We all know the CEO of CHK went on debt financed spending spree and ruined the financial statement which scared of investors. The new CEO has spent the last year and half cleaning up the balance sheet and reigning in excessive spending. Four years from now this company will be investment grade rated, and have a history of spending only its cash flow on exploration and acreage. It will finally sell for the same price to book and price to sales as other energy producers.
wrong!!!! They are 70% hedged on the oil, so decreasing production for 2015 by cutting capex 50% should drive up the hedge book on oil to close to 95%+ which is hedged at prices of $90+
the price of oil will start to climb in six months as Linn and other producers cut drilling (capex) by 25%-50% for the 2015 year. As the price of oil starts to climb due to capex reductions across North America and Canada the share prices will anticipate this and climb.
it is not possible to turn wells off and stop the oil or gas once they are in production. All you can do is pay to store the production and storage is limited.
Will most North American companies cutting capex by 25-50% this is where you have the game changer. This will drop production and raise prices. By this time next year oil will be back to $80 and those not positioned will miss the monthly climb in equity as prices turn and start the assent.
Why would the 50% decline in oil have any impact on a company that is not producing and selling any significant quantities of oil, especially in Australia where it has its largest portfolio of land holdings. The U.S. presence is basically very small.
The middle east countries are producing and selling all the oil they can produce. Tankers are full and oil is looking for places to be stored. Then look at the U.S. It is producing more oil each month over previous production and we see what that did to natural gas prices during the last 5 years, they declined to 10 year lows. Well, we are still drilling and producing more gas and oil than we did last year. If oil drops more over the next few months it will take gas with it and most energy investments fall in lock-step with each other.
So CVRR could go lower. If energy production keeps overproducing demand and Russia needs to sell more at $40-50 per barrel than it did when the price was $100 per barrel, the price could go lower.
We could see energy equities decline another 10% and CVRR would drop with the entire energy industry. When you see a bottom and energy stocks sit for a week or two without more declines, that is probably the time to buy. I would not be surprised to see CVRR hit $14-15.
I totally understand crack spreads but you are wrong about how overproduction is effecting all oil and gas related companies. Look at T. Boone Pickens CLNE energy which sells natural gas to end-users, look at the refinery stocks, they have all collapsed over the last three months as over-production is intimidating retail investors in equities.
Why do you think CVRR stock has been declining each week for the last 2-3 months? Rather than saying I fail to grasp the main point of a refinery you fail to grasp what I am telling you about the reality of overproduction and market psychology.
Every time I look at this company I come away with the conclusion that they are a high cost producer of copper compared to the South American producers. Costs of production are around $2.50 per pound and so they have very little profit on each ounce. For that matter what miner has decent profit margins and is making any serious money for their investors?
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.
Everything I have read indicates that oil production in U.S. this year will exceed
2014. Too many wells were drilled in 2014 and first quarter 2015 was contracted for
with service companies.
Wonder why management has not addressed the $12 billion in debt. I guess there
is nothing to say if you do not have the money to pay the debt down by $1 billion or
$2 billion or $3 billion. Of course that would be a drop in the bucket in terms of total
You are wrong about oil prices. U.S. is producing 1 million more barrels a day than in 2014.
Companies are producing because they have billions in debt at each company and they
need cash flow to service that debt.
Oil price could stay at $40-50 for the next six months, then $50-60 for the second six months.
I would be surprised if COS does not cut the dividend again by June.
The question is how low does the price of the equity fall as the entire sector continues in
free fall during the first quarter.
Sell now, buy back at $4-5 during the next one or two quarters might make some sense but
there is no reason to own this until oil prices stabilize around the world and who sees that
with Europe and China seeing slower growth in 2015 than 2014?
Well, oil is now below $50 and headed for $40. U.S. companies are producing 1 million more barrels a day in 2015 than 2014. It does not matter if it is not profitable, each company has billions in debt and the debt needs to be serviced with cash flow. When your cash flow drops from $100 a barrel to $40-45-50 per barrel and you need to generate cash flow to service debt production goes up. Look at the U.S. production numbers each week and you will see what has been happening during the 8 weeks as more and more wells have been drilled.
Any ideas. U.S. is producing 1 million more barrels of oil in 2015 than 2014 and oil is now
being stored in tankers. Europe and China are predicting slower growth in 2015 than 2014
so where is BBEP headed. $4, $5?
Unfortunately, ever oil producer has a billion on up in debt and cost to debt service in 2015
requires double the production that was required when oil was $100.
Linn Energy has what $12 billion in debt, CHK has $12 billion in debt, etc.
So how low can this go?
Will they eliminate the dividend at the end of the first quarter?
What do investors think?
Sorry, but you can not shut wells down without incurring significant expense to shut it down. Then you have all kinds of expense to bring production back up. Canada and no other country has a light switch that turns off wells with the flip of a switch. I suggest you research the cost and problems with shutting down a well. No one does that without significant money.
48 dollars per barrel is cost
but the big problem is that they have borrowed almost $4 billion and it is due over the next 10 years with 1.2 billion due in five years
Yes, the energy sector has been in free fall and this CLMT is behaving no different.
Also, four of the last six quarters of operations they have not been able to cover their distribution from operations. Having below 1.0 coverage by a significant percentage for the distribution for 4 of 6 recent quarters is not very good.
I would not be surprised to see many energy related MLPs fall another 10-20% and energy corporations another 10% when the 4th quarter of 2014 and the first quarter of 3015 is reported.
I think you need to face reality. Oil was at $100 per barrel for the last few years and no major partner invested in this Australian company.
So now with oil going to be significantly below $100 per barrel, perhaps $50-75 for the next few years, who is going to put up money?
There is no pipeline infrastructure where this land sits. Do you realize it took years and years for the U.S. to build out its pipeline system (50 years, from 1950-1960 to today), and still the pipeline operations in the U.S. have $50-100 billion they need to raise for projects for the next 5 years.
The price of this company has been in free fall all year as I have previously written and 2015 looks no different.
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.
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.