it is different this time.
hahahaha.
I am stupidly bored at work so please criticize my comments below.
I agree - there will be some sort of demand destruction. I am starting to think about how much aimless driving I do. I am sure others are already being farmore careful. Especially if they dont own any oil and gas! In countries with weak currencies this must really bite.
It is funny to me that Schacter has predicted 20 of the last 3 big oil price drops.He has lost out on way more opportunity versus what he has prevented in investment losses in the past two years. Maybe he learned something after a couple of his BNN picks went bankrupt?
My main investing thesis has switched over to asset value/book value.
Using simplistic math and company numbers- If a company like BNE will free cash flow 165 million at strip prices with current hedges, then the book value must be increasing in value 14 million every month. So this company is worth about 40 cents a share more every month if nothing else changes. Ignoring that is an annual number and Q1 prices were much lower. I said simplistic..not simple.
Strip prices were about 15-18% lower than current prices the last time I looked, so that number is probably more like 50 cents per month for the past month or two and going forward. that is pure book value appreciation - without discussing a catalyst that could unlock dramatic share price moves such as a dividend or buyback, or sale or merger or just a refinancing that allows BNE to do any of the above. Or maybe OBE wakes up and puts in a real takeover offer. ?? Really i just expect big cheques by the end of the year. That is our history.
So even if we do have some big price drops due to a major global recession - and we have only had 3 syncronous global recessions in the past 80 years - how badly will it affect us? What is a recessionary oil price if demand drops a crazy amount like 5 million barrels per day? 80 dollars? And what does Nat Gas drop to? I feel like 5 bucks is the new 3? The bottlenecks are now about connecting production to pipeline, not crazy inventories with no place to go. LNG and Mexico export pipelines have fixed that.
By the time a demand drop is reflected in the price of the commodity how much debt will Bonterra have left on the balance sheet? Spending is grinding lower during summer to hit the annual 70 million number, so debt repayment will accelerate again in a month or so. The last news release said the bank line will be basically paid off before the fall review.
We are in such great shape and getting even better so quickly; that it is really hard to see an iceberg floating around anywhere....?