"Most players skate to where the #$%$ is. I skate to where the #$%$ is going to be."
On December 23 PWE?s #$%$ is in a glutted world oil market with prices collapsing below $35 per barrel, no OPEC agreement, Iran preparing to ramp exports, huge tax selling pressure, a downdraft in the stock market and an off-the-charts warm December on the East Coast.
Where is the PWE #$%$ going to be?
-With 70%+ of drilling rigs now idle, North American oil production should fall gradually and then accelerate. While not as steep, the same trend will be repeated in oil producing countries around the world.
-Cut the price of any commodity in half and people use more of it. Per capita gasoline use will ramp? especially in developing countries.
-At some point in 2016 those two supply and demand trends should begin moving global oil prices back toward the average cost of global production. Exactly when, how fast and how far prices rise is unknown, but the long term direction should be up.
A continued near term downdraft in oil prices could drag PWE?s share price lower in the near term. No-one has a crystal ball. When the WTI eventually rebounds above $50, however, it should generate enough positive cash flow for PWE to continue paying down its debt and eventually restore dividends.
At that point PWE shares should be trading above $1.50. As a contrarian investor that is where I believe the #$%$ is going to be.