It would be nice to have more good discussion here. I don't bother with the KOG board any more on account of the idiots there.
OAS is very interesting here. The secondary hurt as well as the lower prices for crude this quarter, but OAS is producing a lot more oil with the acquisition. They also get pretty good comparative prices with their midstream segment, and OAS Well Services saves a lot on the cost side. The secondary will reduce earnings by about 8%, which the analysts don't seem to account for. Still, they're trading at about 11-12 forward earnings estimates.
Seems to me the biggest things holding back OAS, as well as the other Bakken and unconventional oilers, are the high differential for Bakken crude and the perception of an oil glut and price crash. Looking at the WTI and LLS price strip, the market disagrees. What do you guys think about the price of crude going forward and how the Bakken oilers will fare?
They don't and won't defend the share price. On the bright side, when boilie shows bashing EOG and pumping one of his microcaps, the price drop is usually about done.
For all the talk of crude tanking, the wti strip is pretty strong through 2014. EOG is one of the best at getting good prices for their oil because of their crude-by-rail terminals. They do not have to settle for the Clearbrook price, so revenue and profits should be strong for the 4th quarter. Maybe not as good as Q3, but they should still earn well north of $2.00 per share.
If someone puts a sell rating on KOG now, it shows how abjectly stupid they are. Why didn't they put the sell rating on when KOG was 14? Or even 13?
What Bakken oil is selling for is not the important point. The important point is how much OAS is getting for their oil. They are sending most of it by rail to the various coasts and getting much better than the Bakken sweet price.
It's Mark Papa, retired CEO, present chairman of the board until December 31, and future board member.
I suspect Papa repeated some comments he has made before, and some "expert" jumped on them. Papa has said that the US onshore oil production will not grow like it has in the past and won't make a significant dent in world supplies, that the Permian is not as good as advertised, and that EOG will not continue to grow at 40%. Papa has always touted EOG as the best oil producer with great revenue, growth, and profitability. I'm sure he was not bashing EOG, just giving his conservative views.
I wonder if the storm has people thinking that production will be hurt. There is still a lot of concern that Iran and Iraq will flood the market with oil, and there is still a high differential for most US domestic oil.
Fundamentally, with the price of oil steadying around 97 and the LLS/WTI spread around 4-5 dollars, EOG should be doing very well and outperforming their peers. I added a little more today after the dip, only to see it dip farther.
Now that the banksters, thugs, and other thieves have stolen cheap OAS shares, the stock is free to move up again. After all, they didn't acquire their $45 shares with the hope of breaking even. I believe the stock price will be back above 50 by the end of the year.
They might be picking up some acreage, but I doubt if they will buy anybody out. There's still some land for sale, and some operators are pinched for cash.
jim, I consider "general corporate purposes" as an operating expense, whatever they use it for; it all shows up as an expenditure on the SEC filings and reports. I know OAS is close to cash flow neutral or positive, but not sure if they are currently.
OAS is my largest holding, so I am not bashing, just frustrated and venting.
OAS is offering 7 million shares to pay down debt and use the funds for operating expenses. First of all, when dealing with financial institutions, the financial institutions get the better of the deal.
To pay down debt, they incurred the debt in the first place. When a company raises cash, they don't get the full amount. For example, one recent transaction to borrow 1 billion only netted them 983 million. The debt they have is not as good as the recent rates that WLL and KOG got. One percentage point on a billion dollars costs an extra 10 million a year. But that's another story.
Issuing shares generally hurts the stock price, as we see in after hours. It also dilutes the existing shareholders. The financial company makes money on the issuance, often taking a bunch of shares for themselves at bargain prices in addition to their fees and charges.
When OAS uses the money, they pay a penalty for retiring debt early. It's in the most recent 10-Q if you want to check.
If they had issued more shares at 55, this would have been ok, but we are too cheap here at 11-12x forward earnings. My guess is that the offering will be around 43-45, but I hope I'm too low. If the offering is too cheap, some big, insider "friends" of Citi will scoop up the whole offering.
Management is good at finding and extracting oil, but they're very deficient in shareholder-friendly cash management.
My thoughts exactly! I was wondering why OAS continued to get crushed on no news, but as you note, somebody knew and traded on the insider info. Too bad, because Monday was a classic capitulation bottom.
