Is HP going under $50 during the first half of 2015?
Is $50 a good buy point, assuming it gets that low?
Is HP a drilling survivor in this niche?
I can see low oil prices throughout some/much/all of 2015. However, by sometime during 2016 oil prices will likely be north of $80, and could be a lot higher.
buckeye, I haven't been following CRY as of late. One of your overall updates would be appreciated. My gut tells me the only really big play CRY has going is PerClot, and I have no way of knowing how this intersects with BCR's patent. I'm glad to see new management coming in. I hope SA let's the new CEO really start to run the company. The real question in my mind is not earnings for this year, or next; but, whether CRY can pull off a major product like PerClot.
We are assigning an Underperform Rating to the common stock and establishing a one-year price target of $5.00. We are assigning SELL ratings to select senior notes…While Peabody has a stellar reputation and a strong management team, in our view, its shares and senior notes likely will remain under pressure from rising leverage and instability in global coal markets. The shares currently are valued at about 12.4x EV/EBITDA, and could rise to 14.0x if coking coal were to settle at $110/t in the short-term, near where current spot prices are indicated. Our Underperform rating factors in a view that coking coal could settle in the $140-150/t range long-term and the shares should trade at 6.0x-7.0x normalized EBITDA. Our SELL rating on the senior notes is a function of high 7.4x net leverage that could rise to 8.4x with a similar short-term drop in coking coal, also causing free cash flow to turn negative, which would necessitate using revolver capacity or secured debt to cover pending maturities. We are most negative on longer-dated notes the market will realize would be layered with secured debt over time. Like more distressed coal producers (Walter Energy, Alpha Natural Resources, Arch Coal), Peabody’s troubles stem from the debt-financed acquisition of coking coal assets in the 2011 time period when it issued $4bn of debt to purchase Macarthur Coal.
Yes, $30 after a 2:1 reverse split. Why not make it a $60 stock after a 4:1 reverse split?
Coal prices are lower this week than last week. Volumes are likely the same as last week. Hence, cash flow is likely flat to down this week. Natural gas is presently $3.81 per Mcf, meaning that coal's share of the market in the USA is likely to continue to shrink. This stock will fall below $10 before it sees $30. Wait and buy lower. Perhaps BTU is the best horse at the glue factory, but it's still at the glue factory.
Also, the Fed just dropped its asset purchases to $25 billion per month. Next month will be the first time since they started their tapper that asset purchase amounts of $300 billion annualized ($25 times 12 - $300) drops below the projected deficit of around $450 billion. This means that next month, August, will be the the first month that Fed policy is mildly contractionary. Through July, their policy has been expansionary. Of course one never knows what they are doing non transparently. After stopping the previous QE's the markets softened. If they tapper down to zero, why would markets head south again.
Utilities in the U.S. are scrambling for coal, on pace to increase imports 26 percent this year, as railroad bottlenecks slow deliveries and electricity demand climbs with an improving economy. Russia, the world’s third-largest exporter of the fuel, will boost shipments 3.9 percent to 106 million metric tons this year, IHS Energy forecasts, part of President Vladimir Putin’s plan to expand Russia’s role in the global coal market.
“Everyone’s aware that a number of plants have low stockpiles, so you hear Russian coal and they say, ‘Oh wow, people must really be desperate,’” James Stevenson, Houston-based director of North American coal at IHS, said in a July 8 telephone interview.
The Russian fuel appeals to power producers because it emits less sulfur than other coals, making it easier to comply with environmental rules, and has a high heat content, meaning it can produce more power per measure of fuel, Stevenson said.
“If you are on the Atlantic Coast, you have a chance to buy imported coal,” Stevenson said. “If you’re a utility you have to act now and throughout the second half of the year in case there’s a colder winter than last year.”
I agree with poorhouse that this was a positive change. I'm guessing Jon Salveson played a role in this happening. I suspect one thing could become a problem though. SA is a 100% control freak, like a total control freak. The company is his baby and his life. Can he REALLY step back and let Pat Mackin (PM) take control? I don't know, but this will be an interesting dynamic to watch as we go forward in time. If SA and PM can in fact work well together, they would be a powerful force. Also, it had always appeared to me that DAL was perhaps being groomed for the CEO role, so I wonder how that will play out. Since DAL is more a finance person, the selection of PM was a good one in my opinion. Another plus is that prior to this it was my view that CRY's relationship with MDT was probably very poor, because of SA's personality..just my opinion obviously. Now though, CRY's relationship with MDT is likely a good one. The odds of a buy-out just went up. Probably not right away, but a year or two out CRY may well have some attractive buy-out characteristics. I think too that this just made the buckeye 3-5 game plan even better.
Conclusion: Definitely a positive development. If SA and PM can work well together, then this will likely prove to be super positive. Also, it was time for new blood to evaluate CRY's product line and start making needed changes. Simply put, it was just time for some fresh blood at CRY.
