BAS beat earnings estimates last night, as they have done for 2 quarters in a row now. And they are still losing money.
Tucked into the earnings release was a little bit about the company looking to negotiate with creditors and retained the law firm Weil, Gotshal, & Mangers. This is an early due diligence announcement that Chapter 11 is on the table, executive style. Shareholder equity also probably just went negative.
Unfortunately, lads, this is a no win situation. The environment is just too bad, their competitors are all going bankrupt (ironically giving them a competitive edge) and the oil markets will not recover quickly enough. We are turning a corner but it’s not coming fast enough.
If CJES is any guide, creditors will be taking ~95% of these companies in restructuring. I am severely disappointed.
I never thought this would go as far as it did. Even after actively taking steps to lower my exposure in mid 2014, I held a position in BAS and HCLP because I thought it could be saved. Mostly because I thought this despair was obvious to everyone, and that the key players (namely OPEC and the Saudis) would make smart people moves to avoid it.
Well, I am here to tell you, Saudi Arabia is not staffed by smart people. They are staffed by lucky sperm cells surrounded by lunatics. And the oil space bankruptcies are just getting started.
The funny thing here is that these bankruptcies are going to make the US shale market stronger and have the exact opposite effect the Saudi’s were banking on. Congratulations, Saudi Arabia: your budget is in tatters and now US oil will have a cost extraction basis $10 lower from swapping credit for equity and desperation driving sector operating costs down.
Suffice to say, Saudi Arabia are real dipshits.
But I am a victim nonetheless. Now, I am not going to sell out of BAS…because I have 95% losses baked in. Seriously, I could take the CJES 6% equity swap, have the stock rally back to $10, and still be where I’m at today. The damage is done.
But I held this position from 2011. This was an investment and the difference between 93% losses or 97% losses is immaterial.
If you’re a recent buyer, or just have money on the table you can’t afford to lose, get out. The company is filing later this year, I would guess. Probably even if oil prices and drilling recover.Comments »