Recent postsFirst off, I am a shareholder, wish I wasn't...
About the debt:
Well debt is a two edged sword. Just like when someone buys stock on margin. This person who
takes on margin debt is hoping that the risk that is taken on, is rewarded by the stock going up and thus will sell at a profit: for the risk that was taken.
Make no mistake, taking on debt, is a risk.
The risk of taking on debt, is when the asset that is purchased with this debt does not perform to the equaltion of the transaction. Which is selling at a higher price than you bought it after paying the interest.
It would not be bad for SGY to take on debt by taking over another oil company. Of course, when you take over a company, whether you pay with cash or stock or a combination of the two, you also take on their debt!!!
The debt equation NEVER works when you buy at the top, like Paul likes to do...
Years ago, there were a lot of mergers of oil companies. The saying was ' It was cheaper to buy a barrel of oil on Wall St than going out and drilling for it. ' Companies didn't have that much debt.
I have read that with oil at $75, SGY could theoretically buy back their shares in 2 1/2 years: so what??? The debt will still be there! The negative of SGY is not the market cap, it's their debt when the price of oil was going down and the price they were getting for it...
Anyway, I don't know if this is possible, but what I would do is convert ALL debt into $10 bonds!!!
This would bypass banks. Institutions can sell these $10 bonds in the market, if they do not want to continue to hold SGY debt...
It would give individual investors a chance to assume more debt/risk and this would give the company a lot of leeway concerning their future when things turn negative.
I do not expect a negative print in the oil futures. It was a one time thing but you never know.
Having said that, it could also happen the other way also. Someone in the future will insist that the price of oil just can't go higher than a certain pirce and refuse to take a loss and will have to cover at a much higher price. Always remember, that you cannot always sell if there are no buyers but there is always someone who wants to sell...
If these $10 bonds are cumulative and I think all bond interest is cumulative, even if the interest had to be suspended, because these bonds are not owned by banks, the company will not go bankrupt, therefore in the future, the bond holder will get their interest: eventually...
It reminds me of many years ago when a company called Stelco was in trouble during a recession and they stopped paying the dividend on their ste.pr.c . The company was able to weather the tough time and reinstitued the dividend and the preferred 'c' just exploded on the up side, because the dividend was cumulative.
The same thing would have happened to the $10 bonds. They would probably have traded, who knows anywhere from $1-$5, but today they would be trading a $10+. And the owner would get the cumulative interest...
Now that would have been an investment!!!
At the same time, mgmt would not have had to jump through hoops and spend all those hours in meetings with their bankers...
Also, the company would be able to sell these bonds to the sharholders first. I sure that there are ways of distributing these bonds without banks making it cheaper to raise money...
I do not expect Russia to invade Ukraine, therefore I expect wti to trade at $72 first and within 6 months much lower...