"When" you have to deal the the current and the EFS asset is already incumbered tot eh senior secured debt so any sale the cash would be automatically go to senior secure debt and would decrease production, borrowing base and create greater insolvency. You really have to look at the structure of the debt and understand what senior secured means. The only possible ways to survive longer are a total sale of company or issue 100million shares, or a large jv for tms but the current irr are not that attractive and they would have to give up a lot of the upside.
be realistic, let me simplify it: current annual run rate of rev is 100$ million at best. interest servicing and pr interest totals 80 million annually leaving 20 million to cover all cost, drilling, leasing, taxes, corp expense, there isn't enough left over to cover basic ops cost let allow to maintain and grow production. It's over for the common and pr stock
or people are getting out ahead of restructuring, having read the 10k they as many have easily deduced at the current strip pricing GDP will be insolvent shortly. simple answer
from early when new 100million in debt was taken on, completely levering all assets. if you do the simple math the new debt of 100million at 8% spread over 6000bod (5k oil 5k Ng) = $3.65 add to the cost of each flowing barrel. to achieve cashflow neutral. or total added to each barrel over year just from interest servicing cost = $90million / 2.19 million barrels produced in2015 = $41.09 of interest expense per flowing barrel, so what price do they need to be solvent in 2016?
add in the corp cost, taxes, interest, break even = above 100$ a barrel to not be in bk in the next 6-8 months
You are way off! Completely!!! please look at the interest servicing cost per barrel and ops cost, they need above a 100$ a barrel to make 1$ of positive cashflow. They are approaching insolvency in the next 6-8 months. There is a reason the PR trade at 16cebt to 30cent on the dollar and the debt is at less then 40cent on the dollar. Pr is more then 7 million a q. God it floors me how under-educated you are. break-even is not 50-60$ that is a unleveled number that excluded corp expense and interest on debt and assumes a lls prem to wti.....
Sentiment: Strong Sell
it is obvious now new 52 low and the PR that now trade on the open market are down 15%
i'd being doing you a disservice by giving you a quick yes or no. generally With bonds as with the stock of a company, it's the fundamentals underneath that are important. With bonds, due to the illiquid markets they can be harder to exit should things turn against you.... Look at quality of reserves, PDP, cashflow, maint cap ex to keep production flat, apply the price desk.....65, 70 75$ what ever you believe is the long term price for oil/Ng and see if they can sustain the bond payments as well if the bonds have a put option that are senior to the one you want to buy.....Me personally I'd rather buy mlps or convertible PR, or convertible debt....plus with bonds sometimes a negative for a stock is a positive for the bonds and PR, like if a company dilutes the hell out of the common stock it erodes the NAV but increases the cash liquidity and ability to service debt, good for PR and debt...good luck. I own PVA so I obviously feel it will survive and thrive but don't take my word for it, dig, crunch some numbers.
as well I would add pwe and pva to the list. If I were a holder of gdp I'd sell it and buy PWE and/ , or PVA with pwe you get a nav of 12-14$ a share plus a 2% dividend and trades at 1.84 and pva has the potential to triple and most importantly both can survive at least the next 2 years in a sub $70 oil price where as gdp will be gone. say you have 10k gdp sell and put 11k in each one. they both have risk but again will be around a lot longer then gdp
I disagree, they are doing what any would do in that position. they will and produce as much as they can to get ride of the highest tier and costly production. In the end oil will rise to a level where everyone can make money but those who levered too much will be out. long term we will have a 80-100$ barrel. Why should they cut production so companies can fill they gap with there expensive oil like gdp who all cost in, including interest servicing is well above $120/ barrel to turn one dollar of positive cashflow? please keep your racist remarks off the board. Money doesn't care about religion, race or creed. suck it up and accept you make a bad investment.
I've been looking at the mlp space mid-stream and up....now there is still risk but due to low decline rates and longer dated hedges inherit in that sector i like it better then most of the e&p space. Plus the income is nice....basicly i look for buying reserves for a steep discount on a long term $75 oil and $3.5 gas and large land positions in low cost basins that are hbp'd already. Ugly ducks that will fly in the next 2-4 years. mid stream is different, pipelines that service the low cost basins where production will continue in the above price environment. and again at a discount to NAV. Frack sand as long as it's low cost white sand they produce, balance sheet strong too... jpep, mep, vnr, hclp, ocir (Soda ash)....I have 10 others but those positions I am still building so I'll let you know them after the positions are filled, don't want any cost inflation.....but scale in, say 100k 25k now, 25 k in 3 months, etc etc.....one PR i have is SDRXP yields 30% pays dividend in stock, but i bought it 9 pts lower. high risk, small position, there the SD common is ugly but I figure on a reverse split and recap of company with some asset sales, which is good for the PR (remember it's a form of debt) and the par is 100$ a share about $32 today. Don't bet the farm and again i got it 9pts lower. Mostly I am waiting for the next wave of bk and restructuring to hit, hk, gdp, mhr, mpo, etc over the next year a few notable BK's will devalue the sector further creating great opportunities for the wise investor, some will reverse split and recap like eox others will dilute like bbep and nslp with costly PR's, other will be gone.
Sentiment: Strong Sell
they had to sell it to free up liquidity and they didn't have the cash to support the pipelines expansion. this way focus on core business and buy assets where they control pace of development unlike the UOE
Hard to say, in BK if they can't cut a deal with bond holds, the first lien i mean, a forced liquidation of assets would follow and because land prices are so low and almost all their production is unprofitable unhedged or in the low IRR sub 15% the unsecured will be challenged to be made whole. Of coarse the common and PR will be gone 0 equity. Honestly, as far as the debt markets there are many other opportunity to invest in energy where the risk of losing everything doesn't exist, lots of PR and unsecured debt that has par upside and a good interest rate
Sentiment: Strong Sell
Told you so TRADERNOR, RCHITES, new 52 wk low, rig count continue to fall as well as LNG pricing and service fee rev.....I'm the lia?!r....huh....facts prove different as does the 10k. EVERYTHING I STATED HAS COME TO PASS. Are you ready to eat your slice of humble pie and admit it was you who was the liar. Admit it. Clear your conscience son. I forgive you.
Company will be restructured by then. Look at the capital structure it can't survive even at 80$ oil
I agree, the PR shares will fall next and hard once dividend is eliminated. The PR don't trade in a vacuum, their value is a direct relatiion to the common which is directly related to the companies business...it's really a shame that people still try to pump and hoodwink folks into buying the PR, saying oh it's safe, 300% upside....whay BS....read the 10k.....so anyway ikepriv I completely agree with your assessment