Lost a lot on the last few I mentioned, holding and added some total.
Lots of dividend cuts among small cap dividend payers. My positions are holding dividends steady so far, depends on whether their hedging can outlast this fall.
Any opinions on the quality of PVA assets? I was looking at SM based on their balance sheet, but not sure now.
PVA’s Eagle Ford acreage is good. They aren’t in the sweet spot but they are very near it. However, they are a leveraged firm and their debt is not trading well at the moment (~70-75 cents on the dollar). Much of their reserves in the Eagle Ford are “undeveloped” meaning they will require a good deal of capital to become cash flow producing, which could be a problem for a company that is so leveraged.
Oil and Gas E&P is a very capital intensive industry and there are a lot of B-rated companies out there in this space that the markets have not been kind to lately. Debt markets may close to them and these companies on borrowing bases may see their lenders cut back available borrowings, which is a problem for these companies that need the capital (PVA is one of them). U.S. oil and gas E&P’s cash flow statements are not pretty – they have large funding gaps that have largely been met with new debt capital but if that goes away they may have to turn to far more expensive hybrid/equity capital.
Well costs in this industry will come down when drilling activity slows. The leveraged firms may not get access to capital to reap those benefits if conditions persist. These small E&P’s are going to be volatile and some may not be around in 5 years – if you’re willing to accept the risks of a leveraged E&P this could be a play for you. Other E&P’s would like their acreage in EFS and could open the door for a JV. If you want U.S. E&P’s that are investment grade (access to debt capital), have attractive acreage positions in top plays and are leveraged to crude oil prices, EOG, PXD and CLR are the places to look. They will be survivors.
^SM and EOG are having a hell of a day
Tommy - did you reference hubbert’s theory above? The dmr of oil fields and such?
^ Regarding oilfield depletion, it’s just a fact of oil and gas production. When you’re modeling out a new well you’ve got to consider the depletion and the decline in production over time as pressure decreases. I’m not one of the ‘peak oil’ people that calls for crazy high prices b/c of depletion. There’s a lot of sources of oil in the world (we aren’t running out as some would have you believe) but they require higher prices to become economic. Alberta’s oil sands is huge. Venezuela has oil sands, too, and Madagascar. The U.S. has a potential huge source of oil with true “oil shale” in the Green River Formation in Utah/Colorado/Wyoming, but you’ve got to produce it through a mining method to get the oil out of the rock, which is very expensive and needs a lot of water (which there isn’t much of in the region). Someone that’s looked at it told me it’d need $150/bbl to incentivize development. I don’t think it gets developed in the next 20 years (if ever) but its there if the market drives prices up high enough to incentivize production. Environmentalists would throw a fit about it.
Technology is huge. Schlumberger, Halliburton, etc. have very smart people working for them that’ll find oil if they are incentivized to do so.
Phenomenal close, up 2%. Thank you Yellen for delivering a pep talk to the market; “oil price effects are transitory”. It will be interesting to see, should oil declines resume (likely), if the market sees thru it and expects higher GDP, or if they continue to freak out.
i think someone mentioned that the verbiage used in the fed is meant to stimulate the HFT build on specific language. Good ol yellen also sees the lower prices as postitive implicatons - similar to Ohai and CVM - only time will tell
everything is transitory to the Fed. i think they just like the word.
Yeah, they had to say something positive about oil even if they don’t believe it, and transitory sounds fancy. 
Low priced oil could end up being a net positive, but I find it hard to understand how oil can remain low. It seems mostly a problem of supply, and once the high-cost producers are removed from the market supply goes down, and the price goes back up…net it just ends up being expensive jerking production up/down and dealing with the defaults.
She’s a funny little creature (first time seeing her speak). Being a West coaster I’m not used to that East cost accent, and it seems like she would spit a lot with that style of speaking, wouldn’t want to be in the front row. But even though she has no sense of humor, no personality, looks like a hobbit, and talks like a gangster…I thought she was direct, firm, clear, and effective.
That does sound like an interesting exercise.
Usually I dont fancy concpiracy theories, but I would like to hear your thoughts on the following thought of mine: Few people, especially in Europe know, that Russia’s biggest money cow is oil not NG. I recently read a paper outlining that the most effective way to sanction Russia would be an oil embargo, because the blowback for the West would be more managable. What if, behind the scenes, the US have pushed the Saudis and Kuwaitis tp keep supply higher than they rationally would to put pressure on Russia, which cant produce costeffectively at current prices. So one would expect prices to rise when Russia begins to yield to Western demands.
^ Nonsense. On the supply side, OPEC is defending its market share by dumping on the market. Why Americans expect OPEC to cede market share to them without consequence is beyond me. “Oh yes, Mr. Washington, I will cut my production so you can take up the slack at the same price.” What bullocks. If Samsung and HTC were producing more and more Android phones, do you think Samsung would cut production to allow HTC to sell more units at the same price? No. Both companies would be in a race to the bottom on prices, which is the supply side argument to where we are at $5x oil.
my boy goit it under control
http://finance.yahoo.com/news/putin-accuses-west-trying-sideline-110147730.html
This makes sense, because everybody in OPEC doesn’t have the same production cost, and the smaller players are getting screwed over by Saudi, so OPEC as a group doesn’t necessarily benefit. Trying to kill shale by keeping prices low is a really risky game as all these authoritarian countries depend on oil revenue and probably can’t survive that long while US producers are hedged longer.
Also, KSA is ruled by a pretty pragmatic people who will easily cooperate with Israel against Iran while publicly hating both of them…
Cheniere Lands 20-year Natural Gas Deal in Portugal
Same reaction I had 8 years ago when I heard her speak for the first time. She led the San Francisco Fed at the time.
Saudi Arabia said this two days ago. Basically he said OPEC is not going to loose market share when they increasingly can’t control the price. He said OPEC prodution has remained constant for a few years now. So all that means to me is that the production cuts are going to have to come elsewhere.
I’ve been saying this same thing. Americans think these irrational thoughts, and it just makes no sense at all. But they truly believe they are the center of the universe, so I guess it makes sense from that warped perspective. They should work on their international business skills, and also on accepting cooperation as an alternative to competition.
^What? Aren’t most Americans over the moon that OPEC held firm and let market forces do its thing?
And are you suggesting the average citizen would be better off if competition is stifled? I would have thought competition was responsible for the super computer in my pocket and even my $70 dollar electric bill this month.