The free cash may be different from the net income for a particular accounting period, as the free cash flow takes into account the consumption of capital goods and the increases required in working capital.
I am not an accountant but will try to help. Free cash flow from operations appears to be over 9 billion. You used 3.2 billion which looks more like it might be a net profit number. Net profit wouldn't be used in a FCF formula. I think the net profit is equal to free cash less capex, depreciation and possibly a couple other items as well.
The blood in the streets this time might be EXXI. They are heavily in debt and probably will continue to cut CAPEX which would result in falling production and revenues. Oil hedges that are currently in place will run out over the next few quarters. There is no market for salable assets and no other way to raise money. Know what you are buying. If oil prices stay low over the next few quarters, EXXI is one of the companies that end up in big trouble.
So this stock is selling off even though everyone knows that they are on target to hit mid guidance....................................hmmmm
Seems like we have heard you say that many times. Is this time different than all the previous times?
How do you know that, "all the shorts in the bond market started selling. They gave it up."
Did they call you up and tell you? :)
Sorry that is not true. If you put $1,000 dollars into a stock then you put $1,000 to work. That money cannot work anywhere else. If your investment falls to $500, you still have $1,000 of your money working in the fallen stock. If you decide to put your money to work somewhere else instead, you will retrieve only $500 to put to work instead of the $1,000 that you initially had. If you need to sell the shares to pay the mortgage you will also have $500, not $1,000. If nothing changes, you only have $500. You are betting that the stock will recover. If the shares go down, you will have even less money. If you leave the shares in your account for ten years and the stock stays flat, then you would have lost about $628 if it had been invested in a 5% yielding bond. After 10 years you would have lost $344 in purchasing power at 3% annual inflation. The stock is worth what someone will pay for it, the rest of the money is gone.
You are correct about the revolver, they do have access to additional capital there. But the market does not want to see more debt on the balance sheet right now. Hence, the there is an effort to match CAPEX to cash flow. The oil price fell from about $100 to about $90. EXXI has most of its oil hedged at $90 so they are probably getting an average of $90/barrel, maybe a little more 60,000 bbl/day @ $9/ea with 340 days availability = 184 MM in lost revenue. They are on target right now to meet the mid-point of production guidance but can they make annual production guidance with 150MM less in CAPEX than was previously expected? Presumably that 150MM was intended to improve production capabilities.......eventually that cut results in lower production. Even at these prices, EXXI is a RISKY stock.
It is a big loss and that can be hard to take. But all the risk is not out of this stock. Many traders expect oil prices to stay at these levels, or even fall further. EXXI has to fund their capex through cash flow and at these levels that cash flow is much lower than anticipated. The budget for 2015 allocated capex to a level where the company was cash flow even with oil at $100 per barrel. Recently, in reply to lower prices, they cut capex by about 150MM. They are probably headed for another cut soon. If they cut capex too much then they will miss production targets and the market will smack them down again. If this is money that you cannot afford to lose, then you need to consider selling. Maybe sell 1/3 tomorrow and see how if feels. If you can't sleep, you can't own it.
We want to believe you George, but show us the math. What will the EPS be when this stock is in the 30's and how do you get there with oil at $92/bbl and 60,000 bbl/yr?
If you love this stock why would you waste your time here unless you would benefit from it?
Be careful here. Guidance was not reaffirmed yesterday. The choice of words sounded deliberate and they announced that guidance numbers were, "still achievable.". Almost the same as, " anything is possible". :)
One would need to understand the capacity of the wells to make that determination. I am new to EXXI but it seems that they have bought a great deal of played out or marginal fields and expect to wring some extra oil from them. That is a valid approach, but the value of such fields might not match the fields that Encana just bought.
I read in the transcript that SG & A was cut. But SG & A is not CAPEX, it is OPEX so it is not clear what he means by that. Also, two of the new wells are being pumped more slowly to optimize production over the long term. That makes sense over the long term, but by slowing production in the wells they are less likely to hit current targets.
EXXI announced today that they would cut CAPEX from the anticipated 875MM to 785-840MM, with the expected number to be 815MM. Schiller went on to say, "even with the drilling deferrals, we believe that full year guidance ranges provided earlier this year are still achievable." Can the same production be achieved while spending 60MM less in CAPEX?
You need to find another reason to hold this stock
FCX currently has 20 billion in debt and is not interested in taking on any more. They have stated that their goal is to reduce debt and improve the assets they already have.
No major oil company is going to buy EXXI "just for excitement". Furthermore, many EXXI assets were recently on the market and EXXI was the high bidder for them. Why would majors show up now with oil prices at these levels unless they are looking at a fire sale?