Let's consider a situation in which oil prices remained below the price at which a sufficient number of SDRL's rigs were unused such that SDRL was not able to remain a going concern. I don't know the exact amount of oil that is now coming from under water sources, but I suspect it to be over 10 million barrels per day. If rig utilization dropped by 50%, oil production would drop by at least 5 million barrels per day, resulting in a substantial world-wide shortage of at least 3 million barrels per day. Since such a drop in rigs that are used and useful would eventually decrease world oil production below demand, that is not a possible outcome.
The fact is that at $100 per barrel for WTI, worldwide production exceeds demand by a relatively small amount; that is, slightly more than one percent. It is the nature of the industry to overshoot equilibrium price on both the high and low side, and that's all we are now seeing.
I think it reasonable that the auditor would make an issue of the going concern matter. Further, I think it best that OCN be shaken up now since it remains in a good position to correct all outstanding problems without danger of a default on any of its obligations. If a company shows a genuine willingness to make amends for past mistakes, it will always be given the opportunity to do so.
Game, that's me. Tungeinass is obsessed with me and posting on this message board. She (or he) may also have other obsessions of which I have no knowledge.
Good info, but I believe there are other costs that are not included. For XOM FY2013, the cost of production was 67% of revenue. But after all the expenses of running the business are counted, including SG&A, the XOM cost goes to 89% of revenue. I suspect all the DOE costs are low by about 15% because there are indirect costs and the need to get a ROI that they haven't included.
By virtue of share of world production, Saudi Arabia controls prices. That's an incontrovertible fact.
To stamp out high cost producers the Saudis dropped prices, which raised consumption. Further, contango in the futures market resulted in additional storage since the futures price was greater than the storage cost. Saudi Arabia has had to raise production by a considerable amount to keep prices depressed and satisfy an increase in demand by users and an increase in demand for storage.
The price will be held down for as long as the Saudis believe it will take to discourage high cost producers. I expect a WTI price of at least $75 by the end of the year.
Saudi Arabia continues to control oil prices, and have obviously allowed prices to rise a small amount. Any price below $55 to $60 will still put pressure on high cost producers throughout the world; $45 or $50 oil is unnecessarily low.
This is housekeeping. Common stock registered for distribution on incentive plans but not distributed are being cancelled in preparation for final resolution of the bankruptcy.
A final bankruptcy plan now needs to be filed, which will detail distribution of assets to various creditor groups. Not all creditors will be paid 100 cents to the dollar. The creditor group that receives partial compensation on their debt is the only group that can vote on acceptance of the plan. Since RSHCQ does not have enough money to fully pay all creditors, the plan will include a provision that all common stock will be cancelled. Once the final plan is prepared, accepted by the judge, and accepted by the creditor group entitled to vote, it will be implemented. At that time the common stock will stop trading, and put holders will be compensated in the amount of the put.
No RSHCQ stockholders will have any equity in the new SG Radio Shack business.
For the shares to be worth more than zero, all creditors have to be paid 100 cents on the dollar. SG would be able to benefit from buying existing stock if and only if it was willing to pay off all creditors, secured and unsecured. Why would they do that since they already got what they wanted. SG will take Radio Shack public after it gets thing going, but existing shareholders lose everything.
There's not much logic behind the way this stock trades. Even an 18 cent price is irrational because it's obvious that the stock is worthless.
It's amazing how stupid the average investor is. About $3 million was thrown down the toilet today for the purchase of this stock.
Lots of confusion on this message board. When a company enters bankruptcy, the creditors effectively take ownership of the company, and the wishes of equity holders is ignored. Standard General bought the RS name, leases, and some assets from the creditors, not from the stockholders. The previous stockholders don't currently have standing in the bankruptcy proceedings.
A purchase of RSH at this time is like buying a losing lottery ticket for a lottery which has already been held.
Keep in mind that the judge would have established a committee to represent common stockholders if he believed there was any chance that the common stock would not be cancelled as a result of the bankruptcy. So he unquestionably believes the common stock to be worthless.
A logical conclusion from a belief in the EMH is that one can't outperform the market, which leads many to believe in the EMH. However, if the market is highly inefficient the same situation would result.
The imbalance between supply and demand is not so great that it justifies a substantial or prolonged drop in prices to the $50 range. At this price, the rate of increase in oil production will be considerably less than the rate of increase in demand, thus prices have to rise. The current imbalance is about 1.5 million barrels per day. I believe that supply and demand (which increases at the rate of 1 million barrels per day per year) would come into balance within one year had priced dropped to $80. But since the market tends to overshoot for a variety of reasons too numerous to mention, we have $45 for a short time.
Freddy, you may have heard of the "efficient market hypothesis," which says that the market price of a security accurately reflects all available information within minutes of it becoming widely disseminated. What we have in the relative pricing of Radio Shack bonds and common stock is a glaring violation of that theory. If one throws out the efficient market hypothesis, much of the common understanding of the manner in which financial assets are priced comes into question.
The logical conclusion from the current state of the market for RSH securities is that either the stockholders, or the bond holders, or both, have no idea what they're doing. Further, the efficient market hypothesis must be completely wrong.
An entrance into bankruptcy means that all creditors must be satisfied, if possible, before the company can exit. Existing debt can not be rolled over. Most of the Standard General bid is in fact their debt, not cash. The amount of cash in the bid falls far short of what is able to cover existing debt. The SG bid is only slightly more than the bid from liquidators.