I don't think DNR gets much lower than what we've seen, will probably cut the div, that would knock it back and $30s oil would probably put in new lows for everything. Or we may not see $30s, the 150kb/d decline last week seems a big deal, if we can put a few more of those together. Oil probably stabilizes mid next year. Linn has fairly good assets, they have a bunch of gas, their recovery could take longer than DNR's. Linn is well managed and has good assets.. If DNR goes to $3 and is $15 in three years, you won't care if you paid $4.
What has he done? Seems decisions were bean counter type, buying back stock in the high teens and setting out on a yield course. Doesn't work for an e and p company. Most of the MLPs will disappear. They should be cutting it right now and defending the balance sheet.
Probably a chance to cash out before another air pocket, $30 oil if it comes in a few months won't be pretty. The dist won't last. Should start seeing more bk's and the year end reserve valuations could be brutal.
DNR should cut their div but bet at the moment that they don't, a quarter is not the big a deal. All of the MLPs will elim the distribution before we get through this. And would give cover to DNR to do it. At least it's three months away. Kind of think the CEO is clueless but the assets may prevail.
All of the MLPs will eliminate dist before we get through this cycle. ARP probably keeps theirs longer because Eddie needs the cash at ATLS. But it's coming.
Listened to B Sternlicht sp? on CNBC, somewhat arrogant, but worth listening too, real estate investor. Said the obvious, the keys are interest rates, the discount rate for investments and the dollar. Rates going up will lower valuations and the dollar continuing to appreciate, not good for oil price. I don't think rates get away from us for next several years, maybe 3% 10 yr and oil recovers to $90 over that time frame. But the short term makes committing hard for most. Still don't think the shale revolution is over yet, and the infrastructure cos are an easier bet. But the e and p s could double but $30 in the next couple of months keeps most money on the sidelines. And we have the prospect of the high flying momentums coming back to earth, I don't even to pretend I understand them. But you can't ignore that the whole population has their face stuck on their mobile phones.
cbd, I did see anything that was concerning in the announcement. Impressive projection of $2.6mm well costs next year from $4.5mm last year. Those reductions only work if prices don't recover. Also, $200mm of capex to keep vols level with the long lateral wells, that's impressive. Mention of sale of North Park, helps liquidity.
John KIlduff on CNBC this a m, talking about $30 oil year end. Although he couldn't explain the 150kb/d drop in lower 48 prod in EIA nos yesterday, that's a material no and wouldn't take many weeks to bring vols down. BCEI $1.2 billion EV/30kb/d, $40k per daily flowing barrel. That seem way too low. And they could sell Arkansas. Still seems a great value. Trying to figure out how to buy more before the year end. A $30s oil price would have to have an impact on e and p stock prices, more bankruptcies.
Jerry, Kilduff's latest call, at least for me, on CNBC this a m, calls for $30s by year end. Although he seemed surprised at the 150kb/d drop in lower 48 prod yesterday, said it could be a mistake. That's a big weekly no drop if correct. The dilemma, looks like volumes will correct into next year, short term, storage could crush price in the short term. As a long term investor, what to do. I don't see how stock prices hold up with a $30s price tag even if everyone knows its coming.
I stand corrected, proved developed 11 to 12% oil. The point is the same, this is a gas co with third tier assets and not enough oil to pull it out imo. Run the numbers at $75 in 17 and $3 gas.
What will the talking heads talk about after the Fed raises rates. No one is venturing to say where long rates settle, some indicator saw today was at 3%. There is no inflation at the moment, commodities are way down, noticed Peabody cut div, probably ends up bankrupt. Nat gas stays at $3 forever. Most of the e and p MLPs disappear. The world is deleveraging as Rogoff and Rinehart forecast. Wonder what Peter is up to, if I recall he had invested in taxi medallions, did seems a good bet, but with Uber, probably can't give them away at the moment. The NYSE, we saw now has 50 or whatever competing venues, who needs them and a seat on the exchange was a valuable asset at one point. Probably going to take a few more years to delever. Oil is not going back to $100 for a few years. It will eventually but only when everyone thinks it can't. Technology is lowering costs everywhere. Still seems you find a few companies where the macro is positive and the micro is solid and stick with them. Not a revelation but stocks are still the best alternative to fixed income. The Fed last raised rates in 06 if I remember correctly. Kind of like Greece, will probably be more of a media event than a real risk when it happens. Buy DNR and forget about it for three years.
BN, Sorry to hear about your eyes. I had a detached retina a couple of years ago, it's ok now, kinda, but do appreciate the gift of vision. Sounds like you are a good investor, long term which is the only way IMO. When you buy things like energy is IMO probably more important that what you buy. I don't think the shale boom is over yet but it's in the later innings. Your purchase at $3.72, I would venture to say that you will be very pleased with it a few years from now.
Just a matter of who and at what price. ETE at a one for one, near $60 or PSX at .9 shares $65 plus. Either would be a great combination, kind of think Warren would be the better CEO. Don't think I've seen Dominion mentioned?
Looked at DNR started trading in 95 in the $1.60 range and it's $3.75 now. That's remarkable, don't know the other metrics but at $5 billion EV, seems a very cheap asset.
I always stayed away from OXY because of mgt, Irani was making $100mm a year or some ridiculous amount, hangover from the Hammer days. They don't seem to be really visionary but they have great assets, almost 2.5mm acres in the Permian. They could do a lot with chemicals, midstream with MLPs. Almost no debt. If I was going to buy one e and p today, it would be DNR, just don't see how you lose except if oil is mired at $50s for several years. And the CEO would look stupid if he cut the div now.
I wouldn't sell OXY, it could be a target for some one. CRC, great asset but California, think I would pass on it today. Seems OXY could buy DNR, don't think they would, capex going into the Permian. See ME, SA assets and buy DNR, that would be a good trade. At some point the CA assets are going to be valuable.
Today, I think I would buy DNR, I like the 6.5% yield which I think may survive, would be hard for the CEO to change course at this point. And I would buy OXY. I like CRC, massive potential but it is in California, as Birdog said, it might as well be Nigeria, or Russia. Or you buy all three. DNR and CRC could triple with an $80 stock price. OXY would double. The OXY div is safe, they have very little debt and could sell PAGP and the CRC stake and almost eliminate all of debt. With OXY you get EOR, Permian shale and some global, ME and Columbia. DNR mgt is questionable but the value seems compelling if you believe in higher oil, I do. Today, I'm really neg on nat gas, I don't think it could get out of $3 range for years. DNR is 95% oil.
Looked at OXY pres, they call their EOR business their most profitable, looks like costs are comp to DNR low to mid $20s operating costs. And they seem bent on maintaining their div, you can make 6.5% while you wait for oil to recover. $68k/flowing barrel. Debt is high but maturities are few years away. DNR at $3.80 seems a good bet. OXY at 4% yield, probably not the upside but the largest producer in the Permian, shales and EOR. ME exposure. Chemicals exposure as well as export opportunities. Owns part 12% of PAGP and 20% of CRC, which has to be divested. Seems both for different reasons would be good bets for oil recovery. Seems DNR should be on somone's radar, unique asset.