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.
Short *was* the place to be. It's all but played out at this point. I wasn't smart enough to sell my long position, but I'm smart enough to recognize when the easy money on the short side has already been made. We are there right now.
Cut the distribution to zero immediately and start paying down the revolver with our hedged production. The hedges are the most valuable asset we have right now. Management should use them to take the possibility of default off the table.
I want them to cut it to zero immediately. That's what the lenders would want to see. Therefore, it is what shareholders should want. The debt holders are in charge with oil down here.
I had the same thought. If I'm a fund manager I'd want to sell my losers to book the loss for calendar '14, then buy back 30 days later when you have inflows for the new year and the wash sale doesn't hit you.
The other thought I had is that they are placing a secondary and the brokers had to take a short position before they issue the equity. That would be bad.
That's why I continue to be long here. In fact it's my second largest position. There is value here. How to unlock it appears to be the $1B question that nobody has so far been able to answer. But the divvies are nice so I am patient.
With due respect, I know how FLY and BBAM work. I'm in this stock for more than 4 years, and GLS (same structure, with GECAS as their servicer) for 2 years before that.
It was the fact that FLY has only one full-time employee that was a recent revelation to me. It wasn't until then that I fully realized that FLY is not much more than a piece of paper.
I have recently come to realize that FLY = BBAM. FLY has only one employee (Colm). FLY is mainly just a financial structure that is kept at arm's length from BBAM. It probably exists solely to get the tax-favored treatment for A/C leasing that exists in Ireland.