In recent history where we have 6-7 billion people using energy (the last 15 years) of the earth's history there have been 5 oil price declines of a magnitude of 25%-50%. Each of those declines corrected within a period of 6-12 months. This 5th decline which is taking place in this panic selling of energy companies is now 1-2 months old and as history shows when prices get too high they correct and when they fall to much they correct. When demand drops prices also correct and when demand increases they correct up.
I do not have a crystal ball to determine when prices will climb but after every fall in modern economic times with a world population at 7 billion the prices corrected up within one year.
Yes, the U.S. is producing more oil and gas now but the world is going to be driving more cars, planes, ships, trucks and buses every year. The world population is not in decline and wind and solar does not power jets, cars, ships, trucks and buses.
I do not know if we will be back to $80 oil or $90 oil or $100 oil in 12 months but it will likely be one of those numbers. Investors need to stop buying in to all the fear about Linn Energy and other Energy companies. 90% of the companies in energy survived the previous fall in price and there is nothing different about this one.
The U.S. will produce more energy and it just means we can purchase 10% less energy from OPEC and Canada.
Linn is hedged for the next 12 months so all the talk about cutting or eliminating the dividend is foolish. Should management ask the drilling companies for discounts? Yes, of course. Should they reduce overhead and employee counts? Yes. Should they do more EOR and a little less drilling to reduce CAPEX? Yes.
But the fear mongering should stop. 2015 is going to be a mediocre year for energy and 2016 will be back to normal.
Everyone should calm down and take a breath.
CHK sold off 7% of its assets for $5 billion. The buyer expects to make a profit on its purchase. So waht is that 7% really worth. Then equate that divestiture to what CHK is retaining for development over the next 20 years.
Remember, the worlds airplane fleets for cargo and passenger planes is going to double over the next 15 years and they burn lots of jet fuel, not wind or solar. China's and India's car, bus and truck fleets will double in size over the next 10 years and 95% of the cars sold will burn diesel or gasoline.
The trend is the friend of the energy producers forget this temporary over supply vs. demand. These situations have reversed themselves after 12 months. Energy producer wealth is build over each decade not each 12 months.
2008-2009 is not 2014. The world banking system was close to an economic collapse, 2008 was as close to 1929 as you can get. 2014 is merely another oil cycle snap which has happened regularly. I do not think you can pick a bottom. Will Linn Energy continue to go down or has it reached the bottom, no one knows.
If you are going to purchase 1,000 shares or 10,000 shares the opportunity to buy low does not happen very often. Can you time it during the next month or the next three months before it starts in the other direction.
The point I wanted to make was that many companies have seen their share or unit price crash during the last 30-60 days and this is not warranted based on world demand for energy and the state of the world economy.
The U.S. economy is stronger today than it was a year ago and it is much stronger than it was two or three years ago. The same applies to China. These are the two big engines in the world. Russia is a basket case but its currency and economy do not want cheap oil and gas, so that is really a plus in my mind in terms of U.S. energy companies.
Should Linn reduce its distribution in 2015 and start to pay off $100 million in debt every month? That is a guestion for management. That strategy might bring the price of the units a little more stability.
As a shareholder that has owned this company for several years I would suggest staying
away. The company lost $20 million in the last quarter. Costs of production are running
$2.50-2.75 per pound. The company has a quarter of a billion dollars in debt. With
copper under $3 there is no reason to own this mediocre mine and mediocre management.
Earnings have been declining in recent quarters and management did a horrible job of
lining up support for its previously planned gold mine and was denied permits. Now they
want to build another copper mine. With what money? And with demand not very significant
and where price of copper is stagnant and costs are high for copper production in North
America compared to South America mines.
only one of five insiders purchased a quantity of shares that showed any real conviction on the company. The argument could be made that 75% of the insiders have no real confidence in the company. When I make a purchase in any company I do not make a purchase unless the amount is $10k or more, less than that and there is no conviction that this is something worth buying and owning. PWE has had only one real insider purchase that showed conviction that I can make some serious money if this goes up in value. The other insiders in the company have showed no real conviction by buying any significant amounts in the company, hardly an endorsement!!!
They should be backing up the truck and loading up on shares if they felt the company was undervalued.
When CHK sold off the 7% of the company for $5B, the buyer had plenty of oil and gas engineers, geologists, economists and accountants from within the industry help them with their due diligence before they spent the $5 billion. I wonder what number they came up with in terms of return on investment? Most big oil and gas producers will not spend money unless they see a double digit annual return on their investment: I am talking 10% and up. In addition to paying $5 billion for acquisition, the buyer still has to spend a great deal of money to drill each well in the future inventory. I am thinking this purchase is going to cost not $5 billion but closer to $7-8-9 billion.
I do not understand why the administration has been against the pipeline. The Canadians have been moving oil to the U.S. using trains and trucks which is more polluting than moving oil by a pipeline. In fact trains and diesel trucks do more to increase global warming than any pipeline does.
