Ask yourself why Barron's is ignoring the fact that Line/Lnco is 90% hedged for the next several years. Lower oil or gas prices will not substantially change revenue/cash flow and forecasts. With lower prices in 2015 they can defer $100-200 million of capex until 2016 and drill when prices are going up again.
Debt is currently $13 billion and with deliveries of the rigs over the next 18 months,
they will owe another $4 billion or more.
Even with contracts, sector is going lower as world falls into recession over Ebola
spreading and demand for commodities continues to fall.
Boone is wrong as much as he is right in recent years. Hope you did not invest in his company 3-4-5 years ago as CLNE has fallen 75%.
Linn is fully hedged on prices and the planes, cars, buses in the U.S. are not shrinking in numbers. For that matter the number of homes in the U.S. is expanding and in case you forgot, they use energy: electricity and natural gas. So, if all the numbers in the U.S. are going up and do not see the scare on the economies in Europe and China lasting for more than a few quarters.
Our distribution is not going to be cut.
SDRL is in a sector that is in free fall. Today an analyst said the chart on RIG is the worst he has ever seen. As all drillers will continue to fall 20%, SDRL will go along with them.
As oil prices decline and gasoline prices decline and more rigs are delivered to the weaker hands, the sector will keep going lower. Wait for the weakest drillers to bottom and sit at the bottom for awhile, then buy.
Unfortunately, that could be a year in the waiting, but it is not worth the dividend to ride this.
Shares have gone down to low of the last 5 years and most investors
including myself have lost big time over the last 5 years. Management
that watches stock decline for 5 straight years should have been fired,
but obviously, the Board of Directors is controlled by management so no
one is going to make any serious money in this investment. I am getting
ready to dump at the bottom and move on to something that might double
Ensco, Noble, Rig are all selling for less than 1X book value of the assets
on their balance sheets. This company is selling close to 3X book value of
Second, the contracts are short term now, about a year left and when they
are close to expiring in a year a lot of shares are going to try to exit all in
the same 90 day period and AWLCF will probably see constant pressure
from here on out on the price including the tax loss period during the last
30 days of the 4th quarter as many that are upside down will sell to take
Thirdly, what happens if one of the rigs takes some time to re-lease the
rig and they have a quarter with no income, just debt payments. The
negative news usually drives down shares.
Three reasons this is dangerous, especially during periods of war
and economic difficulties.
You have to take into perspective that the shares lost 20 cents during the last 30 days.
Agree, it is not the debt that caused the fall but the drop in the oil price which could
weaken further, causing more pressure on all oil and gas producers.
If it keeps falling a penny every day, I might have to enter sooner rather than later.
Appreciate your comments.
Canadian oil sells for about 5% less than U.S. oil and U.S. oil is falling in price.
Big article in the L.A. Times last week said that U.S. gasoline prices will fall in
the next year to lowest prices in 5 years.
Too much oil and not enough demand world-wide at this time. If gasoline
prices fall another 10% as predicted in the article all energy producers in
North America will feel the pain.
This equity could fall to $4 and I am already down big time.
The board of directors was appointed by the CEO so it is not going to help
Every investment connected to oil has been down as the price of oil dropped 10% during the quarter. The problem with CMLP is that the share price has not really climbed at all during the bull market that has taken the indexes to all time highs during the last 4 years. No real equity appreciation while most all the MLPs are up significantly over the last 4 years.
remember, the lowest interest rates in our lifetime have been during the last 5 years. The FED is going to change that in 12 months. Also, the largest number of new rigs manufactured in the last 15 years is going to hit the market in 2015. Both of these factors are going to impact the market, especially the interest rate reversal. Could the market take a hit of 10% or more when the FED changes course. Easy in my opinion.
Could SDRL hit the same low of 2010, sure, that was $19.
Current debt is around $12 Billion.
Deep water rig count from 2008 to 2013 grew from 103 to 239 platforms.
From 2014-2016 this rig count is going to grow another 25%.
SDRL is going to take on almost $6 billion more in debt as it
pays for its platform deliveries in 2014, 2015, 2016.
There is going to be tremendous price pressure and utilization that
will effect all drilling companies with these platforms and the sector
moves up or down together.
Also, the FED is going to start raising interest rates over the next
three years and a change in the FED course always impacts the
entire stock market.
The stock market has been on a 5 year bull market run, these runs
always correct. When it does everything falls 10-20%, look at the
market history on corrections.
SDRL hit $19.00 per share during the summer of 2010.
If rigs coming into the market in 2015 and 2016 are going
to create price pressure and utilization issues why would
the price of the equity not test previous lows during this 5 year
The $3B of assets called Goodwill is nothing. The productivity of
that excess paid for assets is really worthless and if they were
honest with investors they would write it off.
Goodwill can not be sold, earns nothing, has no liquidity.
Basically it is a phony number that is meaningless.
If management was honest they would write the goodwill off
and take a loss.
Investors need to discount the market value by that phony item
on the balance sheet, then you get to the real numbers.
But management is not going to admit the games they are
playing with the balance sheet. They want investors to think
the assets are worth more than they are.
Actually no. They are down $4B in price because the FED has inflated the market for the last 5 years with a zero interest rate. The entire market has been inflated by cheap money.
The cheap money (financing) has resulted in to many platforms as the world is flush in oil.
The same cheap money has kept oil prices inflated and as those prices go through a decline
which is only a normal cycle and the sector of drillers faces declining utilization and declining revenues, the sector will take all drillers down.
The price decline is not over especially if commodities continue lower, demand for oil declines and the weak sisters in the sector keep falling (think RIG, etc.).
You said this is a good company. Remember, 5 years ago the price was $21, today it is $21. Look at companies like EOG, XOM, CVX, COP, Hess, Google, Intel, Yahoo, Facebook, etc. Most "good companies" are up 100% or more over the last 5 years.
I am holder of CHK and rather than doing a good job it has underperformed the market over the last 5 years.
The price had run up and it was selling close to 3x book value. Even though the platform rigs were purchased at a good price, investors were paying triple the cost of those rigs to the company. Not a great deal.
Also, the contracts are going to expire on the two rigs in another year. What happens if the new contracts have down time and no dividend? Also, what happens when all investors try to unload during the same quarter when these rigs are close to expiration. A small investor group on this exchange can get killed when too many of them see the risk all at the same time.
That is why most investors in this equity might not make any money even with a high dividend over 2014 or 2015. Investing in this security is more like gambling than investing unless you purchase at a price that is at the bottom or very close to the IPO.
Not a great run company. They purchased 48% of Copper Beach with an option to purchase all of it and then did not purchase the balance of the company. So they have a minority position with no control on an investment that they decided was not performing sufficiently to justify buying all it.
Also, they are building out two speculative high rise towers for high end student dorms.
The verdict on that risky transaction is not in and if it does not perform it will result in a further share price decline which will wipe out any dividend you earn for the next year.
The investing public is saying Campus Crest is too risky and management has not demonstrated that they can enhance shareholder value, that is what the share price is showing.
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.
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???