RE:Recession/Fear Drive Beta In Equities & Ignores FundamentalsCorrection: "
2008/2009 BTE stock price lost 1/3 of it's value during the financial crises of 2008/2009"
should read 2/3 of its value. Snowballer wrote: Some thoughts:
My Thesis/guesstimation of the next few years: Baytex SP will continue to outperform until a hard recession hits in 2025/2026 (3 years or so from date of first interest rate hike in 2022 and peaking in 2025/2026). I suspect a massive stock price correction at that time.
Until then, I think fundamentals in the oil industry and discipline in energy producers drive equities much, much higher. The past tells us that despite only small variations in global oil demand during a recession, the equities lose significant market value and take at least a year+ to return to its highs.
I think BTE can potentially hit stock price highs in 2022 to 2025 ranging between $12 to $25, respectively (assumed oil price $65+, little debt, more buy backs). And the next global recession could bring it back to $8 to $10ish ranges. OBVIOUSLY PURE SPECULATION based on past performance.
A rewind of global oil demand, fed rate hikes and BTE SP
*Figures below are approx. and rounded up
World Oil Demand in
2005/2006: 85M per day
2007: 86M per day
2008/2009: 84M per day (Financial Crisis) Interest rates go from 5.27% to zero until 2016
2010: 86M
2011: 89M
2012: 90M
2013: 92M
2014: 93M
2015: 95M
2016: 96M Federal Funds Rate starts to rise, oil demand continues to grow anyway
2017: 98M Oil prices continue to rise
2018: 99M
2019: 100M Federal Funds Rate Peaks at 2.41% and begin to drop
2020: 91M per day (Covid19 "Pandemic" Recession), rates go to zero, oil goes negative
2021: 97M
2022: 100M+ *Estimated
2008/2009
BTE stock price lost 1/3 of it's value during the financial crises of 2008/2009
>World oil demand only loses 2M barrels per day from year before (2007)
>Oil prices drop from $178 to $55
>$32.50 (+/-) down to $10.37 (+/-) give or take
>It took almost 1.5 years for BTE to regain its $30+ share price
>Federal Funds Rate dropped from 5.25% in 2007 down to essentially 0 for next 8 years
>Federal Funds Rate only rose again starting in 2016 through to 2019 where it returned to 0
2019 to 2021
BTE stock price lost 88% (+/-) from $2.8 down to .032 cents during the "pandemic" recession.
>World oil demand loses 9M barrels per day but historic over supply adds to crash in equities/WTI
>Oil prices drop from $66 to below $0
>It took 1+ to 2 years to regain and overtake 2019 SP of high $2's range
>Fed rate rising in 2022, structural oil market remains tight
It seems to me the Fed (who is now already warning of a recession) will create a recession soon in the next few years. But it may come faster given record inflation, rising interest rates, and lack of liquidity (QT).
If we're lucky, BTE runs up hard over the next 2 to 3 years. I will look for an exit when rates hit 2% to 3% range but obviously will need to consider an entire list of things beyond just the Fed's rate hikes.
Happy to hear thoughts on this angle, timeline etc. But the lesson I think I'm pulling from history is it all goes to shieitt when the yield curve inverts. Oil stocks lose significant value despite only short lived variations downward in global oil demand while the oil prices dives based on fear.
SB