RE:RE:RE:RE:Questions on enforcing OPEC+ deal is laughableVET is far from alone in being a poorly run energy company that has squandered shareholders’ money. I mention it here as a public service for anyone who comes to this message board who otherwise may get entrapped by foolish pumping...LOL!!! But seriously, I probably have saved at least a few from losing their hard-earned on VET. That’s the opposite of sinister Moe. JMHO GLTA.
Moemoney42 wrote: Everyone has brought up some good relative points, and with so many factors at play and rumours that Mexico is now on board with a bit of a cut and DJT saying the US will cut another 250G brls/day we could have a 15 million barrel cut easily by the end of the day/week. Now the only beef I have with this commentary is why WMG only singles out VET in his end of oil industry forcast.. you're points could apply to most of the mid cap companies out there... so singling out VET is sinister at best..! WheresMeGold wrote: Fantome, I appreciate your comments. As I see it the result is obvious. OPEC+ had to delay the meeting, couldn’t create even the appearance of unity, don’t have the fortitude to start cuts until May, and could only agree to cuts equal to 1/3 of the actual demand destruction. The result is global storage essentially being breached within two months. This will create enormous pain for energy companies and weak hands will fold or be sold at pennies on the dollar. However, with so many energy companies swimming in debt and their assets and reserves being priced drastically lower, bankruptcies will be the most common outcome for the weak hands.
Contango will be extremely steep but don’t take any comfort that later months will get better as afterwards contango will flatten out as the later months drop even further. This situation will resolve itself in years, not months. Quality energy companies will eventually offer great value. VET is far from a quality energy company. JMHO. GLTA.
Fantome wrote: WheresMeGold wrote: Talk of whether or not the impotent and irrelevant deal will be enforced and policed is laughable. The question is a complete distraction to the current market reality unless the cuts were over 30 million barrels per day for many months.
With cuts at 10 million barrels per day at best for two months and 6-8 million per day afterwards they have left it to the marketplace to make the cuts. With huge storage hubs already starting to fill up in Europe and elsewhere the marketplace will impose production cuts through deep price cuts, particularly in the front months. The pain for energy companies is in the early stages, not the late stages.
VET is poorly hedged in 2020 and even worse so in the second half of the year. VET is extremely vulnerable in today’s market environment. JMHO. GLTA.
https://www.google.com/amp/s/www.barrons.com/amp/articles/oil-prices-turn-sharply-lower-as-opec-meeting-disappoints-51586461742
Without a thorough analysis it is difficult to say which E&P companies are better equiped to withstand the current situation than others. You mentioned one factor...hedging...but there are many others including the mix of oil..ngl...and natural gas production....decline rates....exposure to WCS pricing...debt levels and overall balance sheet considerations...the list goes on...
Suffice it to say though that if the current situation continues for about another month without production cuts..the oil price will tank once the storage is operationally full. Right now it seems that producers are playing the old game of "chicken" to see who will blink first and cut production..
What is not being talked about much and is something that I am focussing on is how do these companies meet their debt obligations in a death sprial where initially oil prices go down and production goes down as well until the market supply and demand gets back into balance..
It is possible that it could work out especially if the banks and debenture holders cut the producers some slack in terms of the debt payments...this will require a lot of people working together for the common good...a big ask perhaps!!....if not..given the size of the Energy industry debt (US alone of close to 2 trillion dollars)....we have the seeds of the subprime meltdown that caused the 2008 Great Recession....and this would be on top of a situation where interest rates around the world are close to zero or negative and Governments afre running huge deficits and growing even larger due to dealing with thw virus situation...this situation is a looming storm and if it doesn't disipate somehow soon then watch out below!!
The image that comes to mind is when my kids were small and we went to Alberta and went to Divide Creek...one of my daughters put a stick into the creek and watched it float down...before it hit the divide where the water separated into two streams we didn't know whether it would end up in Atlantic or the Pacific Ocean...we are kinda at that point now in that we don't know which way the economy will go and the difference between Scenario A and B is huge!!