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At any point do people start to read through the Sanchez story and think, maybe this wasn’t an isolated incident? https://www.wsj.com/articles/coronavirus-threatens-to-hobble-the-u-s-shale-oil-boom-for-years-11590312601?mod=mhp
Maybe instead of being an exceptionally bad shale company this is the canary in the coal mine of enterprise value when maintenance capital ceases?
Maintenance capitals main function is to hide the ugly truth, PDP base decline, that Sanchez exposed.
Maintenance capitals main function is to hide the ugly truth, PDP base decline, that Sanchez exposed.
Most companies I look at currently have 1/3-1/2 the value of their debt covered by PDP and this is dropping fast as they give away reserves at low oil prices.
Think about the fact that the future required price of oil an oil company needs to be a worthy investment is climbing
Think about the fact that the future required price of oil an oil company needs to be a worthy investment is climbing
Every day that the price of oil is down. You can only sell a barrel of oil one time. An oil company has finite reserves. These will be sold at an average price over the lifetime of the company.
There is no way to “repair the balance sheet” or “pay down debt” that doesn’t expose
There is no way to “repair the balance sheet” or “pay down debt” that doesn’t expose
the lack of real reserves these companies have. They will drill as fast as they can for as long as they have cash to do it. Hiding the base decline is priority number one.
I would love to see an asset value model for one of Kimmeridges investments or anyone else who says
I would love to see an asset value model for one of Kimmeridges investments or anyone else who says
there’s real value in shale. The theta burn of low oil price is devouring these guys way faster than most people think.