Hard to tell where it will drop to now, but it should find support around 43 to 44. On the bright side, look what happened to TPLM when they offered a secondary at 6.40.
I agree that OAS is undervalued here--trading at 11x 2014 estimates--but I disagree that Bakken producers are getting around 20% less than WTI. Many send their oil to the better markets, and OAS is shipping most of theirs via rail. I estimate they are getting closer to a 10% differential. Remember, OAS got better realized crude prices than most Bakken operators during Q3 due the midstream/marketing branch of the company.
Which analyst and which lie? There has been so much bad info about EOG since their earnings that it's frustrating. The biggest lie I am aware of is on revenue when mark-to-market FUTURE HEDGING was considered to be an actual loss and the analysts (like lemmings and parrots) said EOG missed revenues. I still think EOG is trading at 15x 2014 earnings.
The Bakken oil price is for those who cannot ship their oil to better markets. In the last call, OAS said they were currently shipping 80-90% of their oil by rail, which gets them much better prices. In Q3, shipping only 40%, they still got more $$ per barrel than most other Bakken producers for their Bakken oil. The OAS midstream/marketing team is doing a great job.
The Bakken spread is a consideration, but not a big one for OAS.
Although the price for WTI and Bakken crude are down, fortunately for OAS, their marketing team is doing a great job. They got a better price for crude in Q3 than a lot of other Bakken operators. They are sending their oil to the better markets, which will continue to give them better realized revenues.
It should be noted that WTI averaged around $100 for October, and thus far around 94 for November. Not as good as Q3, but still highly profitable, and OAS has very good hedges for Q4 and the first half of 2014.
Based on my research, here are my projections for Q4.
1. OAS will be closer to the high point of their production guidance than the low point. I'm guessing 45k.
2. They will continue to cut costs and improve efficiency.
3. Wells will continue to get better with improved completion techniques.
4. I estimate revenues at 370-380mm, and earnings $.90-1.00.
With Oasis Well Services and the marketing segment, OAS has a competitive advantage most of their competitors do not. The share price has been doing poorly, but the company is doing well.
I'm not saying it will go up Monday, because there are many external factors, but it should outperform most of the other oilers on Monday. If I'd had the available funds, I'd have bought 100 shares in the 64.90 range and tried to sell around 66 on Monday. Just a quick trade.
Did you notice that he got a special exemption so that he did not have to play by the same SEC disclosure rules other investors/traders/hedge funds do? It gave him a chance to accumulate a significant stake without drawing attention to what he was doing.
Sure looks like someone wanted to pin WLL at 65 today. Oilers were generally up today, but WLL was down almost a buck. If I'd had some dry powder, I'd have picked up a little for a quick trade.
With the spectacular earnings report and subsequent selloff, today's price action was a welcome relief. After listening and reading the reports, I could only find 3 things that were less than stellar, as opposed to many outstanding things.
First, the East Irish Sea production was again delayed by a couple quarters. That's only a minor issue, in my opinion. Second, they "may" not have such a great increase in production for Q4 as they do more testing to test and prove out acreage. And finally, the price of oil is down from Q3, but it should be noted that WTI averaged around $100 for the month of October, and EOG has been getting better than WTI pricing.
The biggest "disappointment" on EOG's earnings was revenue, but that is not a valid criticism of EOG's quarter. There was a non-cash "loss" of $293 million in mark-to-market hedges. For Q2, there was a non-cash gain of nearly 200 million, so that is a non-issue. With the lower price of WTI crude this quarter, EOG will probably show a non-cash gain of several hundred million for Q4. Their hedges are very good, so cash flow is not an issue either.
Those who glibly cite the PE for EOG are all over the board with estimates, and I think most are wrong. Based on non-GAAP earnings, I have their 2013 PE around 20 and forward PE about 15 with WTI in the mid 90's. Do the math and see what you come up with.
The big story is increased production on better completions and improved efficiencies, and as a result, better earnings and more revenue. Unfortunately, the market has lost sight of those facts and punished shareholders.
Mark Papa probably knows the Eagle Ford better than anyone else, and he has a pretty good idea about how much oil is there. On the other hand, EOG's Permian land is not the sweet spot, so Papa is not convinced that it is better than Eagle Ford. As technology improves and more data is gathered, these oil fields seem to get better and better. I'm sure Core Labs is accurate on their data, but a big question is how much of that oil is commercially recoverable.