Presently there is way to much capacity, so prices are in the tank. Global growth is slow, and perhaps slowing, so volumes are not going to increase any time soon. Nattie gas price at Henry Hub is at the very low price of $4.22/Mcf. This makes it hard for coal to effectively compete in the US. Coal exporting capacity on the west coast is still limited. BTU did extend their debt payment schedule, so they have some breathing room for the moment. However, for another 6-18 months coal is not likely to do well. While I'm long a few shares, I would not be a serious BTU buyer above $12/share. It may even hit single digits before sufficient coal capacity is taken off line. Also, if the Fed is tapering $35B per month and sounding like they are going to taper to zero, interest rates may bump up and growth slow even further. If on the other hand they quit tapering, then they are admitting the economy is not growing very much and that is bad for coal volumes. No reason to buy BTU to buy anytime soon at the current price. If you ant to read an interesting reflective blog on energy and the economy google "our finite world". Just my simple opinion.
Google Gail Tverberg and read her blog. She projects global energy usage usage will peak in 2015 at around 12.5 Mtoe's and then decay exponentially to around 2.5 Mtoe's by 2035. In other words she is saying energy usage will fall by an estimated 80% over the next 21 years. Should this happen, the global economy would be destroyed as we know it. Don't blow off these estimates lightly, because she makes a strong case that energy will fall this much because as energy, particularly crude oil, prices get too high people can't afford the high price. Without the high price the producers can't afford to keep going after the cheap oil. This results in recession/depression and the system continues to implode. This is an excellent blog. The title of the blog is "Our Finite World". She argues that if crude oil prices collapse because of financial reasons, other energy prices like coal will collapse too.
Civilization it not natural. It has to be continuously fed with energy, resources (physical and human), and needs a moral structure and probably a legal structure as well.
I think she makes quite compelling arguments for her positions.
A great video on how math, energy, economics, and the environment work together is one by Chris Martenson. Google "Martenson the next 20 years". A zerohedge link will show up and the video is contained in that link.
Enjoy, or perhaps panic.
Coal prices are the big reason BTU's stock price is down.
CAPP $60.70 per ton down $1.88 per ton WoW
NAPP $65.50 per ton down $2.67 per ton WoW
ILL Basin $46.00 per ton down $0.02 per ton WoW
PRB $13.00 per ton down $0.02 per ton WoW
Unita $36.75 per ton up $0.02 per ton WoW
There are roughly $380,000,000 in these debentures outstanding. At $2.50 per $1,000, the penalty payment would be roughly $950,000 (if every bond holders accepts), so it would seem anyway. Within the scope of all the debt BTU is juggling, $950,000 is simply NOT A BIG DEAL. Accordingly, this is nothing more than a tiny tiny momentary distraction issue. BTU's far bigger long term problem is pricing. Powder River coal is somewhat land locked (because of the lack of west coast exporting facilities) and is currently priced too low as well. Met coal is at terribly low prices globally. ACI, ANR, and others are going to be able to stay in the coal game for a long time. Natural gas at $4.55/Mcf is seriously hurting coal prices too. Perhaps if one steps out 2-3 years, domestic natural gas prices will move up to the $8+/Mcf range. This may happen, because all the natural gas export talk is not about helping the good old USA, but instead all about international price arbitrage so that producers can get the higher international price ($12/Mcf Europe and $16/Mcf Japan). Because about 25% of natural gas is lost in production/transit, the USA price would likely be about 70%/75% of the European price (ball park $8-$9/Mcf). Also, it is clearly possible, perhaps even likely, that there will be another recession somewhere (globally, Europe, USA, Japan, etc.). If there is another recession in the cards over the next 3 years, prices may even move down from here.
BTU has done a nice job of pushing out their debt structure. Debt structure through Sept. 2020 is shown below:
Nov. 2016 - $650,000,000
Nov. 2018 - $1,518,000,000
Sept. 2020 - $650,000,000
IF, and that is a BIG "IF", coal prices were to move up materially from here (say by 20% or more), BTU would have a lot of leverage to the upside. I think there is plenty of time yet before it is worth buying BTU, but BTU's price will probably start moving up before better price becomes apparent to little investors like me.
ST. LOUIS, May 28, 2014 /PRNewswire/ -- Peabody Energy Corporation today announced that it has begun to solicit consents from holders of its 4.75% Convertible Junior Subordinated Debentures due 2066 (the "convertible debentures") to amend the related indenture. Details regarding the proposed amendments are contained in a Current Report on Form 8-K filed today with the SEC. To adopt the proposed amendments, Peabody must obtain consents from holders of a majority in aggregate principal amount of the outstanding convertible debentures, excluding any convertible debentures owned by Peabody or any of its affiliates.
Holders of the convertible debentures who validly consent to the proposed amendments on or prior to 5:00 p.m., New York City time, on June 10, 2014 (such date and time, as they may be extended, the "expiration time"), will be eligible to receive a consent fee of $2.50 per $1,000 principal amount of convertible debentures for which consents are received (and not validly revoked) on or prior to the expiration time. Peabody's acceptance of consents and payment of the related consent fee is conditioned upon, among other things, the receipt of sufficient consents to adopt the proposed amendments on or prior to the expiration time.
The consent solicitation is subject to the terms and conditions set forth in the Consent Solicitation Statement dated May 28, 2014, which is being distributed to holders of the convertible debentures. Holders are urged to read the Consent Solicitation Statement carefully. Persons with questions regarding the consent solicitation should contact the solicitation agent, Morgan Stanley & Co. LLC, at (855) 483-0952. Requests for copies of the Consent Solicitation Statement and the related Consent Letter should be directed to the Tabulation and Information Agent, Global Bondholder Services Corporation, at (212) 430-3774 (collect) or toll-free at (866) 924-2200.