Anyone with a working brain is not expecting a hefty divvy from a 2 dollar stock. The temporary elimination of divvy at time of stress can give the company much needed financial flexibility. If the management does away with divvy now with the promise of restoration at the earliest opportunity, the market will react positively. It sure beats selling assets at fire sale prices now.
December 10, 2014
Sanchez Energy sell-off unjustified, says SunTrust
SunTrust believes that Sanchez Energy should be able to shield itself from market turmoil, given its strong balance sheet, solid hedge book, and flexibility to adjust its drilling program. The firm views the sell-off in the stock as unjustified but cut its price target on the name to $25 from $30. However, it keeps a Buy rating on the shares.
"as one of the lowest cost producers ($10 to $15 barrel)"
This is only the extraction cost, but Saudis can't maintain its various social programs with oil price slightly above the extraction cost. In fact, as of 2011, the break-even oil price required for a balanced budget was around $90. With today's oil price at $60, Saudi government will be clearly running a rather large deficit. This is not a repeat of 1986 when Saudis could fiscally get by with oil in the teens. If the government has to resort to cutting back on social programs that the populace has grown fond of, popular discontent may well ensue. If anything, the house of saud owes much of its relative stability in a highly volatile region to keeping the population contented. Don't know how happy the average Saudi Arabians will be if they have to sacrifice financially to support the government in a prolonged price war with US oil producers.