Actually the common has a good chance of going up if the dividend were to be suspended, showing that management is willing to take action to firm up liquidity, and Pr are just debt, Pr have no ownership take. It's pretty obvious that they have to do something and asset sales in this market are not the best idea, land prices at a 7 year low and selling production will only compound their cashflow problem
(missed the M above in Permian , grand kids spilled juice on my key board last week) could explain strength among the Permian players today outperform general oil E&PS
You have said you won't buy common only PR, well the saving grace is if they get a rally in price they can issue millions of shares, dilute the hell out of the stock but buy time. The debt market is closed to them, so between asset sales and secondary they might make it to 2017
you trust a companies presentation over unbiased geological research. And even if you could get a 10% Irr at 50$ or 35% at $70 They still are insolvent within 10 months, you are missing the point, the point of all this back and forth is you view the IRR as if the company was debt free, deploying it's own capital, it's not, over 800 million in debt. To pay your dividends on PR requires cashflow, and means each dollar deployed has to generate IRR well above 65% because of the low production base this company has vs. interesting servicing. Do you know how long it takes a well to payout at a IRR of 10%, 30% 50%....if not dig and learn so you can model how they intend to survive to fund themselves in q4 2015
Do the math if you produce 5000/ oil, day or 1825000 barrels a year. debt servicing is 80 million a year divide them= $43.83 of interest servicing on each barrel produced so if your all in cost is 50, drilling everything accept the debt carrying cost you need a oil price of 93.83 just to keep the doors open and the banks from taking the company. But wells decline so if you don't spend money and drill, next year fewer barrels to cover that fixed expense, so if need to spend 50 million to keep that 5000 bpd of oil flat then what price do you have to sell your oil to maintain flat production, pay all your cost.....do the math it adds another 27.40 of cost to each flowing barrel at 5000/bpd......so a company with production of 5000bpd, debt servicing of 80million a year, break even at $50 per barrel, and 50million of maint cap to sustain flat production profile must sell its oil for $121.23 to survive and live within cashflow, and don't forget the debt comes due like gdps in 2017then what....are you starting to understand your error? Can help you anymore then I have. you think the dividend is safe, think again, it's the first to go, in BK PR get usually nothing.
There is EVERY need to eliminate the PR dividends and escrow it to ensure solvency in 2016....You should write fiction, CAN ANYONE produce as report that states the TMS is profitable at $50....NO that is a lie, you are lying to the board, stop it, it's childish, google oil production break evens in us shale.
"Break-even points for US Shale" The Grid, Blommberg.
Wood Mackenzie -$72-$80, even with service cost down 10-20% the needle moves a few dollars and that's just to breakeven, then interest servicing, PR dividends, Mait caps
And to say someone would buy the EFS in this environment is equally silly, the current strip produces a negative return, it doesn't matter how much they spent on it already why oil is 53$ a barrel and 2 years out it's below 65$, you can't buy it here and hedge out he future production at a profit. AS well no cap it being spent to keep that Production stable or flat it's in terminal decline and will go from 2000 beo a day to 1200-1300 by year end 2015.....How about you are not allowing to post unless you can provide facts backed by sources another then your gut and "well the guy has his name on the shingle so buy buy buy"
They should cancel dividend, sell what they can, prepare for the put option on the 2017 debt and if they survive start buying back the Pr for pennies on the dollar in 2018-2019 to begin restoring shareholder value.
still doesn't make the concerns any less valid though, they should cancel the Pr dividends to conserve cash and ensure more time for the the common holders...
