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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (54789)	1/14/2015 8:18:12 AM
From: robert b furman	1 Recommendation Recommended By ekimaa Read Replies (1) \| Respond to of 78627

Hi Jurgis, If rates stay low, debt can be easily justified if the purchase price is beneficial. The big question I see is: are shale properties cheaper than deep water expressed as cost per barrel? Mexico is allowing well capitalized explorers to open up their Gulf of Mexico waters - they have huge coastlines. It could very well be a fertile region for oil. Lord knows Macondo proved there is a lot of oil down there. I'm not so sure rig will be acquisitive - rather it needs to just go back to work. I see cop, cvx, xom to go on the acquisitive path and buy up what they missed - shale plays. The premium of land must come out of that first. Bob

To: Jurgis Bekepuris who wrote (54789)	1/14/2015 6:45:00 PM
From: Spekulatius	2 Recommendations Recommended By Asymmetric Mattyice Read Replies (2) \| Respond to of 78627

You have to consider not just that he current balance sheet, but also at the future cash flow and the current Capex commitments to determine if given company might be able to acquire assets in the cheap going forward. For example big oil like CVX was barely able to fund their Capex and the dividend at 90-100$ crude, how are they going to do so with <70$ crude. A lot of these projects have 10 year timeframes, so they can't be turned off - if so, they would be total write offs for the sunk cost. These things will be build, but that means that most big oil will go cash flow negative and being debt and risk averse, it probably won't mean that these companies go out buying like crazy. Same for many larger independents like APC, APA or EOG that are probably trying to keep their projects funded, without risking the company. Some may be able to do deals with equity, selling at distressed prices and buying something way more distressed. The main issue that have with energy related bets, that they all look overvalued when current prices persist and look even more overvalued, when prices fall some more. For E&P's the NPV value of their reserves will be way lower, which we are going to see when the 10k's come out (those will be based on average prices during 2014, so won't reflect the full impact of revaluation due to lower prices yet - watch the disclosure). There will be a lot of reserve write offs, some unexplored land will probably be worthless. Companies dealing in the Energy Capex sector will probably see 30% revenue reductions and I am not sure there is anything cheap out there after accounting such a scenario. The way I see it, we have priced in a V- recovery when it may be a "U" with a long dragged out bottom. I think for straight value investors, the energy sector is a dangerous place to be. If if I were to buy something, I would look at stocks like SLB or FLR, which have a moat of some sorts, great balance sheet and a long track record to deal with all sorts of environments as far as energy prices are concerned. I kind of like FLR (the class act in construction of large scale projects, not just in the energy sector, but I don't think it's cheap enough yet.