 50 but over 70. Yest o Reuters the head of ND state development admitted thats rigs are on track to plung 50% from peak by 3q in the state and that would not sustain production in 2015. So all the mis information spewed by BBG to pushed prices lower is just that. If prices jn 2016 return to near 70 VNR be fine.....maybe they trim divy in interim but thats not what will drive value here. So all the glut talk from EIA while on ther numbers only 0.5% oversupply exists in 2015 will evaporate if prices dont recover....and within 6 mths.
Wrong? go check with IR to confirm.......OIL movements are irrelevant single digit percent moves to DCF given hedges......on oil that is this year and next.....