CWEI
I’m doing some work on some distressed companies whose share prices have dropped more than 50% over the past year. Up until 3 months ago, the list was littered with solar stocks.Since they’ve run up, the list is left with nefarious education companies, as well as debt laden oil and gas producers.
One company that caught my attention is CWEI.
They are about 2/3rds oil, 1/3 natty, heavily hedged at about 80% of production. The interesting aspects about the company is the amount of property they own in oil rich territories like the Delaware Basin and Eagle Ford shale. In Eagle Ford alone, they have 100,000 acres. The reason why the stock is down is due to debt, saddled with about $350,000,000 in debt. However, the company is managing its affairs and has another $100 million left to spend recklessly.
The acreage alone, which are in the two richest fields in America, are worth $720,000,000. That’s not production from their current wells. Clearly, the stock is very undervalued. Their problem is financing. They have too much debt to work the fields themselves. They have $7 billion worth of drilling, which means they need to execute joint ventures or sell some properties in order to finance the rest.
At the current rate, it will take them 30 years to develop their properties. Clearly, this company would be better off under the management of a much bigger company. Merger anyone?
There’s a reason why the stock is down 57% yoy and it has nothing to do with the company being managed properly. Its CEO is 81 years old and I sense that any change at the top might light a fire to the shares.
Oil oil everywhere and no money to finance drilling.
Old Buzzard, Clayton Williams Jr.–majority shareholder of CWEI
They intend to divest from certain investments, using the proceeds to pay down the debt, awfully reminiscent to both WNR and FTK stories. The only question is: will the company find a way to get the earnings machine going again, helping shareholders get back to a $100 share price?
Certainly it would help if oil and gas prices rose dramatically.
I’ll be doing more work on this throughout the week. Any feedback is welcomed.
Here is last qt. earnings call.
$APP
Going to $00.00
Nice. The young and dumb is what it is.
My understanding is that they also own their own drilling fleet, which supposedly keeps costs down. I seem to remember them owning some midstream assets they could sell in a pinch as well. Since I last looked at it, the balance sheet has materially deteriorated, as you pointed out.
they do have some rigs and pipeline infrastructure.
You can’t give away a land rig in North America.
test?
Dear Mr Fly,
I was trying to put here a big apology for being a pinhead, but it seems too long for comment field and did not publish.
Here is the key takeaway:
I must extend a big thanks to The Fly and Jake Gint for taking time to review my messy dwellings here at iBergamot, and offering an actionable advise regarding Proper Paragraphing etc.
With my top hat clenched in a sweaty palm, I stand corrected.
(Full text is in my update to this post:
http://ibergamot.blogspot.com/2013/02/the-fly-review-of-my-blog.html)
Cool.
Never take my harshest words as anything but constructive criticism.
Nothing says happy birthday to Clayton like a garbage bag, some duck tape, and a canister of helium. Cheers.
I sense that this is a funny comment, and yet, I can make neither hide nor hare of it.
That I get that it’s still funny, however, is a credit to you.
Cheers.
_________
I worked with Clayton Williams once and after considering myself lucky to have emerged with all ten fingers, have avoided anything associated with him like the plague. He’s made more money while losing OPM than perhaps anyone else in the O&G biz.
He does like to say that, OPM.
What do you think about the stock down here?
Here is their hedging program, disclosed in 2011.
In August 2011, the Company added hedges of 1.683 million barrels of oil at fixed NYMEX-WTI prices as follows: 4th quarter of 2011 – 189,000 at $98.35; 2012 – 785,000 at $100.75; and 2013 – 709,000 at $102.10. Combined with its other oil hedges, the Company’s cumulative positions and average fixed NYMEX-WTI prices are as follows: 3rd quarter 2011 – 547,000 at $83.78; 4th quarter 2011 – 729,000 at $87.56; 2012 – 2,649,000 at $95.75; and 2013 – 1,189,000 at $99.92. As a percentage of the Company’s estimated production from existing wells, these volumes cover approximately 100% through 2012 and 50% of 2013. In addition, the Company has approximately 3 million MMBtu of natural gas hedged for the remainder of 2011 at $7.07.
Impressive!
The problem here Fly is the Eagle Ford is more of a gas play and no one is paying up for gas plays at present. Clayton is no different than any other oil field trash…they are all crooks. However, the stocks can be traded.
Most of their production is from Delaware basin
Oil has been up for too long, 0bama will soon throw a wrench into the works so watch out.
And remember, it’s boom or bust in the oil patch. 100 Bbl can turn into 50 Bbl real fast.
Why does the sight of the nikkei ripping higher bring out thoughts of Godzilla fucking shit up? Watching the japaneeze go kamakazee is epic.
The yen is going to Shitsville ahead even of the BernankeBuck.
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Careful with Clayton. Not all of the Eagleford acreage is working. Much of the tier 2 acreage needs higher than 90$ oil to make a buck. XEC, FST are two others that were caught out with debt and dry gas. Lately, I’ve made a few bucks simply trading FST.
Not XEC, I meant to type NFX.
I’m thinking those PM shorts are starting to look rather distressed.
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DDD-I don’t like to short stocks but DDD might be a good play here. With a P/E of 84 they are overpriced based on their earnings just released. They beat earnings by .01 cent and missed on revenue by 2.26 million. Still not bad but the stock is priced for explosive growth.
There is FTK dna over at CEP too…
BRY was recently bought out so why not CWEI? However, there is a $60 oil and $1200 gold prediction out there – certainly not impossible. Most of the oils like CWEI correlate to a large extent and CWEI is now lagging the group. Large cap BP is around $40 and one day will rejoin its peers which would be close to $50 – a nice divvy is paid in the meantime.
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