cbd, have a great day. Jumped in yesterday at $35.50, miight get more opp Friday. One scenario is that this was expected and traders could be covering oil. I can't see global oil at $70 longer term. Agree that this could be a good buy opp. We do know that OPEC is not going to be a factor in the future, wonder how that changes the dynamics of price, US costs are the main factor it would seem. Guessing that the cos don't show much downside on Friday, could be temporary, will see.
Thinking more about global deflation. Seems inflation will come from labor costs, commodities, housing which is driven by mortgage rates, food, which seems is energy affected, and health costs, not sure what we do about all of us older folks. Throw in technology which reduces costs across all the sectors, my guess is we don't see inflation pressure for a long time. And would bet technology continues to trump other factors. Maybe Greenspan was at least right about tech although he got most other things wrong.
Looks like the ECB is joining the deflation fight. We could have low global rates for years. Probably end badly but too far off, assets inflate in the process.
Easy answer in energy investing now is to buy the infrastructure cos. They will do well at $80 or $100. Only have to look at the nat gas business, at $4 and it's still going strong. Saw where the Uinta's breakeven is $80 and that's with a $20 diff to WTI, reduce it by $15 and you have a $65 breakeven, which competes with the top tier plays. The e and p s will pay for more pipe.
Investors acted like yesterday was the bottom for this downdraft, not sure it is. Will know in a week or sooner. Not betting on it. Think the Saudis just want to see where the market settles and that could take a while.
If oil stays where it is, in 16 the hedges run out, they pay a 40 cent div and keep production flat again. Sounds like a 4% return to me, when they promised a 5% yield and maybe 8% growth,13% total return. If prices don't recover the whole industry will be cutting capex. Saw an analysis that most of the oil shales require $100+ oil to make a 10% unlevered return. May take a while to test that thesis. Companies are cutting capex but still showing growth with hedged production. Seems 15 could be fairly weak if the Saudis don't cooperate, which today I don't think they will. They are going to bite the bullet to find equilibrium, could get ugly.
No conspiracies here, oil has dropped 30% and they stumbled with their growth plans. The dividend increase is meaningless. No reason to buy over other companies, Apache just announced 8 to 12% production growth next year. Seems it should get a $100k per b value in a $90 oil price scenario, $10 per share minimum. At $80k per barrel $7. Not sure it will snap back as much as others if oil does rebound. At the previous growth of mid to high single digits, $15+. A company can't afford to not execute in this environment. Guess you could collect your div for a while until they get the issues resolved but it seems there are other companies are still growing.
If you want a yield bet in energy with growth buy Chevron, almost a 4% yield now and they have 1.5 mm acres in the Permian, the biggest ownership, 700k in the Marcellus and 600k in the Utica. And a bunch of world class global assets. Wth DNR you get no growth and a 4% yield.
DNR has micro issues as this analyst points out. Not saying it won't be a good buy at some point but to think they got ahead of the curve on reducing capex seems weak. Could end up being a good move but if oil pops back to $90, the production issues are still there. Much better places to get yield and there's no growth now.
"Overall there wasn't much more clarity given [at Analyst Day], whether operationally or financially, and as such the uncertainty at Denbury has increased significantly while the macro remains troublesome as well," analyst Jason Wangler said.
They aren't stupid, they just didn't execute, you seem to forget that production was down this quarter, far from the 8% annual growth they had talked about. This is more than the drop in oil. Doesn't make sense to me to raise the div when prod is flat and prices are down 30%. If oil doesn't recover in 16, then they will basically keep prod flat again and just have enough to cover the div. Imo, they are masking the operations issues with the drop in prices, the departure of two top operations execs is not about commodity prices. Haven't owned DNR is a while but if you believe prices are coming back, I do, DNR will not be at the top of a list of oil co buys. Again, think it was kind of ridiculous raising the div when you rang the alarm on prices and you're not executing. Smacks of desperation on part of CEO, throw investors a bone to give him time to execute. Finance guys in the top job of an e and p are always suspect.
Almost bought tod#$%$y, I'm going to try to w#$%$it out #$%$nother down dr#$%$ft. Suspect OPEC does nothing #$%$nd the he#$%$dlines will not be good, but re#$%$lly don't think #$%$nything they do will h#$%$ve #$%$ long l#$%$sting effect. The $90 price still feels right long term. Should be interesting.
Flipped through the slides, oil drops and they blame the change in strategy on that. Seems they aren't executing. This is good franchise imo but they need a new CEO. Not sure they get out of the hole without a change in leadership. With all of the shale ops, don't see a logical buyer ex maybe LINE and they have there own problems.
Half listened to Charles Biderman on CNBC, Trim Tabs, he monitors flows in the market. His thesis is the market is going higher because there is more money chasing fewer shares, has nothing to do with the economy, qe, profti ratios. A smart guy and there may be something there. Too simplistic for the "smart" money guys to adopt.
Throw in cash taxes and they have $1.70 per share of free cash flow after the $550mm capex, which keeps prod flat. From a value perspective, this seems a good bet at $10. Oil prices in the short term could get uglier.
CS downgrade DNR, target to $16 from $19. They still project nearly $1.1 billion in cash flow, around $3.15 per share, half of it goes to capex and $175mm to the div. Will be interesting to hear what they say about the new "plan", if they have one. Still seems it puts them in play. You can get a 5% yield while you wait and if you think oil has bottomed. I don't see how it stays in the $70s longer term. Still seems the MLP form would be the best for a yield play.