Won't there likely be impairment charges that will drastically reduce book value? I see book value as irrelevant…what matters here is whether they generate enough cash to meet all operating expenses and interest obligations without #$%$ through what they already have in the coffers.
I agree and will take it a step further. Any company that pays a dividend should be current with its trade vendors. I do business with automotive companies that line the pockets of management with billions of dollars per year in dividends, but magically they are too cash poor to stay within generous Net 60 payment terms.
The problem with dividends is that a large percentage of dividends are paid to the very insiders and institutions who are charged with determining whether the dividend is an appropriate expenditure versus the other options you listed.
Sorry tool you just can't file a petition to shed debt and eliminate shareholders without proof of a clear cut need to do so…such as lack of liquidity and access to capital.
Well since you seem to be the resident know-it-all, in your so omnipotent opinion, what impending event causes SD to file bankruptcy?
Then when their hedges expire and they are subject to the market price, they should cease all drilling, store some oil for immediate cash flow when prices recover, lay off all non-essential admin, sell assets to service or pay off debt, and ride it out until prices recover.
By virtue of the fact that there exists a cartel that can manipulate oil prices at will, and most of the cartel members have far lower production costs than non-cartel members, there is no free market as it pertains to oil.
All IMO - but I suffered through this before.
1. Load up on debt when asset prices are high and drilling is profitable
2. Commodity prices tumble leading to asset impairments - book value tumbles
3. Asset impairments lead to debt covenant violations
4. Maybe a deal with vultures to delay the inevitable, maybe straight to BK
5. Stock wiped out
6. Debt holders end up with assets
7. Management gets to keep their jobs as a "thank you" from debt holders
It's not the debt service that will cause major problems, it will be the hit to book value taken when unprofitable fields are written down (impaired). Whether or not it is resolved will depend on how hard of a stance the debt holders take, how soon commodity prices are forecasted to rise, and/or SD can convince deeper pockets to scoop them up prior to #4-6 occur.
Never trust what a hedge fund is doing. Since they operate in secret with no reporting requirements, they can just as easily take a huge naked short position to offset their long position. Basically they have learned that if they have the financial resources, they can manifest their own desired outcome by dumping money in one direction or the other. So TPG and Coop may tout their long positions in SD but there is no way to know if they don't have a huge short position too…especially those bogwans at TPG.
Bondholders will short the common into the ground in an effort to trigger debt covenant violations and eliminate the possibility of ever doing a secondary at decent prices. The goal is to end up with the assets. When they see no recourse, big shareholders andy management will play along and sell into the spiral to save their skins and get a sliver of the new pie. The only thing to save it is a buyout by someone who sees the end game and wants the assets bad enough to thwart the final plan. See GMXR for the template. They had billions in assets virtually stolen by WS vultures with full complicity of management.
Yeah I bet the investors who bought at the $30-65 range in 2007-2008 after the IPO were really excited about that move from $4 to $15.
SD is down 80% from its high from 7.43 to 1.50. Now if we were to go up 80% from the low it would hit a whopping $2.70…woo hoo! In my opinion that is why short selling should be more tightly regulated…in this day of media induced panic and robot trading, it's much easier to destroy someone's wealth than it is for them to create it. If someone bought this stock at $5 when the analysts were pumping it, they're down 64% and they need a 177% gain to get back to even. So for a drop that took a few months it could take years to recoup.
The average American driver buys 500 gallons of gas per year, so with gas prices headed down it will put $250-500 in their pocket…big deal enough for an iPhone or a cheap flat screen. Meanwhile, the most important growing industry in our country and the underpinning of the recovery since 2009, domestic energy exploration, goes dormant while the Arabs get richer. You tell me what's more important in the big picture...
Are rats jumping from the ship before something really ugly is disclosed?
Given their liquidity position, hedges, and impending spin off of the water unit, these lower oil prices won't even be an issue until 2016. So unless there is material information that has leaked, all of this talk about BK is BS.
Maybe some of these hedge funds claiming to be long-term believers in SD have huge naked short positions and the only was they could cash in was to take control and drive it into the ground. Perhaps they were scared TW would eventually succeed in growing SD despite his extravagances and they took advantage of his egomaniacal tendencies to wrestle the company away and save their short positions. Seems awful quiet on the management front as the share price dwindles, the lawsuits come in, and the misinformation gets spread.