Problems with server
I was not able to review most of the boards that I follow because of problems with the servers on iHub.
The reasons given for rally appeared to be for three reasons:
1: Short covering. I do not think that was the reason, since any retail would have to short at $5/share or higher, and the stock only just got back to that level before falling again.
2: Oil prices up. Oil did get as high as $38/barrel and I think the muppets started to pile in, thinking that the company will recover.
3: Former CEO died and people think the company will not suffer any consequences for the price fixing. While the company may not have an fines or penalties from the price fixing by government action, the owners of the rights are still going to have to be compensated for what they were cheated out of, if they sue. The CEO dying does not change any of that.
The problem is that even if the company somehow survives to when oil prices recover, the company will probably be nothing but a 'zombie'.
There is a preferred series above the common shares worth about $3 billion, implying that the company needs to somehow make a yearly profit of at least $150 million in order for the common shares to be considered worth anything, if you apply a multiple of x20 to earnings. The problem is that the company is expected to lose money into 2017 with prices as low as they are.
The company has suffered so many losses so far, plus lost assets from the expiration of leases that were not drilled, that at best, the company will be able to keep current on their debt. At some point, even if the company makes it through the current crisis, the next downturn would finish off the company.
Louis J. Desy Jr.
