RE:RE:When These Sector Wide Cut Backs Kick In
Ok, so let's assume that:
1. Well 5 is very disappointing.
2. Stella delayed until 4th quarter or, lets really push the scenario - 2nd quarter 2016.
3. Oil price stays stubbornly low until 2nd quarter 2016.
Hedging protects Ithaca and Ithaca will tick over on existing cash flow. The net asset position and forward earnings prospects remain unchanged - we simply face a delay, we have a huge margin of safety now at current prices.
I would add that if oil prices stay low until 2nd quarter 2016, a decent chunk of the higher cost global oil business will be either bust of indebted up to its eyeballs, the subsequent price bounce would be huge as supply would inevitably crash. However you look at it, Ithaca ultimately comes out strongly within 6 to 15 months depending on how things pan out.
The likley scenario is that Stella will be pumping oil at a partially recovered oil price, albeit at a profitable oil price, by the Autumn and at a fully recovered or even higher price by quarter one 2016.
The biggest surrender of potential gains for investors is likely to be early profit taking. It will be important to wait around for 2 to 3 years to reap the gains from the cash deployment once Stella gets going - there is no oil company capable of deploying its cash more effectively than Ithaca Energy.
Doug