Get it DONE (Acquisition) ... or go home!
RED ALERT ... RED ALERT
"The Saudis Will Win The Price War, Oil To Rebound 50% By December: says recent report by Nomura Securities"
From: Barron's Asia - January 13, 2014, written by Shuli Ren:
"Nomura Securities is already calling the bottom and “the birth of a new oil bull market.” The bank forecasts that Brent crude will bottom at an average of $45 in Q1, recover to $55 in Q2, and go back to the long-term average of $80 by the end of this year.
The oil market is in real trouble if the bear is driven by weak demand, but fortunately, this one is just a temporary price war started by Saudi Arabia.
The force is still strong. “It is not demand weakness that triggered the oil price collapse. Global oil consumption is at a record high and there is only about 3% of spare global capacity as the era of easy oil is long gone,” according to analysts Gordon Kwan and Bob Chen. The recent oil price collapse was “deliberately triggered by Saudi Arabia” to slow down development in U.S. shale oil, Canadian oil sands and deep-water and Arctic drilling.
Just like in 1986, Saudi Arabia will win this price war again, because the Middle East has the lowest cost producers. The Middle East producers incur only $15-40 per barrel in costs when they drill, whereas “half of the world’s projects would not be economically attractive if oil prices remain below $50 per barrel.” Brent crude stays below $50 this week, recently trading at $47.87.
Already, we are seeing signs that Saudi Arabia is winning – U.S. oil producers are cutting back. Here are Nomura analysts:
Last week alone, US oil rig count plunged 61 units to 1,421 according to Baker Hughes stats. This is the biggest weekly decline since 1991.
Shell last week announced cutting hundreds of jobs at the firm’s massive Alberta oil sands project. We expect more large-scale layoffs to come. Similarly the oil companies’ contractors and service partners have also started to reduce headcounts. Halliburton and Hercules Offshore have already announced layoffs.
More than 40 companies have cut their 2015 spending budgets since December according to energy investment bank Tudor Pickering Holt.
Canada’s Suncor Energy (SU) is the latest to cut spending and jobs.
As such, Nomura sees oil prices recover by the end of this year and Brent crude goes back to $80 per barrel.
If you agree with Nomura’s thesis, the Chinese oil companies can be good investments then. Lower oil prices and less operating cash flow is forcing China’s big oil companies – PetroChina (0857.HK/PTR), Sinopec (386.HK/SNP) and CNOOC (0883.HK/CEO) – to prioritize profitability over growth. The Big Three all emphasized this point during Nomura’s recent oil and gas conference in Hong Kong.
In addition, with better balance sheets, the Big Three can go buy good-quality assets for cheap from distressed companies, a hypothesis echoed by Goldman Sachs yesterday.
Of the Big Three, Nomura likes PetroChina the most, because it is the most diversified. “Diminishing gas import losses from Turkmenistan and Myanmar, lower windfall taxes and increased shale gas subsidies to expedite development of the higher cost oil/gas fields” are potential catalysts for this stock. Nomura likes CNOOC the least because it is most exposed to the upstream drilling business. China Oilfield Services (2883.HK) would be the first to rebound in the oil field services sector, because it is larger cap and more liquid."
To Southwest: HELLLLLLLLLLLLLLLLOOOOOOOOOOOOOOOOOOO!!!! Get off your duff and use your recent share appreciation to ACQUIRE a stand-alone operating entity that will add value to your consolidated balance sheet. JUST DO IT ... because the 'good times' of 'cheap oil' won't last much longer!
AI
