Afternoon,
I sent premium Gold Investment Letter members an email yesterday that we were adding a second tranche of GUSH at .79 US. I forgot to send it to you. However, it's back there now! So go ahead and grab another tranche if you are playing in this trade, which is again, very risky so don't put huge money into it.
Haliburton (HAL) is around the same price as my initial alert so no second tranche there yet. Even if oil is heading sub $25 per barrel, which it probably is at least temporarily, it won't happen without some violent bounces along the way. We're playing GUSH for a trade. HAL can be socked away long term or potentially traded. They are a conservative company with a strong balance sheet in the energy sector.
Shoal Point (SHP/SHPNF), our biggest and favorite position in the sector, has LOTS of flexibility to get through this situation, even if it gets a lot worse as the year goes on. The burn rate is low, they can pause plans on drilling well #2 to conserve cash if needed, and CEO Mark Jarvis is able, and has in the past, lent the company money in lean times versus diluting cheap equity.
We're all good on SHP! This could be a very positive longer term scenario for Shoal Point if over leveraged US oil producers start to go belly up and need to puke out non core assets in fire sales to try and survive. I'm in full support of SHP over the long haul, meaning another strong financial backstop for the company if/when opportunities arise and/or this low oil price environment drags on.
They also will be generating revenues from well #1, which even at $35-40 per barrel oil, probably pays the bills. We'll have to see what the final flow rates become once the two tier of production are combined, then do the math, but I'm comforted by the company's very low burn rate. They only have large cash outlays if they decide to drill new wells and they have no hard commitments to do so under any particular timelines.
I suggest slow accumulation and stepping up if we get a whip down on virtually no volume like we saw on Monday (somebody puked!). "Stink bids" are wise ideas in markets like this in thinly traded stocks. Meaning, someone got filled at .08-.09 (not much) by having a GTC low bid in there. I remain long term bullish on SHP and am nibbling at various bid levels between .10-.15 CDN.
There will be some INCREDIBLE buying opportunities later on in the oil/energy sector. Haliburton (HAL) is a good start, but go slowly because things can and likely will get nastier in the general markets at times this year. Oil/oil stocks are very oversold. If OPEC comes back to the table, which is possible, we could see a $40 handle stabilize versus the $20 oil predictions.
Either way, the most important thing is to have some cash available to take advantage of fire sales. Don't be the person who has to sell at the bottom to pay your rent or panic near broad peaks in FEAR. If needed, lighten up positions worrying you on rallies and step aside for a bit. Cash and gold are kings in this environment but oil will be an essential commodity for decades to come, even with the electric/green revolution slowly arising behind the scenes.