That's true, but the assets the other people are going to really want are the ones you're aren't selling. If the enterprise value of the company is greater than $11 BN, and it must be since someone loaned them the money, the debt shouldn't be an issue to the right buyer. XOM could buy it out of their cash flows, pay cash; accept they could refinance the debt a lot cheaper than WLL since they have a triple A credit rating.
You think $5.6 BN in debt will bankrupt XOM? If the assets reflect the enterprise value of the company, debt shouldn't be a problem, the companies mentioned as potential acquirers could pay cash.
Apparently you are a knucklehead based on the fact you that you don't haven enough skull power to have a conversation without calling someone a idiot. When you do it reflects on you. I have seen plenty of deals go down just as I suggest and have been involved personally in quite a few and have plenty of money to show for it.
I don't think the company, WLL management, has said a word? Its not on their website. Its media speculation. Do you have a reference from WLL management-like the CEO? If you do I would appreciate it.
Why would guys like Paulson and others make huge money bets on a company like WLL if they thought it was a dog? Follow the money. If Paulson don't have a problem with the debt, neither will XOM.
Probably not much; too small to materially impact earnings of Berkshire, he does big deals. WLL if it's actually sold will be a great fit for someone. Buffet has made plenty of mistakes by the way.
It's all speculation to a point some may have more insight than others. Market is uncertain so the volatility. The certainty of misery is better than the misery of uncertainty. WLL management hasn't said a word and they count.
Companies typically don't respond to rumors, they actually have a fiduciary responsibility to be responsible. The only company that counts right now is WLL management. They haven't responded because…somethings up. WSJ, Bloomberg, info is typically credible because credibility is all they have to offer and they have contacts within most companies, particularly investor relations. They have insight posters don't have.
If you are a strategic buyer, you buy the whole company, remove another decision maker in the market. The pieces theory seldom works. A buyer can by the whole company at their given hurdle rate and sale the pieces themselves if they wanted to.
Mid-fifties or you will see management in stripes. In fact, it would be better for management to let the company go into bankruptcy than take a low ball offer. What you suggest has about zero chance of happening.
Why? As compared to all of XOM's opportunities worldwide WLL's a slam dunk. Proven reserves and in an attractive quantity, a few warts around transportation, but as compared to drilling in the ocean, Russia, the Arctic etc. WLL is easy. You need to think strategically, not the emotion of today's market, but where the market is going to be. That's what XOM will be thinking. I''m just surprised they are interested since WLL is small potatoes in the scheme of things. Mid-fifities for WLL's proven assets is a deal even in today's market. The Arctic is about $120 to $130/BBL.
WLL's assets are only good or bad by comparison. For a strategic buyer like XOM, WLL has promise.
Very insightful response and I really don't have any disagreement with what you are saying. I'm just stepping back and taking a broad brush approach. Buying a company is an investment very similar to say investing capital to build something, other than you already have customers, markets, etc.
Let's say EXXON decides to drill a new oil well or build a new ocean rig platform. They will run financial analysis, cash flow, DCF analysis etc to get a range of potential returns timing of cash flows etc. They accept that it may take 2 or 3 years from the time of investment until the well is producing to get a positive cash flow. Similar to buying WLL , market is tough right now, they may have to curtail production of those assets for a year, may not get a return for a couple of years, but the pay off will eventually meet their hurdle rate. So their DCF/cash flow analysis has 2 or 3 years of 0 or negative cash flows from WLL, but since they are strategic investors they are forecasting the future market not today's market and 3 years from now oil is $75/BBL and we are making lots of money. That's what CEO's get paid for--taking risks. You take more risks to get higher returns.
I agree that debt is important, but the debt paid for current or future income generating assets; hence, enterprise value = equity + debt. I'm just saying that debt want impede a strategic buyer if the returns will be there, the returns may take a while. Debt is just a cost.
Management has fiduciary responsibility not to give the company away. They will never ask what will you give me. They will only approach suitors where WLL has a strategic fit that increases the overall value of the acquiring firm.
Expect you are more right than not; KMI $128 BN enterprise value vs $38 BN. KMI more diversified, but both are great companies, particularly as energy play now. I own both, both for dividends but KMI will likely result in substantial capital gains. SE I can see $6 to $8 bucks through time; it's more a dividend play.
Global warming is likely a fact, but its been a fact since time immortal. Today it has been politicized, and every politician has an easy solution that is a band-aid. The only way to control carbon emissions is population control, other than China no one talks about it because "its in the too hard box". Everything else is a bandaid or extender and I'm not a free radical; just standing a fact.
It's either a sale or an equity issue, pick your poison. Big shareholders, nor creditors will ever allow it to go to $19.75. It's the assets that are important. If a large major looks at his, opportunities around the world and think that WLL has the right return profile they will buy it, the market, the debt is just noise. You think WLL is the only company to have these challenges. I wouldn't worry about anyone else, looks like you're about to take a bath. If you're shorting, maybe an equity issue would work you.
Seriously? Look at the cash flow? All they would need to do is cut the other 50% of capital investment and defer maintenance spending for 6 months, hell paper mills have cut maintenance spending for 20 years. More likely 10% bankruptcy and 60% sale, 30% stay a going concern.
Way too much press not to be under consideration. Management is being pushed by both large shareholders and creditors to sale. No management don't want to sell. It could be that only the CEO, CFO, and the head BOD member are the only people that knows what's going on at this point. That happens more often than not because it protects people from doing something stupid with their stock.
With current oil pricing and their debt level, they only have a few options and selling seems to most prudent; and they will find a buyer. That's just where they are at. Don't like it, but their on audited reports lead you to the same conclusion. They can't impact market price, they can control their volume and cost, that's about it.
Probably want happen, no synergies, a buyer will need some hard synergies (cost reduction, etc), to make it work, none are available to a financial company--typically.
With 100% certainty I can tell you publicly traded companies can't make the books look like anything they want. 1) If that was the case, no one would buy a stock. 2) Personal experience. That's why you have external auditors, etc. Is it possible, sure but the culprits are wearing stripes. A lot of companies have bad quarters, tough markets, and challenges thats what makes stock investing interesting. I could say 50% of the companies are at risk in E&P and I'm not an investment banker or energy banker. But I would say 90% of the companies will thread this needle. The reason I know that is because look at all the other commodity type businesses, they all experience the same at some point.
There are a lot of energy companies that have balance sheets that are a mess---that's opportunity. I'm not sure when WLL's debt is due, but surely since they just closed on a large portion of the debt with Kodiak it isn't due next week? Need to chill until more factual data is available.