Thanks for the replies. Slider, I've read your posts and appreciate what you are saying. Yet, I have trouble fitting the producers with paltry earnings and cash flow multiples into your theory. Take a hypothetical producer selling at or below 2X cash flow and 5-6X accomplished with say, realized natgas prices of under $3 (they do exist). What is the market looking forward to in these cases?
I can only best reconcile this with two thoughts: 1) Even a producer that will be dirt cheap after the death of commodity prices will have no great growth prospects. Perhaps, I think, this smacks of the "growth at all costs" mentality that is now being purged from the marketplace, IMO; 2) That the nature of an E&P is that whatever profits can be made from commodity sales will ultimately be poured back into more holes until there finally ain't no more product or money. It is the later thought that worries me most.
I've always been an FA investor, and its served me well save for 1998 and 1999 of course. Still choosing to believe that the market's tastes during those two years were an ugly anomaly and not something to become accustomed to.
I'm on board with your analysis of the last two "mini-cycles". Yet what about the 70's and 80's? Could any of our highly knowledgeable posters here give this young kid their recollection of the energy cycles back then??
Slider, cash may be king, but what currency? Holding a wad of greenbacks doesn't sound too great to me now. We may agree that the U.S. dollar is overvalued right now, and what about the very real possibility that inflation, errr... inflation statistics will start to run soon? Owning mineral rights, directly or indirectly, doesn't seem to be that appalling of an alternative, even if the elevator goes both up and down.
I got some gold miners. Also got a boatload of REITS and energy MLPs, which have held up extremely well. Sure wish there were better water resource plays out there. I like real assets in this environment!!
Diversification may be man's real best friend. A debt-free approach to life also has lots going for it.
Best regards to all, and thanks to Slider for taking the time to produce the good-natured, helpful posts. |
