Get it right Wheel, I bought 90% of my shares at less than eighteen cents a share, so yes I'm still way ahead of your market-timing MO. You are right in that I've never "shorted" KOG although I can easily see the wisdom of doing that especially in the rear-view mirror!
As far as taking a haircut down to around Six Bucks a share after the merger, you know darn well that ALL of the oils got a haircut of their $100+ oil prices. In fact back in 2008 oil went from $144- down to around $38- in about six-months, which is precisely where I walked in the door at forty-eight cents, then thirty-cents and finally down to the real basement of just over sixteen-cents which is where I bought in big time. Of course in hindsight, I shoulda, woulda, coulda bought it all that price!
This +/-$60 oil won't last long anyway. But I wouldn't be surprised with the fracking revolution world-wide, if oil settles around the $80-85- range for years to come. I can't think of a better catalyst for the world economy than stable oil prices in the range going forward. Plus there's plenty of money to made in the oil patch at $80-85- oil with the improvements and efficiencies in the drilling and recovery process. The keystone project can only improve on all of that.
Have a nice day wheels, you were right to short the stock and I am right to continue to own the oils and buy on the dips.
I said I was going buy on Monday and all I got was cat-calls. Some say it was "oversold", of course it was, it always is when the commodity drops and everybody wants to sell before the other guy does, and most people want to "wait and see" which doesn't exactly put a floor under the stock.
Last Friday the graph was flat but the volume was way up, a sure sign that the bottom was near.
Today the graph was way up and the volume supported that.
I'm waiting for Whiting to put something out on how they're going to adjust to these low oil prices going forward for a while.
E.g. Are they going to let go of the three rigs that KOG had up for renewal this month?
Are they still going to take delivery on the four new BOSS rigs this next Spring?
When do their hedges run out?
What are the terms on Whitings Debt? We know what KOG's terms are.
I have never lied about any of my purchases on the dips. Yes, I've been optimistic about the stock price, but oil prices changes things.
And yes I did start buying KOG at 48-cents, then 30-cents and finally at 17.5-cents culminating for 50K shares in February 2009.
I have only one handle and yes, I'm a Buy and Hold Investor even though it's pretty obvious that others can brag about their timing in and out which I will not do.
The seeds of another oil bull market are being laid in every collapse.
And yes, I will buy more on Monday, mark it!
When any commodity drops this far this fast, it always gets oversold at the bottom.
The only question is where's the bottom?
I will be buying this next week before the "followers" decide its time to buy back in, after all somebody has been buying all of the shares that have been sold so far by somebody.
All it takes is a little time to completely flip one person's bragging rites into yesterday's mistakes.
All it takes is patience, stay away from margin, message boards, and if you can find one, a successful mentor that has a LONG record of success checkered with a few losses along the way to inspire a little humility.
All debt is not equal. You are correct in describing the debt as about $5.2B and some of it ($1B) is bank credit line debt which is senior to the remaining bond debt. The bond debt from KOG has an average coupon right around 6.25% and is due in about FIVE YEARS and are NOT CALLABLE and represents about half of WHITINGS CURRENT DEBT. There is no reason for the bank(s) to call-in WHITINGS based on Oil Prices because the bank debt enjoys a senior position with plenty of collateral value even at $40- oil.
The only question is whether WHITING can lay-off enough rigs while these oil prices are low and getting lower to make the interest payments until the bond maturity dates start looming.
The answer is obviously YES.
So how secure is WHITING?
FIVE YEARS is a long time in the oil patch for things to stay the same.
$40- OIL would bring gasoline down to around $1.50, anyone want to bet that would last long?
$40- OIL and $1.50 gasoline would spark all kinds of demand and put the DOW over 24K.
None of this is going to happen because OIL is near bottoming out now and it should in around $75-80 until the demand increases come by Spring, then higher prices will come with the driving season.
Tax selling is in right now and it'll be 30-days outside before sellers can buy it back.
Or was it the ARBS squaring their accounts?
BOTH stocks show massive volume and neither reflected a drop big enough to match the volume.
No, I'm just Symon or "S" and I am up 38-times on my original 50K shares at 17.5 cents. Oops, I stand corrected, I did buy 4K at 48-cents and 6K at 30-cents. The rest are anywhere between .50 and around $12- but not too many. You can blow all you want, but that's what I've been saying for 5-years now and everybody knows it.
And Welbie lives somewhere in North Dakota but I don't know where, and I suspect you live in your Mother's basement under a 40-watt light bulb that matches your IQ.
Just wondering how many alias's do you have? And are they all buying to fill? Or did you sell at 16- and buy back in at $10-? Or are you still shorting at $6.56?
Me? I'm still sitting on a 38-bagger, but you're right it was a 94-bagger at $16- but I blew it!
It's tough, that's for sure because if I would've listened to you and sold at $16- then bought back today I would've had a 229-bagger.
So where are you now? A 2-bagger? 3-bagger? What?
