Big drop in production next year, starting this quarter which will be back under Q3 of 2011. Our growth stock had one quarter of growth.
In 2014 USEG spent 30 million of drilling apex to help grow the company. After that investment the market cap of the company is at 40 million and falling, and production and cash flow are falling. As cash flow falls it takes more and more of our oil profits to cover ongoing costs at the Moly Mine.
We do have a new COO, and we think he holds the reins.
If the hedges default that would affect more companies than HK. The whole purpose of hedges is to protect against unexpected drops in price of oil. If the counterparties default, you are talking about another financial crisis.
That is the number of daily barrels that HK has hedged at $87.29 for the entire year of 2015. I really don't see how they can get in any trouble with covenants through next year.
As mentioned continental resources indicated the will lit activity away from Bakken toward SCOOP. But that really doesn't affect the contracts to move oil from Colt hub to west coast refineries and east coast refineries (70/30 split)
They will get an extra 300-400 million in cash flow in Q1 selling Deep Panuke Cash into Boston for over $10. That won't last for very long (at most 1-2 years) but it will come in handy this year. They also have a lot of carried capital in Montney and Duvernay for the next couple of years. Things are not dire with ECA by any means.
I am a believer. I like Encana. Oil is cyclical. Always feels at the top like it will never go down. Always feels at the bottom like it will never go up. But that is not how it works. I am sorry they don't have more 2015 hedges - just the 12,000 barrels that Athlon had hedged. They probably did't want to layer in more hedges at $75 because they thought oil price would go back up. Mistake for sure. But hard call at the time. Hedges are easy looking back. One could be perfect.
Encana is fine. Oil sector is not. They have 6 billion in cash. DPTR had operations problems in three areas - most importantly in paradox basin. Encana is great operator.
You are kidding arn't you, when toy ask if this is a quick beating, or if the beating has legs. Seems to me we have been pummelled for a long time, brutally.
Either that or zero. Or maybe even a real big negative if they retain the water treatment obligations in perpetuity and are never able to monetized the asset.
Good point that counter parties to the hedges face some gigantic losses. Who loses there. Meanwhile HK in pretty good shape to ride this out. Only 6 rigs for 2015 (3 Bakken and 3 eagleford) . That will GROW production 20 percent. Plus they have great hedges on 30k barrels, assuring good cash flow all year. They are drilling NOTHING in TMS next year and have booked ZERO Reserves on the TMS, so nothing to write down there no matter how low oil prices go.
You can pick out winning and losing trades from the hedging department all you want. But the have earned 9 billion over the last 8 years, substantially more than the ATHL total price tag.
It would cost several hundred million to get the mine to production. USEG doesn't have that, and certainly couldn't borrow it or get it by issuing shares in equity market.