Oil is very unstable as February futures contracts were closing yesterday and rolling over for March today. It is the big battle for direction now. We may see more clarity by the end of the day.
CEO should buy 7 figures at these prices personally, and I mean shares, not dollars.
And also announce up to 50% shares buyback. Not necessary to buy now, just to announce. Start buying after next asset sale. Lifetime opportunity for this management
Sentiment: Strong Buy
The important thing to understand is the price advantage range and duration for every producer.
If prices stay in the following ranges for 12 months:
Below $40 - some US and Canada highly leveraged producers to shut down, others - withstand with some losses. Russia, Iran, Venezuela - close to default, cut capex by 90% with zero new drilling. Saudis take market share, but at huge losses due to budget deficit.
$40-50 - few US and Canada highly leveraged producers to shut down, others - withstand with minimal losses. Russia, Iran, Venezuela - same as below $40.
$51-60 - few US and Canada highly leveraged producers may be shut down, others - make minimal profits. Russia, Iran, Venezuela cut capex by 90% with zero new drilling. Saudis lose market share to US and Canada but regain from Russia, Iran, Venezuela, still huge losses due to budget deficit.
$61-80 - US and Canada producers will make profits. Russia, Iran, Venezuela will allocate capex for 50% new drilling. Saudis lose market share to US and Canada but regain from Russia, Iran, Venezuela, still substantial losses due to budget deficit.
$80-95 - US and Canada producers will make big profits. Russia, Iran, Venezuela start capex for normal drilling with no growth to accumulate currency reserves. Saudis lose more market share to US and Canada but regain from Russia, Iran, Venezuela, still some losses due to budget deficit.
Above $95 - Everyone will like it except Africans, but will be reluctant to increase capex except US and Canada
Saudis and OPEC are lowest cost producers is the myth. They re better off for a very short time, may be a few months. But in the longer time frame they are in the worse position as their total cost is ~$90 vs. $60-65 in US and Canada. Saudis game plan is to move oil so low to trigger some companies out of business. I don't believe they will succeed. Capitalism always wins.
Your points are valid too and believe me I'm not in less frustration than you are. Except that I may be started later than you-after not putting the company for sale and announcing the turnaround plan.
The question I ask to myself - what other mistakes will Roberts and Co. potentially make and who else would do better at this point? My answers are no more mistakes and nobody respectively. I think the mistakes and problems are cyclical, not structural and this is important for me.
As I indicated Roberts has brought the PWE to the point to start growing again. Unfortunately oil prices did not cooperate even close.
Also we can better understand now the reasons for such huge de-leveraging via asset sales and lowering production costs. 14 months ago PWE was in a stalemate, too high debt/ebitda ratio with inability to borrow more for production increase even at low interest rates and good economics. If interest rates rise, PWE would be BK with no options for stock investors.
Now PWE is in the good shaped despite very low stock price, I believe temporarily. They just need some patience until oil prices recover for starting growing. They will have flexibility to borrow more as needed for production increase.Just need prices north of US$60-65
Russia, iran, Venezuela? Yes. Canada? Yes. Who else?
Surprisingly it is Saudis
Saudis are pumping 10.5mm bpd and at $45 oil they are short of ~$200 bln a year to balance their budget. Unlike US they cannot running deficit, they cover it with their reserves. True, they have $700 bln in reserves, but $200 a year shortfall is huge and they cannot afford the reserves dropping below 200-300 bln. It seems the current price movement has caught them by surprise. They expected higher prices, but longer. Now they can't afford such prices for too long and try to scary market participants to either cut capex further or cut real production.
Russia, Canada and Bakken cannot cut production in winter, too risky, but our gulf coast producers can. There are no signs of doing it, and that drives Saudis crazy.
Would be interesting to see what Saudis next action would be, if oil prices stabilize and even rise to ~$55-60 by April based on demand increase due to too low prices and the start of driving season in US.
At that prices US/Canada producers will produce small profits, but Saudis, Russia, Venezuela and almost everyone else except Kuwait and Qatar would still incur huge losses due to budget deficits.
P.S. Oil rose 3% from the low to the end of the day today.
Sentiment: Strong Buy
You're acting the wrong way. PWE management is doing the best they can and nobody would do better after huge mess they inherited. The only mistakes they made is not hedging for 2015 and perhaps not selling no-producing assets in Q2 2014. That's it. But they made huge improvements in the balance sheet according to their turnaround plan. After ~3.6 bln total debt (who knows how much it was as short term borrowings were a mess) tehy brought to 2.2 bln long term with zero short term. Very clean.
Surviving? Not an issue. They can reduce capex by 100mm or 20% more temporarily to allign with current oil prices, if they are willing to. But the truth is PWE balance sheet is so clean (and will be even cleaner after more asset sales) and ready from production growth as soon as oil prices start recovering.
