Congrats for not digging your heels in on the short side (like I did on the long side - I'm still slightly under breakeven right now). Best of luck.
I am suspicious that BBEP was the victim of naked shorting, and a failure to deliver perhaps millions of synthetically created shares, combined with the rise in oil prices has triggered a massive squeeze. The action we have endured (the dramatic downswing but ALSO the recent dramatic upswing) goes beyond fundamentals. We've really had no substantive news from the company that would trigger such a move in either direction. To me this is indicative of something very broken within the technical aspect of how this security trades.
This is looking pretty squeezy. The question is whether or not there are any fundamentals behind it, or if this move is entirely technical.
It acts like maybe they are about to get some financing and the banksters know about it. Fingers crossed.
Everybody on every upstream message board is clamoring about how good the hedges look for their favorite company. Well, the collective hedge portfolios of oil producers - the thing that should save them from low prices - in this case turns out to be the *cause* of low prices.
Every energy CEO I see on TV says that in spite of low oil prices, they will pump more oil this year than they did last year. Why is that? It's because their hedged production for 2015 is bigger than 2014's production, and no company is going to stop pumping oil that they've already sold in the futures market at 2x the current spot price. They need the cash! But that only serves to increase the market's oversupply, further driving down the spot price. It's a vicious circle.
Congrats. I thought you were really pushing your luck back at what, $7-8. Well the joke is on me. Whatever you do, don't stay too long and give back your gain. They call it a "short" for a reason.
Not at this time. The 8.3-cent monthly dividend should be safe through March or April. At that time the banks that hold their credit line will evaluate BBEP and could force them to suspend it until they pay down the loan.
Agreed it's ridiculous as the whole thing hinges on their qualification, "if oil prices do not recover." I translate that to "We have no idea what will happen, but we have to say something to look smart to our clients."
The answer to this question lies in how much the cost of drilling is impacted by the oil price. At a low price, the marginal plays (fields that have high cost to produce oil) are simply not economical and no amount of drilling can fix that. Drilling activity will stop in these areas, increasing rig supply, thus decreasing drilling costs. If the cost to drill falls enough, then yes, companies could just drill more in the areas where oil is cheaper to bring to the surface and where wells have a lower rate of decline. But then you have an industry that is pumping more, lower-margin oil and that just keeps pressure on price. So be careful what you wish for.
What we want to see is the lower price of oil stimulate demand. That, plus the lower supply in marginal plays can hopefully reverse the price trend over the next months.
In particular the domestic land-based drillers - see NBR. Keep an eye on it - if it holds on it could be a good sign that the end is near, or at least a dead cat bounce.
Here's what annoys me the most. I hedge my BBEP position by holding stock in big consumers of oil. And you can look at any such inverse proxy for oil that you want - airlines, truckers, etc. They are not moving up in relation their savings on oil. In fact, the airline lessors are getting crushed today. If the market truly believed the drop in oil were real and prolonged, those stocks should be soaring. So, with that, I'm casting off emotion and sticking to the program. Buying more now...
As much as I hate to say it, she's been right! ~10% decline every day for what feels like weeks. I can't believe that the blood letting continues today. I really thought we'd get a reversal at the close on Friday, with people not wanting to stay short into the weekend. Wrong, wrong wrong.
I feel like it's too late to sell this. But I have also felt that way for the last 30% of this gut wrenching decline.