Here is an article regarding more or less what you said about some companies not as hedged as people think they are.
Tumbling oil prices have exposed a weakness in the insurance that some U.S. shale drillers bought to protect themselves against a crash.
At least six companies, including Pioneer Natural Resources Co. (PXD) and Noble Energy Inc. (NBL), used a strategy known as a three-way collar that doesn't guarantee a minimum price if crude falls below a certain level, according to company filings. While three-ways can be cheaper than other hedges, they can leave drillers exposed to steep declines.
Scott Sheffield, Pioneer's chairman and chief executive officer, said during a Nov. 5 earnings call that his company has "probably the best hedges in place among the industry." Having pumped 89,000 barrels a day in the third quarter, Pioneer is one of the biggest oil producers in U.S. shale.
Pioneer used three-ways to cover 85 percent of its projected 2015 output, the company's December investor presentation shows. The strategy capped the upside price at $99.36 a barrel and guaranteed a minimum, or floor, of $87.98. By themselves, those positions would ensure almost $34 a barrel more than yesterday's price.
However, Pioneer added a third element by selling a put option, sometimes called a subfloor, at $73.54. That gives the buyer the right to sell oil at that price by a specific date.
Below that threshold, Pioneer is no longer entitled to the floor of $87.98, only the difference between the floor and the subfloor, or $14.44 on top of the market price. So at yesterday's price of $54.11, Pioneer would realize $68.55 a barrel.
Full article here:
hope this helps
Good luck to all!
Well, oil is testing $54 today so the value is less but the share price is still at a big discount to a fair takeover price or enterprise value. Thanks for the post.
Good luck to all.
I figured oil would get a bounce at $55.00 but it crashed through that last night. Technically I would think that $50 would be next major level to test (though I will have to take another look at the charts). I also believe that oil is oversold. Did demand really drop that much to warrant 50% drop in oil prices? no. It will come back when the powers that be are done playing their games. China and India and even the US consumer must be loving these prices as applied to the price of gasoline. A 12.7% dividend is not too shabby while you wait. I would not go all in however. Take small steps if you are inclined to invest at this point.
Good luck to you.
Looks like TLM is being bought for 6 Billion Euros. They should have sold a few months ago when they could have gotten much more.
I would assume that Crescent Point is looking to acquire some great properties at these bargain prices. I know they are looking.
Good luck to all.
I think Crescent Point is licking its lips right now and hoping these oil prices stay low for a little bit so they can snap up some assets at great prices. On the other hand, as long as the price of oil drops so will the share price of CPG.
With oil breaking the $60 mark I expect continued pressure until something big is announced to change the direction of the price of oil. I would imagine the $55-57 is the next test as that is the next support level. I see $60 now as a resistance level though if it can close above that it could become support again.
Good luck to all.
Mackie, some more info for you from a motley fool article questioning the sustainability of CPG dividend. In summary, the article states CPG has good history of dividends, strong balance sheet (not much net debt), though they have on occasion paid the dividend in stock rather than $$ to save some $$ (but you could just sell those for the cash if you want). The article mentions that payouts exceed free cash flow and the article concludes that CPG is not a good investment for a conservative income investor (though the author mentions that capital expenditures will remain high next year and I think CPG leaves plenty of wiggle room to reduce spending during times like this).
Hope this helps
that was a nov 27 2014 article on fool.ca
Those are all good questions. With respect to the dividend though here is a little bit from a recent interview with the CEO of CPG in a Bloomberg article discussing the viability of Canadian Oil Co dividends:
Some companies are also partially shielded from oil’s slide after locking in future prices with hedging. Crescent Point had 37 per cent of its 2015 output secured at prices above $93 a barrel as of Oct. 28, the company said in its third-quarter earnings statement.
“This is a great investment opportunity for people to collect a pretty high yield on a low-risk company,” which has never lowered its dividend through six downturns in the price of oil, Crescent Point Chief Executive Officer Scott Saxberg said today in a phone interview. “Our hedging program keeps our cash flow strong and allows us to maintain our dividend, maintain our capital program and battle through this.”
Anyways Mackie, the real question I guess is the one you asked. What is the bottom for oil? Because if it keeps dropping you may get CPG for cheaper than $19.50 (12.xx% dividend). There is really no need to try to pick the bottom. You could play it safe and wait until oil stabilizes. I think OPEC (The Saudis) want to put some pressure on the prices to hurt the US frackers to maintain market share. I am sure there are some geopolitical considerations as well.
Good luck to you.
Is CPG dividend safe? I am glad you asked. Yes it is but don't take my word for it. What did the company tell Bloomberg 5 days ago?
"Crescent Point... told Bloomberg they will be able to maintain their dividend next year."
