With a dollar forty per share in cash equivalents, plus little history of losing money, it would seem like this stock has little risk at this price. It values the business at only 53 cents per share.
While there is no guarantee the management will ever establish worth to the business model, at least they have some cash on hand should the right opportunity come along.
---We remain well positioned to continue to fund our drilling commitments through cash flow from operations if continued development is the appropriate course of action. In the meantime, we continue to remain focused on finding accretive acquisitions and believe that we will see favorable opportunities in the current commodity price environment.---
You would assume he knows where the cash might come from.
Don't know if this directly affects JAKK, but the consumer seems to be spending his gas dividend on discretionary items.
It also shows how Yahoo Finance has given up its monopoly position on financial message boards, now sharing it with IV and SA, who seem to do a much better job in getting quality comments.
While there are no guarantees for any of the E & P companies, USEG has a very low debt ratio compared to most. Also, I believe the quality and value of their Booth Tortuga properties are drastically understated on their books.
That being said, the longer this down turn lasts, the more pain inflicted. It's one thing if oil averages $45 for a few months, but it might be another if it lasts 5-10 years.
Despite that the wells are paid for, the depletion costs are based on the useful life of the well. Thus depletion expense will flow through the income statement as long as the wells are pumping oil.
I don't know if you are paying attention, but LEI is close to being delisted.
I'm surprised $1.1 billion of PV-10 could support $2 billion in net property assets without causing an impairment. The issue goes back to last year also.
The PV-10 announced yesterday still has a relatively high price, almost identical to 2013. The price will start to change drastically as we go into Q1 and Q2 of 2015, every E & P company out there will be vulnerable to large impairments on its property.
While there is lots of debt, most of it is a form of a bond that has different requirements than bank debt.
What if the company is forced to write down the value of those $85 million in net depreciated producing oil and gas assets?
I don't believe the hedge would protect the company from property impairments. If the net worth is wiped out, it could trip some of the loan covenants, regardless of how the hedging protects short term cash flow.
Who can say whether the price of oil will rebound or stay low? None of the talking heads on todays’ news predicted the current environment last summer. If they weren't right then, why would anyone believe them today....My point is that no one knows where the price of oil will be in six months.
However, we can make some assumptions about AREX stock. If within a few months, there was a total rebound in oil prices, AREX share price would likely rebound into the 20’s as if no damage had occurred. But if oil prices stay at current prices for a year or more, AREX will write down the value of its properties, probably by enough to wipe out its net worth and allow the lenders to take possession of the shares.
While there might be a year or so to monitor the situation, the shares won’t be safe forever.
IMO, a sudden drastic move like we've seen in oil does not make sense based on normal supply and demand economics. The price move would have been much more gradual.
That leaves world politics as the price mover, and IMO that is very hard to predict. Just like interest rates have stayed down much longer than anyone imagined, if the governments want oil down for a while, it will stay down.
The revenue report was nice reassurance.
On CNBC this morning there was an analyst suggesting the debt holders of most E & P companies will be the new shareholders in a year or two. I don't believe that would happen to USEG because its debt ratio is so low.
However, the company is poised to lose a lot of money over the next few quarters, you'd hope there is enough cash flow to keep it going while this industry sorts itself out.
While oil pricing has made things quite a bit worse since Dec. 1, I would like to remind you of Keith's recent statement,,,,, we continue to remain focused on finding accretive acquisitions and believe that we will see favorable opportunities in the current commodity price environment.....it didn't sound like cash would be an issue in survival....Don't know if that changed in two months.