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Your friend is not happy because of the large stock price reduction. I completely understand.
As I mentioned, if oil price dropped below $30 for more than one month then IMO there is significant risk.
IMO oil prices bottomed about $30/BO and should be ~$40-$45/BO by mid-year. Under this scenario, CRC is $2.5 to $3 per share.
Bankruptcy isn't taken lightly. The CEO Todd Stevens has over 550,000 shares, and executives and employees continue to buy. If they thought the bankruptcy option was likely that wouldn't be the case. Try getting investors after you file for bankruptcy, it really hurts your brand. It would definitely be a last option.
No pain, no gain.
Look what happened when oil price dropped to $27/BO. Always in crisis groups project extremes like $250/BO, but fail to consider the self correcting market mechanisms. $20/BO means a global melt down - it can't happen in isolation.
http://news.peak-oil.org/2016/02/oil-bears-closing-of-600-million-triple-short-fund-bet-seen-adding-to-tumult/
A $1.8 B signal oil price is headed up.
This triple short fund was depressing oil price by ~$12/BO. This fund is closing - oil price should be >$40/BO by June 2016.
Yeah, IMO unsustainable but certainly possible. Like a global depression.
IMO CRC would have some fire sales and fire a large part of their ~1700 employees. Restructuring debt is always possible under a global depression scenario.
IMO the chances of oil price staying under $30 for more than a week is unlikely. Crc is about a break even in the low $30/bo oil price.
35% of production is hedged at $52/BO.
I like CRC's management team - all experienced old Oxy executives. Plenty of options
Linn for oil and LinkedIn for tech ruined the day.
IMO a tough slog until about mid year. I dollar cost average, so when it does go up ...
IMO I am not sure why anyone would buy this stock now. Likely bankruptcy = equity owner lose everything.
Crc is living within its cash flow, so as oil price is $>30/BO IMO not much risk. Also it has a $2B line of credit to get through these unsustainably low oil prices.
IMO will eventually sell the midstream for >$1B and maybe some coastal land.
It's amazing to me anyone would buy these shares right now. I think power ball ticket holders have better odds.
Wow, this things is dead. Even at higher oil price, it was a problem.
We should be filling up the strategic reserves now. My feeling the Fed./Gov. will intervene because low oil prices are causing systemic problems. We don't want another 2008, and believe me there is a lot of energy junk rated debt floating around the globe - subprime 2. It's all been passed on to mutual funds.
Not all the land is developed, just possible plans.
Much of the land is owned in fee - sell with drilling easements. A lot of the land is along the coast.
Crc owns 2.3 million acres of land in Ca. How much is that worth? Probably more that the current market capitalization of the company.
Yeah, IMO it's going to be tough for awhile. My guess is 3 more months. I wish I knew how long, so I could time this thing. Most likely the timers will miss the big upswing.
It is not an activist candidate, the management team has done an outstanding job so far...by the way, the author misses a HUGE point
THE BANK THAT DID THE SPIN HOLDS THEIR DEBT!
Yes, I'll admit, if you apply traditional credit analysis framework to the story it looks skews risk/reward negatively.
However, they did not "back off" their asset sales either, which likely will run in the $1 bn to $1.5 bn range i.e. the entire amount of their first lien
Per your slide, these assets are not E&P, which in this market is a PLUS because there actually is an appetite for power assets (especially as natural gas increases).
So much is written at the headline level and 10 ft view on this company yet no one really understands the story
-Fantastic geology and well decline
-operating in CA is bad? try the middle east
-Trading at 1.5x CFPS now
-Deleverage their $5.8 bn by $1.5 bn and all of a sudden their debt looks serviceable
-THEY ARE CASH FLOW POSITIVE IN THIS ENVIRONMENT!
Yes - I am long, and taking my medicine right now
• CRC just reduced their debt by 0.2*$2.81B or $562 million or over $1 per share. I am starting to think the market is just mentally slow.
California Resources (CRC -3.7%) is lower despite announcing a bond swap deal with bondholders to exchange unsecured obligations with up to $2.81B of secured debt.
• CRC says the unsecured bonds accepted for the exchange will be acquired for $0.80 on the dollar in return for new, second-lien debt due in 2022 with an 8% coupon; it sought tenders for three classes of notes with coupons ranging at 5%-6% and maturities from 2020-24.
• CRC’s $2.25B of 6% notes due in 2024 traded yesterday at slightly above $0.43 on the dollar to yield 19.845%, a 55.6% drop from an April high, according to Bloomberg.
Okay, 40% of CRC's production is hedges at ~$61/BO. Have the ability to drop 3 active drill rigs and save $15OMM per year. Just reduced its debt a few hundred million by moving 71% from unsecured to secured. Breakeven operating about $30/BO.
Book value over $6.00 per share. Huge opportunity here!
I guess the market finally noticed CRC's oil price hedges.
One thing all analyst seem to miss, Saudi's Ghawar oil field (largest in the world) decline rate will increase with current production. Once this happens, it will be like losing a huge oil field a year - oil price will hockey stick up!
I hear they are starting to see increased water production. We shall see!!
