I think the market will turn on a dime in November but I could see front months suffering until then. I'm very bullish come November because we will be at peak storage and supply should be down a lot because of rig count.... I think the play is to short OCT front month and buy December front month.
jan-march this year not looking to be that cold...add 800 BCF to 4000 starting inventory and you get 4800....storage capacity is 4200....Houston we have a problem. We need to cut supply over demand 10BCF a week over year ago levels Pronto!
Maybe only the bonds of the co's survive and the equities all go to zero. Nobody is going to stop pumping until they actually go bankrupt and that will be years still. The bearish factor I see is that storage is headed toward 4500-5000 next year even with normal jan-march weather.. 4200 seems like a lock at this point which is capacity so that could take NG to $1 who knows. But then December it should be $3 with cold weather.
But its over 25 times peak years earnings....shouldn't it trade at about 10 times peak year. That would be $48. I
They need to eliminate the dividend and build reserves. That is why the stock crashed I think. Plus production cuts are coming thus less volume... But mainly this thing is insolvent if they had to pay current market rates for oil debt.
If WTI was $70 and shale was $62 They still would hardly make much after capex. Maybe $1 billion but the enterprise value is $16 billion. a 16 multiple which is high for oil. Believe it or not CLR still trades as if Crude is $70. But its $38, They must have something really really good.
its a Ponzi and the market somehow strips out capital expenditures but why pay $8 billion for CLR when you have to keep putting in $1.6 billion a year in cap ex just to try to get the $1.6 billion back if you lucky.
some of the $8 billion in Debt has value but the stock is like a crude call option with a $60 strike trading for $8 billion when it should be trading for about $3 or $4 billion IMHO
Given the low usage in December and the 10-20 BCF a week in oversupply weather neutral...I'd say we on track for about 4800-5000 storage....We can only store 4200?? So Im assuming there will be huge production cuts if not they will have to cap wells or something???
January weather looks normal... But when you consider we used what 300 less than normal in December (I'm guessing). And we are overproducing 20 BCF week too much (conservative). Lets say we keep over producing at that rate for the first quarter. That is another 250 BCF. That puts up 550 BCF above year ago...Which will send inventories to 4400+. Can we store that much? So Drastic production cuts are necessary next year. I'm no expert but would like to hear what the experts think about this. It seems like a Dire situation to me. I think there will be a pivot...Where front month October is super cheap and December futures are really expensive if that scenario unfolds.
I think it will stay low over fears of running out of storage next winter.. ANY kind of excess supply will put us well above 4000 in storage in October. .but as market realizes the above that you mentioned...maybe around June prices will just trend up and up and we could easily hit $3.50 next December. If we can get a few more months of staying under $2 will really scare Cap ex and production will finally fall 10%. But at the same time Nat gas could fall to $1.25 if production doesn't fall because storage will be full??
Sorry you are wrong.. They have $3.5 billion credit line with Zero drawn... read the last EPS press release. They were $250 million cash flow positive last quarter. Things have worsened since then but these oil and gas companies really do not burn much cash even at the current prices.... That is the problem and why prices keep falling nobody will cut production. But nobody going under any time soon. Crude would have to stay down here for years until the bonds come due...many years.
He was right short term in that case....The drug failed initial trials.
But if nat gas prices stay under $3 for years there is almost no equity value relative to the $4 billion debt in a regime where oil companies have to pay 10% plus interest junk bond yields. UPL bonds are currently yielding 16%... My guess is this will bounce up to 4-5 later next year but it may ultimately be worthless. Who knows impossible to know but market is writing off too much of optionailty value at $2. It can trade much higher before the bonds come do IMHO
nat gas and oil down 25% from Q3 prices..... UPL has cash flow before expenditures of about $30 million down from $80 million in Q3. They have been spending about $90 million a quarter in capital expenditures. My guess is they will cut expenpditures in half if they can so they don't have to spend more on their revolver. That said they are not really going backwards...They are not bleeding cash or Gap losses even at these prices amazing!!! So if Nat Gas went back to $3.25+ before bonds have to be rolled in 2018 All would be good without dilllution or impairment of the future.