Xray, you got your facts wrong: RIG's lowest share price came about during lots of rumors that the company was going to cut out the dividend. The lowest close at $13.60 came when they actual cut from 75 cents to 15 cents. Five days later, RIG closed at $15.25, which I would use as a 10-year low based on fundamentals. Today's close at $14.92 represents that lowest share price in the last 10 years. As far as the lowest share price on record, RIG did close at $12.14 in January 1993. That's when I first bought the stock. I sold out in Aug 1997 for $68.00. I've been in and out of RIG ever since.
My problem with RIG is that I've been nervous over crude prices ever since WTI jumped up $18 from $42 to $60, rapidly bypassing the $50 range. This was too far too fast. Neither could I figure out why crude production continued to rise even after the storage tanks were full at the hub in Oklahoma. Then I found out that a lot of shale producers had insured their per barrel price at $90. This insurance still runs for another 10 weeks. Jesus, with the producers getting $90 per barrel, naturally they are going to produce as much as they can regardless.
Anyway, crude's move above $60 without lingering in the $50 range made me believe we were in for a correction. I think this is exactly what crude and RIG needed. We shook out a whole bunch of weak shares and replaced them with new blood. I also think we got rid of a lot of shorts and will soon get rid of a lot more. The large short side was lowering confidence of long term buyers. Anyway, the correction was badly needed and sure to happen. I got a truckload at $15.43 average and could not be happier. I think I'm now in for at least another year.
Moreover, there will be no Iran deal approved by Congress regardless of what takes place over the next week. The great majority of US citizens do not want this deal. No one in the US trusts Iran. Neither does Saudi Arabia or Isreal. They have the most to lose if Iran cheats on the nuclear deal since Iran has already pledged to wipe them both off the face of the Earth. No one can trust Iran as long as Ayatollah Khomeini is in charge. The Saudis and the Israelis have powerful friends in Washington. US oil producers also have a lot to lose and a lot of friends in Washinton. No deal will get past Congress regardless of what John Perry does. If there ever is a deal, it will not come until after the US has a new President and Khomeini is gone.
China's stock market bubble does not convert into a drop in crude demand. The bubble is caused by rules governing margin accounts. Too many shares outstanding on long margins. A correction is good for China. Besides, if China crashes, the rest of the world will recover stronger than ever. China might have imported a lot of crude oil, but they cut into the economies of many countries, such as the US, Japan, and other Asian countries. China folding would be a world blessing in disguise. The rest of the world would boom.
Greece means nothing to the world economy. Kicking Greece out of the Euro will only strengthen the currency and prevent a contagion. The Euro crashed less than a penny today--big deal. The Greeks did it to themselves. Just watch GOLD. If this metal starts to run up fast, sell your oil stocks and buy gold mining shares. Right now... Gold is holding above its 5-year low so there is NOTHING to worry about with Greece.
And, there is nothing else going on in the world to cause worry. The pullback in crude is healthy. It has instill confidence that RIG share price has hit its absolute bottom. Long-term investors can now buy in and replace the weak shares. This is good for other long-term investors and will reduce volatility.
A few more rigs drilling in the US means nothing. Rig prices are down to their lowest. Producers with money should drill now while day rates are cheap. What are they gonna do? Wait until the market is hot and then pay twice as much per day?
The world is expanding at a rapid pace. Expansion demands lots of crude oil in the $75 to $85 price range. The big profitable long-term discoveries will all be offshore. The majors know this and will be forced to start drilling like crazy to keep their market share.
Furthermore, OPEC countries, including Russia, do not want $50 oil. They will cut production on their own rather than sale then their oil at a cheaper price. No one wants $50 oil. The sweet price for brent right now is to slowly drift back above $60 by the 1st of August. WTI will follow at $57. and hold until October or November. We will see $75 oil by March of 2016.
This will correct itself in 2 months.
If someone wants to get in RIG at the bottom, they better do it in pre-trade first thing Tuesday morning. I predict an opening at about $15.25 which I consider the absolute bottom for RIG based on fundamentals.
An investor in RIG for over a decade.
By the way, I like posting my comments to the RIG board so I can go back 6 months from now and review any mistakes I made in my thinking.
AI