I do not understand why we do not hear anything about the facts, that the current transportation of Canadian fuel is much more polluting than the pipeline.
the Saudi Oil Minister is in Davos, Switzerland and he told the conference of world's billionaires that the prices will start to go back up in a month. I think he knows more than just about anyone on the subject. He obviously feels that the price below $50 per barrel is an overshoot on the down side. Still if oil stays at $50-60 for the next year there is going to be a great deal of hurt.
the amounts spent on purchases by insiders is a joke. Come on, With what four insiders spent on buys you could not purchase an automobile only the CFO spent a significant amount, the other insiders purchased amounts of shares that are really a joke if they had confidence they would have all purchased six figure amounts of stock rather than less than $10,000 each.
This basically shows that this management is not very effective.
All my other six holdings in energy are hedged as to about 33%-50%
These shares have fallen to $10 and $14 twice during the last decade.
Why would it not fall to those levels again???
a price target on these shares of 70 cents by TD Securities is just terrible. I imagine lenders will reduce the lines of credit or extract higher rates of interest. Basically all the analysts in the last 30 days are saying they see no hope for these shares. The problem is that this is a Canadian company and in Canada you do not have to file with regulators until you have acquired 10% of the shares. This allows a bottom fisher to acquire 10% of the company at very low prices and then make a very low offer, say $2.50 or $3.00 for the rest of the company. Even if the shareholders and board to not like the price, all the investors that came into the company at under $2 per share will sell as they are short term investors. It is the long term investors that will get killed as these shares go lower every day. I personally own investments on seven other energy companies and five of the seven have gone up in price the last two days, but my two Canadian energy companies have gone down both days.
I suspect the Canadian producers will fall further on bad market days if they are unable to go up in value when other energy stocks are rising.
Look at British Petroleum (BP) this morning. They said they see $50 oil for the
next three years. These guys know what they are talking about.
Yesterday, I spoke with the president of one of the oil companies I invested in
with 100,000 barrels a day of production and asked him why he does not cut
production 10% and use the money to buy back shares. He said he has to
keep production up for the cash flow to debt service the loans and for the loan
covenants. If this is the situation then production is not going to drop that much.
SDRL has hit $8 and $9 per share twice in the last six years. I would not add at $12 if I were you. I see no reason it does not reach its low seen in 2008 and 2010.
SDRL has a debt of $13 billion and it still has to pay for more platforms being delivered in the next two years. I do not expect a dividend on SDRL during 2015 or 2016, so many more people still have to dump the shares that need dividend income during the next few years.
When this stock drops below $1 there are delisting issues.
The board needs to quickly consider a 1-5 or 1-10 share reverse split to
avoid the regulatory mess.
As the equity vanishes in value what are lenders going to do?
When CHK closed on the sale of 7% of the company this week, we need to remember that the buyer not only spent $5 billion on the purchase but they also have billions more to spend on the purchase to develop it over the years. I am thinking they had to commit not just $5 billion but possibly a few billion more. We also know that energy companies expect a double digit annual return on their investments. They are not interested in a 5-9% annual return on invested dollars.
So what did the buyer company expect this $5 billion acquisition would really return to them?
Take that number and apply it to the remaining 93% of production, land holding and other assets held by CHK and the SHORTS are going to be in deep trouble as other investors beside Carl Icahn realize what CHK is really worth once the rating agencies give them an investment grade rating.
When all the investors start making a run into CHK sit tight for the ride. It may not be for another six months but hold on.
why pay down debt when none is due other than small amounts. They just sold 7% of the company for $4 billion. The best buy in the market right now is CHK. Do the math. They need to buy all the shares they can during the next six months as energy prices usually stay down after a fall only 6-12 months.
Cheap fuel is going to cause a lot more driving all over the world during the next year. People taking trips at half price for a gallon of gas in 2015. The price will correct itself as each producer drill less wells in 2015.
During the last six years Seadrill has twice dropped below $10 per share. So why not again???
Who knows how long the dividend will be suspended. The company has $13 billion in debt now
and more platform rigs that have to be paid for and delivery taken over the next two years.
If the dividend is suspended for 1-2 years I would be surprised if the shares do not drop to the
previous lows that were twice hit in the last six years, once in 2008 and again in 2010.
At $8 or $9 per share the current price at $16 sure has a ways to fall to reach the recent lows hit
twice before in recent years.
What do investors think about where the floor is if there is no dividend distributions and the investors
that need income abandon this investment during the next month???
Pickens is the same guy that threw a ton of money in CLNE (Clean Energy) to sell natural gas to trucking companies and automobiles. His judgment over the last five years is not what it was when he was on his game. He has lost a ton of money over the last five years with his holdings.
I am in many oil and gas investments from Linn Energy to Chesapeake Energy to small Lighstream Resources to the pipeline companies and MLPs and all of those companies have had insider buying during the last 90 days. I am talking about CEO or Chairman buying hundreds of thousands of shares.in each company.
Ask yourself why that has not been the case with the management and board of PWE. The only answer I can come up with is that they do not see the value in terms of the risk. By the way, those other companies hedged significantly, so that might be an issue.
Still it is not a good sign that PWE insiders have not been buying six figures amounts of shares at this price.