RE: RE: What caused the debt to spike? So Dove33...what do you think? Nuttal said he agrees the debt is a little high and that they need to improve financial controls. He did not provide details on why the debt increased. So to me, I can only guess, but it would have to be lazy operational performance on existing wells, or novice negotiations on the Pennwest negotiation causing them to close the deal way higher than expected. Either way, this reflects badly on management.
I think the biggest risk is the world price of oil. We're likely into the "sell in may and go away" correction now on global growth concerns, so hopefully this just shakes out weak kneed investors and we bounce. Nuttal said something about Saudi policy preventing oil price tanking completely but I don't agree - I think world economics could easily overwhelm and create massive pain. Tough couple of months ahead I think.
On the plus side, RPL has shown a resilient ability to bounce fast in the past (granted they were a junior oil and not a divi paying company then). In Sept '09 to April 2010 RPL went from $1.30 to $4.10. In October 2011 to March 2012 it went from $2.25 to $4.60.. CEO is heavily invested himself. PennWest properties are most likely fine and they could surprise positively. Differentials will narrow further with rail support, whiting refinery coming online and keystone could bring in a whole new group of buyers. RPL wisely hedged this year and next so they will be paid. China GDP numbers, while missing this week only missed by a little. China can and will surprise on the upside from time to time in the years to come which generally sends oil higher.
I'm actually going to purchase more shares. There is no credible news about operational disaster ahead and no news whatsoever on management dishonesty or fraud. Soon there will be challenges to decide when it's time to let it go and sell...Even if they cut the dividend in half, I'd still be satisfied with a 9-percent yield on their growth prospects. Let's just hope they start cracking the whip on cost-side of their operations!