Everything except ONE!SGY delivered better results!
With the price of the stock going up, the ~4% yield is in line to what Paul was directing...
The hedge will secure the dividend for years and if SGY can have success in their drilling,
the extra production can be sold on the spot market rather than hedged.
The hedge is a downer because it is probably $20 below the spot, but the spot can easily go
down $10 in one day...
Anyway, the one area that I disagree with mgnt is on the buyback...
The buyback should be done ONLY at the time when the stock is making a NEW LOW!!!
If SGY are able to get a line of credit on demand, the money for the buyback should go to
reduce the debt..
This way, because their debt is reduced, the bank will lend the money for buybacks because
they would be lending to a company with less risk and they will be able to handle the debt
because of their hedge.
FCF as a sign of value, goes out the window when there is turmoil in markets...
At present, a NEW LOW is around $3 but that will go up but the 200dma is around $6...
So, if we have a severe correction that would be the target. It doesn't mean that it will stay
there for more than a day or so, but markets can be irrational and if SGY can reduce the s/o at
a good price, why not??? Even if it is a few hundred thousand share...
CPG are also doing a buyback, but they are doing it now, as the price goes up. Their problem is
the over hang of Shell's 40 m/s that they got from CPG when they bought their property almost
2 years ago.
At the moment, I can see $117 oil and after that a new high, but I also see $90.
Let's hope that ESGers get more vocal and they live a very very long life.
Oh, by the way, did you hear what Charlie Munger said about US oil, that he would keep US oil
in the ground and buy every drop that he can from the middle east and keep US oil for later...
He described it as precious...
Let's give oil the respect that it deserves!!!
So far, mgnt, good job... But always keep in mind ' what if ??? '...
How many lives has the oil industry used up so far...