They are assuming the debt, taking the company private and the debt will continue to trade. It happens all the time that way. Get over it already.
Sentiment: Strong Buy
With today ending the quarter and the preferred dividend to be announced in the next couple of days, the preferreds could see a nice bounce off these very depressed levels. If you accept Porter's representations, and I do, they have the cash flow to support all the debt payments thru next yr and beyond which make the preferred an easy double and then some while being paid about 2%/month to wait. That being said, the bonds trading down to 61 don't exactly reflect Porter's confidence. One of the best thing insiders could do for the company and their own net worth is make some preferred stock purchases whenever possible.
There have been a number of E&P companies that have suspended preferred dividends and that has put quite a bit of fear in this sector of the high yield area...as if there wasn't enough fear already. The pummeling of Glencore has, I think also impacted the sector.
According to Porter at yesterday's presentation, GST has more than adequate liquidity thru 2016 and maybe even 2017 to fund capex and fixed obligations, ie. debt and preferred. I'm not sure of the math behind 2017 but I can accept 2016 since capex is expected to be lower.
E&P's are slow to respond positively today despite a rebound in oil.
It would be quite reassuring to see an insider buy of the preferred... altho it may not be possible just yet as I think some well results are due out soon.
But.... it would be quite reassuring to the preferred market to see an insider buy of the GST A's and B's.
The bond/noteholders are dumping too. A big dump at the end of the day took the price down to 64ish. No wonder the preferreds tanked as well. But the fact that they just bumped up capex a bit suggests that liquidity is not the concern the price would suggest. I think there is some panic because a few other E&P's have suspended preferred dividends.
and it's a market laggard? And it has lots of hedges. Go figure that one out.
I'd say maintaining the borrowing base despite the plunge in energy prices is another rabbit pulled out of the hat...voila!
Energy investors searching for clues as to where prices are going often look to the oil futures strip – contracts that expire in each of the months ahead. It beats making predictions on what is frequently a volatile and unpredictable market, particularly in the recent past.
But an analysis of monthly spot prices since 2001, compared to average expectations in the 24 months leading up to those dates, shows that the crude oil strip is a poor indicator of future prices.
On top of that, TD Securities analyst Juan Jarrah found that the higher-than-average volatility associated with oil prices movements indicates a wide range of outcomes may occur.
How bad an indicator of future spot prices is the futures strip?
In the 175 months Jarrah tracked since January 2001, the futures strip overestimated the actual price 32 per cent of the time, and underestimated it the other 68 per cent.
“Although WTI has recently shown to be highly correlated to the global supply/demand imbalance, this has historically not been the case,” the analyst said in a research note. “Clearly, there are other factors involved, but our conclusion is that the current weakness in oil prices is an overreaction if solely blamed on current excess supply.”
Given how high volatility is relative to historical levels, he believes there is ample opportunity for the strip to be wrong again when it comes to 2016 and 2017 oil prices.
Jarrah noted that the standard deviation of the July 2015 contract during the past 24 months was US$15 per barrel, compared to about US$7 per barrel between 2011 and 2014.
As a result, with the current spot price more that two standard deviations lower than the strip would have predicted, he believes the current futures curve could prove to be excessively bearish.
So with market sentiment at a recent low, Jarrah looked for names that stand to benefit in a rising commodity price environment. He noted that companies with more than 20 per cent liquidity on their bank credit lines, below-average cash margins, and a more than 70 per cent weighting to oil look most appealing.
Among the junior and intermediate producers in the analyst’s coverage universe, those are Baytex Energy Corp., Lightstream Resources Ltd., BlackPearl Resources Inc., Surge Energy Inc., Twinn Butte Energy Ltd. and Zargon Oil and Gas Ltd.
I had the same question as you and wasn't around Friday to hear it. I read the transcript and I thought it read better than the price action suggested. Looks like it tracked the decline in oil. Oil finished down at the low and so did GST along with most other E&P's. This is SUCH and unloved sector. Barron's headline story yesterday to buy commodities can't hurt.
The bonds trade under a CUSIP- which is 36729WAA1. Price has ranged from 85 to 92 this week with the last trade today, a sizable one [1000 bonds], around 87.