Have you looked at NFX debt and interest servicing cost and negative cashflow...I'm interested in businesses that can not only survive but grow and thrive in a $75 oil price, NFX respectfully can not
I'd like to add a few points as well Reserve/Production ratio based on 2014 +30 years, years of drilling inventory at 100well a years and 500million cap ex= 20 years, debt per proved reserve Boe =2.58 debt to MCFE = .43 cents.....These all incredible stats, and all acreage is in the stacked Permian Basin ....Now at year end 2014 they should add net 25-30 million barrels to reserves and throughout 2015 increase production by 10-15% with one rig running and by q4 be self funding and have a vast inventory of mature wells whose b factors has stabilized, meaning low decline rate providing a steady baseline production and cashflow. With oil at 75-80$ easily worth $35 a share..... to be self funding will compound the value as debt which in minimal is retired and reserves, production are add free from leverage. I would expect they will be acquired or management will be growing the land base, buying from highly leveraged players who are distressed.
Sentiment: Strong Buy
plus all of SDRL customers are slashing cap ex. not positive for them. And their captial structure is very complex and being a foreign company not subject to US laws
I wouldn't go with sdrl, the economics for deep water are more challenged then shale oil. I'd focus on USa producers in great basins with excellent balance sheets. AREX, BBG, are the only two E&P's i hold outside of MLPS and both have extremely low debt and will grow production next year. I hold as far as MLPS, MEP is an excellent midstream, just raises distribution and has ENbridge as the parent for drop-downs. For the current price each of them are worth a look.
Sentiment: Strong Buy
have a look at BBG and AREX, both have super solid balance sheets and will be growing production in the low double digits in 2015. You won't loose sleep worrying about solvency.
A few more facts to consider in your investment thesis. Debt per proved (Boe) reserves = $20.1, Debt per mcfe = $3.35 Debt per flowing barrel (boe) $91000, I'd be asking if they are not self funding and have to borrow to keep production flat and growing at what price for oil and gas, production level and leverage is required to start reversing to trend? As is every barrel of additional production increase these numbers because they borrow to fund ops... Anyone care to answer? is it $70 / 15000 bpd / 1.1 billion or $120 / 25000bpd / 2.4 billion assuming a 35/65% NG/OIL
Right here son, Man you are emotional, not the best way to approach investing, you want to claim victory over a one day move. great go ahead, but the long funding problem still exists, and until oil trades above 90$ restructuring is a high probability in 2016. Your selective memory is very entertaining, the reality is GDP is still down 20% for the year where a vast majority of energy stocks are flat to positive. regardless that's all short term trading, the facts are clear and posted about their debt and what oil and NG price is nessessary to support it's capital structure...it seems to me you and your pal clearly want to ignore them. Your choice your money, I don't care if you make and lose it, I'm concerned with the truth, the financials don't lie, regardless how many times someone post "very profitable at 70$ oil" It is clearly untrue, concretely. Plus i didn't bring it up before, there debt will grow by approx 100 million in 2015 adding another 6-8 million in servicing cost. All or lose everything strategy is a gambles approach.
It was a great day in the market, i'm happy, everything I own up across the board.
Jagen, Smither.....Have you ever worked in the oil industry or commercial banking.....That's the only rational reason GDP is down today?! The lack of volume in the PR doesn't support your thesis..... Come on, look at the numbers, (income stmt, cashflow stmt, balance sheet, )they can't survival past 2016 without oil in the low 100's Plus none of their NG production is profitable currently and the forward strip on NG only produces a low single digit margin if that. Instead of making these grand assumptions that its the shorts, or people buying the PR or the Easter bunny... how about looking at the debt structure and negative cashflow....The senior debt is trading at .40cents today... I did you a favor posting the numbers based on the facts and even suggested other places in the oil sector, the MLPS all up 8-17% today, BBG up 8%.....since my suggestion you would have banked a 30% return in 2 weeks plus 15% a year in income that is secured by hedging into 2016-2017. your money, good luck if anyone else wants advice backed by actually facts not hopefully fiction feel free to ask. "Some men just can't be reached." How'd that work out for Cool Hand Luke?,
good luck, you are obviously insane. no one is shorting you can't under 5$ and no stock is available. And again where are your numbers to support your bull case? Nowhere. You put your salt in management who have lead this company to a 93% decline...