It sounds like the 60% of bond holders made a very bad decision in view of the collapse of the common stock price after July 18, 2014. Especially given the 2017 expiration date of the bonds (only 3years later). Thanks for the interesting post.
On July 23, 2014 Seeking Alpha published this: Here's why you should ignore short term fears about SDRL
On July 22, 2014 Mötley Fool published this: Why I'm not selling SDRL
Plus lots of other similar articles last summer.
However, on July 29, 2014 Tor Olav Troeim, Fredricksons partner for 19 years resigned, but stayed on the SDRL board. On Sept 29 he resigned from the SDRL board. Seems likely (to me) he sensed big trouble ahead, and warned Fredrickson, but was ignored.
T Boone Pickens failed to predict the drop in oil prices. No way to know if his next prediction will be true.
If they do that SDRL with never get another loan from anyone. Not to mention the lawsuits and confiscation of assets by the lenders. Your option is not being considered IMO.
The Kudlow Report (TV) a year ago featured a video of a company that can convert most cars to NG in a few hours for about $800. Pretty slick. But I'm sure the gas companies, and key politicians, will block any measure to install auto refueling depots. Boone Pickings had a plan to build depots but it seems to be stalled...I think because NG prices are too low.
I agree. Hiland Partners is (was) an MLP but what they were doing seemed under the radar except for the list of assets. For example, I never found any financial details online, like a balance sheet. We are told it sold for $3 billion including debt. How much debt? One analyst said $500 mullion, another said "almost a billion". I did read that Continental Resources paid $300 million for the Double H pipeline. Is that cost part of the debt? Hard to know.
I've read it doesn't matter what Obama does because a number of Nebraska landowners oppose eminent domain access to their land and vow to take it to the Supreme Court if necessary, which could take years. Eminent domain exercised by a for profit foreign company does seem fishy, to me anyway.
An Oil &Gas Journal article (1/6/2014) said: "This estimated undiscovered technically recoverable resource makes the Bakken-Three Forks system the largest continuous oil accumulation in the US as assessed by the USGS."
If that's true then why did Harold Hamm sell Hiland Partners? Was it because of his divorce? Seems unlikely to me. One analyst speculated, instead, that with $3.08 billion in the bank he can rapidly expand his Bakken holdings by buying out other over leveraged Bakken operators forced to sell by todays low oil prices. That makes sense to me. I think Hamm is basically an oil man who makes big, risky bets. He's not a slow growth steady operator like RK and KMI. Hamm prefers owning drilling rights and oil wells, not gas gathering pipelines.
If so, that should bode well for KMI if Hamm expands his Bakken holding. After all, KMI gave Hamm the money to expand.
Thanks for the clarification. And I assume that includes Hiland Crude, a subsidiary of Hiland Partners. Hiland Crude is finishing the 488 mile Double H bakken crude oil pipeline that connects to the Tallgrass Pony Express pipeline. Double H has a 84,000-100,000 B/day capacity. Obviously a valuable asset in addition to the oil and gas gathering pipelines.
KMI now has 1.8 million acres under contract for oil gathering and 3.7 million acres under contract for gas gathering, all in the Bakken. The largest contracts are with Continental Resources, managed by Harold Hamm, who sold Hiland Partners to KMI.
Did KMI buy all of Hilland Partners assets or only the assets in Montana and North Dakota? The Hiland Partners website doesn't even mention the sale. Hiland Partners has gas gathering facilities in Oklahoma too.
I've read that in mid 2014 significant new oil and gas was found BELOW the Bakken shale in the Three Forks region...in 3 of the 4 Three Forks strata. As a result the USGS raised their estimate of recoverable reserves by 30-40%. This is an area that is relatively unexplored so far.
Night satellite photos of North Dakota reveal large areas where gas is being burned due to a lack of gas gathering infrastructure. KMI, hopefully, will address this issue.
How big is 200,000 sq miles? That's an area larger than the state of California! The only state bigger than the Bakken formation is Texas, at 276,000 sq miles. Plus the Bakken lies entirely within the even larger Williston Basin which is also a source of oil, gas, and coal.
Various opinions given, pro and con, on this investment. Some contend the Bakken oil will begin to decline steadily in a few years. That's why, some say, there has been little interest by pipeline companies.
I checked a Bakken formation map. It covers an enormous area...200,000 sq miles of North Dakota, Montana, and Canada. Many large areas currently have no wells at all. I'm no expert, but it's hard to imagine the Bakken play ending anytime soon even if existing wells stop producing.
Enbridge built a 145,000b/d pipeline 77 miles north from North Dakota (across the border) in 2013 to connect with their 2,400,000 b/d west/east pipeline. Keystone XL crosses the border too but has a 800,000b/d capacity, is 875 miles long, and carries tar sands oil, not light Bakken crude.
I'm pretty confident the Bakken investment was a smart move.
I much prefer a train tanker spill to a Keystone XL spill. A train tanker carries 2000 barrels of crude. Keystone XL carries 800,000 barrels/day (33,333 barrels/hour) thru sparsely populated areas. The potential for a major disaster is far greater in a pipeline, especially if it goes undetected for a few hours. As for a truck spill my understanding is that trucks are never used to haul crude. Tanker (ship) spills are also much worse, generally, than a train spill.
I think we will see/hear more detail in the news next week. I've heard that 100-125 farmers and ranchers in Nebraska are suing. The primary concern is not the pipeline itself, it's the danger of a spill affecting the acquifer underground, which could be devasting over a very large area and affect thousands...with basically no remedy if it happens. There was a small pipeline spill in the Yellowstone River two days ago...now the residents must import drinking/cooking water because their wells have benzine in them.
It's a "no brainier" all right. You have to have no brain to support it. One example: Eminent domain will force a number of Nebraska landowners to grant access to their property for the benefit of a private Canadian company.
I wish he had mentioned the pipeline oil spill into the frozen Yellowstone River two days ago. Virtually impossible to clean up and the town's water is now contaminated. The much larger Keystone XL will cross 14 rivers including the Missouri and Platte. We will eventually regret it was built.