Keep in mind that many companies have told news services that their dividend is safe and then have pulled the rug out from under the shareholders i.e. SDRL. However, CPG has an excellent history of maintaining their dividend in turbulent times. They have also actively hedged a lot of their owl for times just like this.
There are some very good companies that are being dragged down with the debt laden ones. CPG is one of the good companies that will bounce back the fastest. They should confirm the next dividend on or before the 17th of December.
Good luck to all.
Very good point. They are in a much better position than many other oil companies. Strong enough to take advantage of the situation. Once the dust settles, CPG will climb back up much faster than others.
What do we know? (btw if this posts twice it is yahoo's fault as I tried to post link to the article earlier and something went wrong)
1. Oil prices have tanked!
2. Insiders of the stronger oil companies have been buying their own shares in record amounts in the last month as they believe their companies are much more valuable than this fire sale suggests.
But how would a strong company act in this situation versus a weak company? I am glad you asked. Strong companies see this weakness in the price of oil as a great opportunity to acquire some prime assets. Don't take my word for it. Let Crescent Point Energy Chief Executive Officer Scott Saxberg tell you himself as he stated in an interview a few days ago.
“We look at this time period as a great opportunity to look for consolidation opportunities to further grow the company and take advantage of guys who have weaker balance sheets,” Saxberg said by phone today. “Guys that have to sell in a down market usually sell their best assets.”
Yahoo will not let me post the link but go to Bloomberg and search for crescent point and the news story/interview should come up. It was from 5 days ago.
Good luck to all!
While the price of oil seems to be under attack, which can't be good for the industry in the short term, is there any good news out where with respect to Crescent Point Energy? I am glad you asked.
1. While analysts and talking heads all have predictions about the future price of oil, I pay more heed to OPEC members. Kuwait said they expect the price of crude to be in the 60's for the next 4-6 months. That means we may be close to a bottom here.
2. Even if the price of oil stays in the $60's or drops further, Crescent is hedged 3 years out. This company plans ahead so they can weather any storm and continue payouts.
Crescent Point told investors in an October presentation that it actively hedges production as much as three-and-a-half years into the future to bolster quarterly payouts and capital spending.
3. At $21.50, CPG has a pretty nice dividend over 11% and management that thinks ahead to protect it.
While a lot of oil companies will be hurt by this decline in price of the commodity, CPG is a well-managed company that has proven it can weather storms.
Good luck too all.
Well, you bought a little early. But as you said, it seems you have a long term horizon and the dividend will ease any short term pain.
Good luck to you.
JF buying more shares is a positive IMHO, however if another billionaire stepped in and bought the same amount of shares I would be more inclined to follow him/her. JF has lost some credibility with the dividend fiasco. I would also think he also has his shares protected somehow (options) so when the stock tanks he suffers a minor scratch while the average individual investor gets creamed. I think he also bought some shares when his old friend bailed on the company (around $24 a share).
JF is not in control of oil prices. I think OPEC is not done letting the price of oil fall. I tend to lean towards Merrill's analysis more than speculators and hedge funds. While there may be a dead-cat bounce or two in oil, I think it continues to slide until OPEC says they will cut production.
There is no rule that you have to pick the exact bottom in a stock or commodity. No reason to try to catch a falling knife. Personally, I think it is better to wait until the stars align in your favor and invest on an uptrend (at least for medium and long-term investors). If you want to be a hero or make a quick killing, good luck to you.
Good Luck to All.
We expect to see no reversal of negative news flow soon, although we believe this is already well appreciated by the Street. We view a group inflection boiling down to an improving oil price outlook, and recommend sticking with premium asset exposure (Seadrill and Atwood) in the meantime. Dividend cuts also appear on the horizon as companies seek to conserve cash and ride out the storm, although the market appears
to be already pricing in dividend cuts, with current yields now well above historical trading ranges. However, we still see relative safety in yield-cos (Transocean Partners (RIGP) and Seadrill Partners (SDLP)), which should continue to offer robust distribution growth profiles driven by parent need for funding.
SDRL was around $24.50 then.
Good Advice guys! Not!
First, I have not read any of the contracts between SDRL and the Oil companies. However, generally speaking (without an express clause stating otherwise), a change in market conditions does not let one party change the agreed upon terms of a contract. While there is usually a "force majeure" clause (allows one party out of their promise due to acts of war, acts of god, etc) a drop in oil prices, no matter how severe, does not qualify as force majeure. I can't remember if international sanctions qualify but I think they do.
It would be nice to take a look at one of the contracts though.
Good luck to all
Maybe if and when it approaches $10 a share; if and when the price of oil stabilizes or turns around; if and when CEO apologizes for screwing over the stock holders with what could easily be characterized as deceitfulness; if and when a dividend is reinstated.
Until then, stay away. (JMHO)