For the record, I've been adding all the way down to last Friday and I'll be adding in again next week.
So let it be known, I'm long and getting longer thanks to $68- oil which really has had little effect on either KOG or Whiting so far. They're still selling oil for $95- and their debt hasn't changed by one dime.
Cheap oil is going to do what it always does, stimulates the consumption of oil leading to another round of stabilization, leading to price increases, leading to a boom, leading to a bust, leading to yadda, yadda, yadda.....
Show me the covenant that says that the $2.4B in bond debt due in five years can be called if oil prices drop.
Show me where KOG's ability to pay the interest on this debt if oil drops down to $50- and KOG drops all of their drilling rigs over the next 2- years.
Show me why Wells Fargo would call in the credit line when they have have a senior interest in a general business agreement.
Show where these agreements have not been accepted by Whiting and the debtholders.
You guys are so transparent in your efforts to mislead shareholders.
Up until now, the only holder of KOG's debt that has lost money, is Wells Fargo in their hedging unit, and that is totally unconnected to any debt issues.
Now that we've reached the "bottom of the barrel" price-wise, and maybe on this board messagewise, you guys better fill and move up. (Or is that what you're already doing?)
The trade date is the date for cost basis, not the settlement date. And selling KOG for a loss and buying it back must be 30-days away or it is indeed a "wash sale". But selling KOG and buying a different stock is not a wash sale. KOG and WLL are two completely different entities, the fact that the ARBS consider it one makes no difference to the IRS.
If you want to speculate about something consider this: is the combined affects of some selling KOG and buying WLL lower the price of KOG and raise the price of Whiting in a microsecond scenario? On the other hand, the ARBS will be selling a higher WLL to buy the lower KOG, again in a microsecond scenario.
These two cross currents are directly opposed to each other and I'm thinking that their net effect is to lower both of them temporarily until all of it is one company next week.
What do 3-15-09, 9-5-10,10-2-11, 6-7-12, 4-14-13, 12-9-13 and 12-2-14 all have in common?
On those exact dates, this message board was buzzing with doom and gloom and name-calling from the peanut gallery bragging about how they "got out" and Peterson was the worst CEO yadda, yadda, yadda.
And some of us were talking about fundamentals and the expansion of what our friends in ND were doing and buying more shares.
And then what happened?
Go check the long term chart and weep.
Live and learn, tomorrow is a new day and the next day everything changes,
Kodiak investors that bought over the current price, are selling to buy Whiting in a lateral move to claim a capital loss while avoiding the IRS "wash rule".
This drives KOG down, but the Arbs balance it out by selling Whiting to buy KOG thereby raising the volume of both stocks and creating confusion among the technical traders.
I love confusion, the more the better. When money is on the run, cool heads and cold cash have the upper hand.
The way that this deal is structured is more like a merger than a "buy-out" because a BUY-OUT means that we would be "OUT" and we'd be getting PAID something. But we're not OUT and we have no money to show for this.
The numbers you're quoting were used to determine how much each group of investors would own of the new entity.
Some investors originally were carping about not getting a premium price for their shares, but again we weren't getting OUT, we're getting ABSORBED.
But if this deal was based on a set price for either entity and not the other, the deal would no doubt have a BAIL-OUT clause.
E.g. Let's say that Whiting offered a premium for KOG, like say $20- per share, and the price of oil went up to $144- per barrel like back in early 2008. KOG shareholders would never vote for the merger even though KOG would have to pay $500M to WLL as a penalty for backing out.
Likewise if oil collapsed down to say $68-. the Whiting shareholders would want to back out even if they had to pay Kodiak $500M as a penalty.
By setting a percentage of the new combined company for each shareholder group, no matter what happens to the oil price up or down, it is fair to BOTH parties.
I've structured a number of mergers on a much smaller scale, and this one was well thought-out as the lower the price of oil, the better the combination is for all shareholders. Conversely had the price of oil shot-up to historic levels, it would've still made much sense for BOTH groups of investors going forward.
Now we have to wait a few more days for the wreckage of all of the margin damage done to the speculators in both the stock and futures markets before the recovery begins anew.
There's bank debt and then there's security (bond) debt and they are not the same threat to a company on a short basis.
At $100+ oil, KOG's debt to equity ratio was around 40/60 in favor of equity, with oil dropping down into the mid-70's I would guess that ratio looks more like 20/80 which is very high.
But KOG's debt is substantially different than the garden variety debt that the market seems to ascribe to companies generally in any sector under pricing assault.
Because KOG's bond debt cannot be called in like bank debt, KOG's only obligation or risk is making the fixed interest payments on time. KOG's bank debt (credit line) is senior to security debt, but again, it is senior so the price of oil would have to drop down to near the cost of production to be a factor or be withdrawn.
This merger is exactly the best thing that could happen to KOG at this time because of KOG's debt.
And this is also the best thing for Whiting because they're not committed to paying a specific price for KOG, but rather a specific percentage of the combined new company, which makes the deal fair no matter what the real value is going forward.
