Big Banc Split Corp T.BNK

Art Cashin from CNBC

[braincloud]

Made the same comment I did about the high yield debt market. If you guys look at HYG spreads have blown out suggesting that investors are getting nervous. There is a very significant amount of debt within the energy space and with oil prices the way they are it should surprise that there are some companies that will just close up shop. This may be what OPEC is waiting for. Once Financing dries up the decline rates will catch up to marginal producers and weak assets will no longer be viable. This will translate into significantly lower production. What's more is that the industry will begin a consolidation phase.

[lefmike]

Yes We could see that happen alright, BUT !   Will BNK be around ?  The company could be one of the victims I'm Wondering.. Or afraid  of happening...  Their debt right now is totally manageable but in the future??

[braincloud]

That's one of the more compelling things about BNK IMO. They can scale back OPEX down to just 1 rig if required. They continue to operate within cash flow. EOR working really well and debt is pretty much zero. yes, there is some short term concern w.r.t the Tax situation , but again, I think that works out in BNK'S favour. They too have seen the cost of production drop plus they've

[Allisonbike]

Does anyone have an update on the carbon tax or VAT. Have those issues gone away, or are they part of this tax situation?

[oilsyd]

If this company is managed well (and I think they have a good team), then I do not see how it would be possible for this company to go under. They still make a profit on every barrel coming out of the ground. They are currently not making a profit because of the costs involved in drilling for oil to offset decline. If they scale back on their drilling program, they can avoid further debt. Of

[cashtango00]

the problem is there are plenty of companies with excellent prospects, reasonable capital structure, and good management that don't have to deal with issues like the Albanian government and are trading at 4x next years CF.  there is as lot of value out there now with lower risk.  BNK is cheap.....but there is a lot of cheap around right now.

[maxpayne99]

[dubsbs]

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[50centdollars]

But would the Albanian allow them to reduce production, thereby decreasing tax receipts even further?  I imagine the company is under a lot of pressure not to cut production. The company isn't being given for its operating results or asset base because the fear is the Albanians will just swoop in and nationalize it at some point.  That may be an overreaction, but that's what

[oilsyd]

Cashtango and 50cents, you made good points. There has been a severe erosion of trust which takes a long time to restore. I was responding to the suggestion that BNK could go bankrupt.

[Insidetheropes]

Heard a good quote today regarding banks: "If I owe you a million dollars, I have a problem, if I owe you a hundred million dollars, you have a problem". The banks are in really, really deep and need energy to get back on even footing. In Canada, it is quite possible we see unparalleled support of the energy sector to see them through the current situation. Only saying it is something to

[braincloud]

i don't think the banks in canada have much in the way of direct exposure to oil. The worst is National Bank, that said, the are a few hundred billion in bonds out there that don't look so good. Look at HYG. It's saying something bad is going happen. Spreads have blown out big time!

[Insidetheropes]

Someone has to be holding all that debt. I think it is deeper than is being let on. What do you think that "something bad" is going to be exactly? I hold some HIgh Yield ETFs and they are getting sh#t kicked.

[braincloud]

I think there's some bad oil and gas debt going to blow up. Look back to see when the last time credit spreads blew out like this.

[Insidetheropes]

Understood.