I have been doing oil/gas asset management for ~30 years. I have helped take companies public, bought and sold oil properties. Based on all my experience, this is a really good investment. It's impossible to pick a bottom, so it's best to dollar cost average as the price drops.
I have been through this four times in my career. The lower oil price drops the higher it will go. The outcome is very predictable, but timing is uncertain.
I buy more every time it drops. IMO this is an incredible opportunity.
I guess the market doesn't consider hedging. Great, I keep buying!
The next two quarters will be tough on crude prices, but 2016 will be a year of transition for oil markets, IHS Vice Chairman Dan Yergin said Friday.
Yergin told CNBC's "Squawk Box" he expects oil markets to begin to balance next year or in 2017.
"The oil market "can't stay low like this because you're not going to have the investment you need," he said." "By 2020, the world oil market is going to need another 7 million barrels a day of production."
"Right now, the whole mantra is slow down, postpone, cancel projects," he added.
Multinational energy companies and U.S. shale oil producers have slashed capital spending in order to protect their balance sheets as their revenues plummet and cash flow dries up. Crude prices began to sink from historic highs last fall, and the downturn accelerated after OPEC announced it would not cut supply to balance oil markets.
Despite expectations that high-priced American crude production would collapse at $70 a barrel, U.S. producers can perform well at $55 to $60 per barrel. However, current prices in the $40 to $50 range are creating "great pain," he said.
Yergin said he does not expect OPEC to change its policy of maintaining current oil output levels to defend market share. The 12-member orgnization is meeting Friday in Vienna.
In order to earn really high ROI, you have to be willing to suffer some.
CRC has ~40% of production hedged at about $60/BO, so it's in great shape to survive these price drops.
Extremely Important:
This is the only time in history where there is no spare oil production capacity - everyone is producing at maximum capacity - any disruption and we will see a big spike! Also investment is down big, so one year or so from now ....
I was referring to a war that disturbs the flow of oil.
Saudi is burning $10B per month. My guess is they will play poker for awhile longer to maintain market share. However their bank account isn't unlimited. My guess is they will eventually complete a deal with Putin and OPEC to raise the price between $60-$70 per bbl. We have way more supply than demand, and IMO it's in Saudi's best long-term interest to stabilize the oil market. With interest rates increasing and oil pegged to the dollar without intervention it isn't pretty. Much lower current investment will eventually lead to another oil price spike. All that Frac stuff declines at 20-30% per year - huge investments are needed to arrest those decline rates. I drilled many of those wells, so I know.
Forget about what is being said and just look at the numbers. Anyway... Several years from now IMO I expect CRC to be in the $15-20 PPS range.
Who ever is shorting oil stocks and/or oil price has ball of steal - war could break out at any time and this stock will jump hyperbolically!
Right now I like California Resources Company. In the short-term oil prices will likely go lower, but longer term IMO big upside potential. It's trading at about 0.6* book value, and about 40% of the production is hedged at about $62/BO. A lot of value in selling their midstream assets - gas plant, pipelines, power plant, etc. the CEO in the last quarterly meeting said a deal (sale, lease, JV) will be announce within the next 6 months. Even with these low oil prices, operating revenue is about $400 million per year. It's invested back into drilling to keep the production decline rate flat.
My target price is about $7+per share.
Like JGPK, I own a lot!
Interesting, thanks.
CEO announced a deal will be completed before the end of this year or 1st quarter 2016.
Should get a big POP!
Yeah, IMO JGPK's management didn't have the courage to take the next step on its own. It's too bad because we likely would have all made a lot more money.
Oh well, trying to find the next JGPK!
Thanks, IMO Singapore got a great deal. Not too many out there with JGPK's outstanding financial metrics. I am not sure why JGPK didn't merge and go on the Nasdaq. IMO this scenario significantly increased value!
Not an optimal valuation, but I'll take it. Searching for the next JGPK....
$70-80 per barrel = $15-$20 per share IMO. It's just a leveraged oil price play.
Putin is driving up the oil price with war and (non)opec discussions. Russia is the top world oil producer, and Putin is the new Reagan (a thug version IMO).
Yes, when the deal closes it's over - JGPK will no longer be traded. The board has ~70% of the stock, so IMO no other votes are needed.
I didn't see a closing date, but I am sure it's soon.
Thanks, I built a few financial models and anyway I looked at it, it was undervalued.
IMO if the company would have had more shares available to trade and moved to the Nasdaq the value would have been many multiples of $1. Maybe sold the pieces versus the whole the valuation looked even higher. Anyway... I stared buying at 0.15, so I can't really complain to much. It's been a fun ride!
Interesting, thanks.
Yes, it's worth more than $2 per share.
I don't understand how the company was sold for $0.99 but it's trading for less. Looks like an arbitrage opportunity to me.
Use guru focus Apple application to calculate. IMO Jgpk needs more outstanding shares to be liquid and to move to a better exchange to receive the intrinsic value.
The core business is solid the rest is just doing deals.
Intrinsic value: $2.77 per share
Assumptions
Growth rate: 25% per year
Earnings per share: $0.07 (last qtr)
Simple calculation, it's time to merge and move to the Nasdaq. IMO huge upside that should be released.