As a KOG shareholder, I am looking forward to owning 29% of the Colorado and Texas Whiting properties, and the better equity position that Whiting can bring to the table to either weather this oil price collapse, or to exploit KOG's superior acreage in the immediate future.
For now, money is on the run, and it's times like these that real wealth is made at the expense of the fearful.
Much has been made about drilling for oil in shale at under $80- per bbl., but as usual, there's always more to the story than that. Amortizing drilling costs into oil prices certainly makes sense if starting from scratch, but during hard times in the oil patch, all that matters is survival until prices return to "normal" which apparently is around $85-95 bbl.
KOG's leases on drilling rigs is a staggered 2-year deal. So if oil prices drop below the amortization rate, KOG's recourse is to start dropping rigs while their hedges support their existing short-term cash flow.
But if oil prices stay under $50- for more than 4-years and the 5-year bond repayment is looming, then there will be a problem. (That's assuming $1.25 gasoline!)
Finally Chad you're making some sense.
But there's two problems with your US (Obama) analysis:
1-The lower prices will absolutely put the damper on the renewable pipe dream of energy independence.
2-You're giving way too much credence on the administration's ability to organize and lead anything beyond a one-car funeral procession.
Laugh if you want to, but I have been a net buyer this morning as I'm sure you have been.
This is precisely how deep pockets can fleece the wallets of the uninformed who trust "stop limits" on what is normally a light trading day between Thanksgiving and the week-end.
In fact this is exactly on the 6th Anniversary of when I bought my first KOG shares at .48 in 2008 after oil went from $144- all the way down to $38-.
A month later on the same kind of week-end after Christmas, it hit .30 and yes, I loaded-up again.
Finally when the year-end report came out in the 2nd week of February 2009, the market tanked the stock down to just 16-cents and I managed to buy-in at 50K at 17.5-cents.
Between the hedges and the merger, I don't think we're far from the bottom right now. But who knows? Oil is not bananas and it will keep. Once the weak hands and the new Congress takes over, things will get better.
Meanwhile cheap oil does hurt Putin, Iran and the other side of oil contracts at $95- bbl, but it's very good for the other industries, at least for awhile anyway.
Think about this: If KOG's cost of production at around $100- per barrel is $40- (See website), what is it $80-? Or $40?
Is it still $40-?
No it isn't!
Because the 18% royalty interest decreases with the price of oil.
At $100- Oil, the $40- cost of production has $18- built into it.
At $50- Oil that 18% royalty interest is $9- instead of $18- and the cost of production is just $31-.
At $75- Oil, it's $35.50 everything else being equal.
The point being that the KOG/WLL combination coupled with the expected economies and advancements in the "spiral fracking" area will soon become apparent to the market. (We'll have to wait until next year to find out about the Red River).
CLR's Hamm gutsy lead of selling all of his forward contracts and going ahead with Billions of future production at spot market prices speaks loudly as to where Harold believes oil prices are headed. (I think he's right!)
Fundamentally this looks very much like a buying opportunity instead of a dead-end stock. After all, every share that has been sold since $16+ was bought by somebody.
In fact if some bought at well above $10-, they should sell it for a loss and immediately buy Whiting back to avoid the "Wash Sale" tax rules that state that one has to wait 30-days to buy a stock back.
After all. KOG is not WLL just yet, but soon will be come next week. (Like having your cake and eating it too!)
Yes, I think following Hamm's lead is a prudent strategy in predicting oil prices over the next year.
Certainly he can afford it now that his divorce settlement is known, and the fact that he owns 70% of Continental, let's him use his "gut instincts" honed over 50-years in the oil business to follow such a "gutsy strategy".
I'll take it!
If this winter turns out to be as cold as it appears right now, oil is going to recover by next spring's driving season. Meanwhile there will be consolidations in the oil patch and this merger will certainly help with that.
With Hamm's divorce in his rear-view mirror, Continental will be on the prowl as well.
And what better time to get a 3D siezmic survey done on the Red River as well? Prices will come down on all oil service company's services.
Peterson & Co decided that the best deal for us was to structure this deal like a merger for tax reasons and for fairness to BOTH entities.
E.g.If Whiting would've offered a premium price of say $20-, and oil prices skyrocketed UP, I can only imagine the cat calls from the peanut gallery.
On the other hand if oil prices would've collapsed down to say $78-, Whiting would've probably written a "bail-out" provision in the contract and the deal would've been off and the peanut gallery would've said Peterson was a Dufus.
I think Peterson and Volker made exactly the right deal at the right time and fair to BOTH sides.
This way, oil prices going either way is a neutral and the lawyers waiting to pounce on any "P" or "Q" will not have a case.
In a few weeks this combination of two complimentary entities will begin to show the market;
1-the efficiencies of this deal.
2-the huge increase in production and and eventually reserve values as oil prices stop dropping and start rebounding back to around $90- bbl.
3-Determination of the size and scope of the Red River Formation underneath the Three Forks.