Sentiment: Strong Buy
btw Swift is 90% NG producer. But what interesting is that both oil/ng producers reduce budgets and even if a core business is oil, their ng production will fall either. The same work for NG producers, their oil output will fall too. Overall we should see both oil and ng production to level off or fall in H2
Nobody is profitable at $40 oil, just nobody. The total costs include production, delivery, administrative, financing service, dividends and regime financing.
US and Canada costs include the 1st five, but all OPEC and Russia - all six. And the 6th is higher than the first five.
The other things that mosters like Exxon, Chevron have other busiensses and large independendts like EOG, APC have very strong balance sheets to weather this storm, but $40 oil is unprofitable for incremental production for all of them.
If you mean whether to expect higher PWE stock price, it is possible, even likely, but not necessarily as it takes ~2 years to build plus 7 months for application permit. Generally rails are currently full in capacity restricting crude, coal, metals etc production increase. After Keystone XL construction additional 830,000 bpd of crude would be transported by the pipeline for a total of 1.3 mm bpd with 2 lines unloading rails and adding extra capacity for coal, metals and even light crude .
Although new 36" line is expected to carry heavy crude from tar sands the existing 30" would be fully assigned for light crude. Also tar sand bitumen is required to mix with light crude in order to get heavy crude, that will increase demand for light crude locally.
The main benefit would not only be price benefit, but also opportunity for substantial production increase by resolving transportation necks. That should result in more interest in asset purchases in Alberta, trigger more investments and higher asset values that should eventually lead to upward revision of book values and likely higher stock prices. But this is a slow process. JMHO
Hey, LSTMF CEO just bought 150K and couple of other insiders bought some too.
I may consider buying this stock despite it's too leveraged for my taste.
I wasn't in the stock above 11 so I can't comment on putting PWE for sale. I doubt they could sell it for good prices in H2 2013.
I agree it is sad we're talking about above 2 instead of above 10, but I'm not just hoping, I'm absolutely convinced PWE will get above 2,3,4...8,9-and at reasonably favorable conditions (oil prices above 100-110)-above 10 unless would be bought out earlier. This is just a matter of when.
I concur with Roberts's plan of deleveraging and raising efficiency (PWE would be close to BK now without his plan), but I'm very disappointed with his asset sale timing and lack of hedges as I posted several times. Roberts sold (selling agreement) in Nov 2013, Jan 2014 and Oct 2014. While it is difficult to sell everything at best times none was sold in Q2 2014. As an example LSTMF sold in Q2 for ~$700mm and got ~20% higher than expected (I have no position).
I admit I was advocating postponing asset sales till H2 2014, but producing assets only to keep flowing revenue until new production from 2014 capex would compensate for sold production. Who prohibited selling non-producing assets in Q2 1014? Why not selling at least a part in Q2 2014? As investors we never buy or sell everything at once, we take advantage of prices the market offers.
The answer is Roberts was convinced in rising oil prices beyond 100.
Lack of hedging for 2015 while having relatively high debts is beyond my understanding, this is the huge mistake. This is true risk mismanagement. They hedged NG by 40% in 2015 that shows conviction in oil and lack of conviction in NG.
I'm not for Roberts and BOD resignation but I'm for healthy criticism. Roberts is very professional, everyone makes mistakes, but I'm for accountability. He should increase communication level as often as possible and proactively inform investors perhaps weekly about all steps currently taken to improve value. He also shall personally buy at least 500K-1.0 mln shares to put enough skin to the game.
Sentiment: Strong Buy
Russia, iran, Venezuela will drop capex by 90% I believe, stop drilling by almost 100% and leaving just service and pumping costs. They just have no choice. Their production should drop by 6% or ~0.8 mm bda for all three this year.
Iraq should also reduce capex by at least 50% this year. Other OPEC countries will quietly reduce capex too despite recent claims about no production cuts. They have no reserves to continue drilling except Saudis, Qatar and Kuwait no matter what their production costs are. JMHO
I don't think the weather will impact in Bakken. But what interesting is that Bakken production costs are higher than in TX particularly in Eagle Ford and Permian. However Permian rig drop accounted for almost 50% of the total drop (28). Permian is the largest developing area where majority of shale production is concentrated. It did not experience any drop in rig count in prior weeks. This is the 1st week it is effected. The train has moved.
We need to get to ~10% or more below beginning of the last year rig count, or ~1250 as rigs became more productive and drill time has reduced. I believe we will get to that target in a month.
Oil is up 2% from today's bottom and recouped more than half of day's losses. The trend may have changed after huge rig count drop. 61 is ~4 time bigger than several previous week drops of 17 on average.
I believe in the worst case scenario, even if congress does not get 2/3rd to override veto near term, Obama will be forced to approve by the mid year. This project is not for near term, it is not based on low oil prices, this is the strategic project for US/Canada security, and dems cannot ignore that despite short brained President.
Total oil/gas rig count is down by 4 compared to last year, down for the 1st time.
However oil rig count is still above last year by 41. Remember last week the difference was 102. Rigs are dropping fast. We may match or lower with last year next week. Feel like oil is very close to stabilize.