GREY:WFREF - Post by User
Comment by
lessspikeon Jul 17, 2015 2:52am
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Post# 23932955
RE:RE:RE:RE:bashers
RE:RE:RE:RE:bashersPut yourself in the shoes of a CEO in this situation.
The first thing is to identify your non-core assets and then seek for a buyer to whom those assets will be core assets to them. That's how you get a fair price for assets as it's a win-win. At the end of the day, you have lost only non-core assets and your remaining assets are better focused on the future.
Another thing to look at is capital spending. You get much more selective, drilling only the very best if you have any targets that will pay an acceptable return.
Then you look at operating costs. Right now, the oilpatch is getting more competitive all the time. There are lots of opportunities to reduce op costs.
Admin costs. Make management lean and mean, especially if you are reducing capital costs. There are lots of costs which don't need to be carried by the offices.
A sale or a part sale of the whole company. Management is usually reluctant to look for a full sale because it could cost them their jobs, particularly in a merger with a larger company, but it is their duty to do so.
One bad thing to do is to do what Lightstream did: issue high interest rate debs to pay the bank. It satisfies the bank but increases risk to shareholders by saddling the company with a higher interest expense. A small issue may not be too opressive though. If LRE added $50million to debs as part of a comprensive program to meet bank requirements, it wouldn't be overly oppressive.
Other than a complete sale, a company could attack the problem from all directions.
The other thing to remember is that their hedges still aren't too bad for 2015. They may end up with a significant contribution to the debt payment from cash flow between now and May 2016..
So it's not all over for this company, far from it, unless they do nothing. They need to make some smart strategic decisions now. I agree with you, O&G ain't coming back in price for a long long time without a strong change in demand so the survivors will be the mean and lean ones.