Twin Butte Energy Ltd TBTEF

I am getting cautious

[PUNJABI]

Saudis are talking down the oil price.  It has worked so far.  Huge drop again today. Oil has been constantly tanking in the last few days. It has dropped too fast. We have not stopped using oil then why such a huge drop in matter of few days.. This is not based on present supply & demand. This drop could be more of financial transactions like short selling & some panic selling.

Do not understand the politics behind the Saudi stance. Too complex for me& even lot of fund managers.  It is short term or would be for two years ? I am hoping it is some kind of a short term game. If Oil prices stay around $80 on average for two years then oil patch is in serious trouble.

The oil sands & shale oil will be first casualties
The highly leveraged, dividend paying models & oil trust units are also cooked.  The companies with high leverage will run into trouble.  With 20 % plus drop in commodity price how will the companies with high leverage  & above 100 % total payout ratio continue to pay dividends.

Companies with above 100 % payout ratio will have serious problems. Banks are not going to allow them to pay dividend from borrowed money. As the price of oil drop the lines of credit may be reduced.

Lot of dividend paying companies have hedges. Some of them will be fine for a few quarters & bear the brunt in short term. Two years of about $80 per barrel will take toll on most. Companies with less debt, high net backs & low total payout ratios should be much safer
If the present oil price is just a dip & oil will rebound in matter of few months then. This is a very good buying opportunity. But if this is beginning of depressed oil price for a year or two then staying on the sidelines & selling the rallies would be prudent.

Canadian oil stocks have been destroyed & it is very tempting to buy them specially dividend paying as the yield have become massive. We may have been close to capitulation in oil stocks. But if Saudis are going to allow the oil around $80 for two years then oil sectors will look somewhat like uranium sector.  

I am getting cauious & will mostly take,  pull back trading till I can understand what is actually going on with  oil prices.