Bob/CPE:
It goes without saying that I greatly respect and appreciate your DD, Bob. But I have a very different take on a few of the points you just made re CPE, and now I'm wondering if I'm confused- so please correct me if that's the case.
Specifically:
"The issues with CPE are the hedges that are going to drag on oil earnings for the rest of the year."
I believe that the impact of 2005 hedges is fairly tame (certainly nothing like we saw in Q4), per the last earnings call.
"In their most recent guidance the company said they are going to charge themselves taxes but not pay them. This will lower eps by 30%. That will bring the eps down into the .30-.38 range instead of .50 to .55. "
I see close to zero chance of earnings coming in at .30. Even .38 would be very disappointing and surprising to me. I ran the numbers assuming $39 net per barrel of oil and $6.50 ngas, and got .40 EPS conservatively (analyst forecasts are at .43 EPS for Q1 at the moment, by the way).
I wonder if this assumption is the reason for your lower estimates: "They are barely into the $30's in oil/barrel due to their poor hedging in 2003. "
Are you saying that you expect them to get low $30s per barrel for Q1? If so, I think you're too low. Because I believe that the company said in the last call that they'd get about $39 net/barrel after hedges if oil prices averaged around $51 in Q1 (which they did).
Meister
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