GREY:TBTEF - Post by User
Comment by
pm1231on Nov 16, 2014 10:12pm
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Post# 23134750
RE:RE:RE:Look out- Dividend Cut Coming
RE:RE:RE:Look out- Dividend Cut Coming I do agree and noted on seeking alpha that the jury is still out on decline rates. They fell short of my projections but are in line for $225 M cash flow target. As for the prices of oil a year from now - I wrote another article to address that. Prices declined rapidly based on speculation - not fundamentals was the basic thesis. There is a great deal of fear and speculation in the markets but at the end of the day, the world is still consuming 92 million barrels a day (give or take depending on which estimate you use) - leaving supply exceeding demand anywhere from ONLY 1 to 1.5M barrels per day - something that can be easily solved with an OPEC production cut.
A material OPEC production cut would send prices in reverse in a hurry given the rapid price decline in a very short period of time. OPEC starts to break apart if members like Venezuala (a founding member of OPEC) defaults on thier debt obligations given the current price of oil. Other coutries aren't holding up either. Kuwait and Saudi Arabia may be able to hold production levels at current levels, but other countries will break. OPEC members are acutely aware of the stakes which is why long bets on WTI are going back up. They are clearly between a rock and a hard place since OPEC is losing tens of billions in the current oil environment and are the only entity positioned to cut production unilaterally (unlike the US with its collection of shale plays). OPEC will start to crack unless they resolve this and they know this even if thier intent was to squeeze the US shale oil plays. As the analyst community is calling it - it is a game of chicken and no one has the benefit of time.
Long story short - i'm not looking out beyond 2 quarters with sub-$80 oil. Supply will contract and demand should start to see some of the benefits of lower oil.
Clearly, if sub $80 oil holds, TBE will be challenged, but will be a moot point since the entire global energy sector will be lined with casualties far worse off than TBE.
The most important thing TBE has going for it relative to other players is Time - about 2-3 quarters (August 2015) where cash flow should remain steady assuming declines rates hold - something other producers can't claim.