The Oil & Gas Consolidation Is Coming

1,453 views

We are soon to enter the next phase of the oil price collapse, which will take the form of industry wide mergers and acquisitions, stitching together failed businesses where the cash rich emerge on top.

Although I have been perhaps loyal to a fault with this industry, I have also warned of being on the wrong receiving end of just this very development from the start. Following BAS’ latest earnings report, management talked about this looming reality at some length.

The entire industry is failing and some are on the cusp of insolvency. Although the Saudi’s are failing in their alleged goal of destroying the US space, there will be no dawn for many of these highly leveraged and small players. BAS and others are preparing to pick through the carnage and buy out their assets for pennies on the dollar.

Those who have not maintained their asset rollover plans will be discarded via hard default; no savior come for them.

Prepare yourselves…

Oil Treading Water

1,649 views

Another disappointing inventory report sent oil down about 1% over the past 24 hours. Despite this, the oil names are holding up okay. BAS, HCLP, and VOC were all up today, and ALDW was down if you can imagine.

We’ll see what tomorrow brings. The oil and energy patch is down from the recent top, but this is a process we are working through.

See you tomorrow.

I Seem To Be Experiencing A Correction

1,096 views

Welcome back and how I did miss you all while I was away. My 9th floor office had that cold air of abandon wafting through it for the better part of forty-five minutes, before the warmth of the hearth drove it out.

The recent days have brought a correction in my positions, with BAS diving back below $10, HCLP testing $30, and some others also wallowing. It is hard for me to read too much into this, at the moment. The EURUSD is running back to test 1.10 and bonds are rallying again. At hand is the question of whether we are to retest the lows of the damage or will find support.

But for me this question is superficial in a sense. BAS in particular was up a great sum and so though we have corrected significantly, it’s nothing I wouldn’t expect from a distressed asset. My positions are derived from non-technical details mostly so while it’s difficult to watch this sort of thing play out, it’s not material.

The summer months are upon us now.

BAS Exhibits Classic 100% Upside Reversal

1,983 views

In December, for like two days, I sold out of BAS. I was done.

And then I was right back in again. I think now I can finally give a small sigh of relief. I mean, my chest is still tight, but at least BAS is a +50% winner for me again (my cost average is somewhere in the $7 range).

I’m sticking around in these names for longer yet. I understand that you do not believe. But I have this strange conspiracy theory ringing in my ears.

That this is all just one big gigantic attempt to fuck retail investors and make off with their toys.

One day, we’re all going to wake up and it will be like oil was never in trouble. The Saudi’s will flip a switch, toast to their good friends in Iran (who will perhaps be sunbathing with Exxon Mobile executives) and everything will be ’90’s summer fun again.

It doesn’t make sense, I know. I don’t have any proof, or evidence, or even anything that looks like “sanity”. But it’s going to happen, mark my words.

Anyway, I’m +16% for the year, sort of 1/3rd-ish of the way out of the hole I made in 2014.

Basic Energy Services (BAS) Didn’t Really Lose Much Money

1,464 views

BAS is up 12% right now following their earnings report. They lost a ton of money on paper and the market isn’t falling for it.

Basically, despite idling equipment and firing 20% of personnel, BAS wrote off more in depreciation than the same quarter a year ago. But properly stored and idle equipment isn’t really depreciating, is it? So there was about $20 million there over my fair guess for what the company’s actual depreciation probably looks like, best estimate. Then they wrote off another $5 million or so in non-cash items tucked into expenses for employee retention and such.

You pull out the write downs and the company lost may $0.19 per share, compared to a gain (after one time items) of $0.11 per share in Q4 of 2014.

Let’s look big picture here; the company saw revenues plummet 35%. I mean, Completion and Remedial Services alone plunged 45%. All of that cost me $0.19? (Cue crude jerking motion of the arm)

I don’t care. We’re fine here. Management knows what they are doing. The company just renegotiated their credit facility, lowering the issue amount by $50 million to $250 million outstanding in order to strip some undesirable covenants, but adding an accordion feature that can get them to +$50 million or $350 million total if it’s an emergency. They have headcounts under total control, and they are defending market share vigorously. They’ll get cash flows to balance in the next 6 months and we go forward from there.

I’m not worried about BAS. BAS’ competition should be panicked.

What A Wonderful Day

900 views

I am 70% long, and this is what my day looked like:

BAS +12.61%
CCJ +7.56%
HCLP +3.42%
ALDW +1.99%
VOC +1.76%
TIS +1.48%
OMAB +0.70%

It’s difficult to scoff at a day like that.

Yes I am still down from 2014. I have no desire to hide behind spin. 2014 was a horrible year. But as I said to those of you asking why I was still hanging around BAS, it was because BAS had 100% of upside…at least. And now here we are, closing in on $10 from $5.

I like all on the list. I’ve carefully vetted these positions and wouldn’t it be something if it was these same positions that ultimately redeemed me? I’m not wedded to the thought (for fear it will kill me) but it’s certainly quite possible.

The Oil & Gas Consolidation Is Coming

1,453 views

We are soon to enter the next phase of the oil price collapse, which will take the form of industry wide mergers and acquisitions, stitching together failed businesses where the cash rich emerge on top.

Although I have been perhaps loyal to a fault with this industry, I have also warned of being on the wrong receiving end of just this very development from the start. Following BAS’ latest earnings report, management talked about this looming reality at some length.

The entire industry is failing and some are on the cusp of insolvency. Although the Saudi’s are failing in their alleged goal of destroying the US space, there will be no dawn for many of these highly leveraged and small players. BAS and others are preparing to pick through the carnage and buy out their assets for pennies on the dollar.

Those who have not maintained their asset rollover plans will be discarded via hard default; no savior come for them.

Prepare yourselves…

Oil Treading Water

1,649 views

Another disappointing inventory report sent oil down about 1% over the past 24 hours. Despite this, the oil names are holding up okay. BAS, HCLP, and VOC were all up today, and ALDW was down if you can imagine.

We’ll see what tomorrow brings. The oil and energy patch is down from the recent top, but this is a process we are working through.

See you tomorrow.

I Seem To Be Experiencing A Correction

1,096 views

Welcome back and how I did miss you all while I was away. My 9th floor office had that cold air of abandon wafting through it for the better part of forty-five minutes, before the warmth of the hearth drove it out.

The recent days have brought a correction in my positions, with BAS diving back below $10, HCLP testing $30, and some others also wallowing. It is hard for me to read too much into this, at the moment. The EURUSD is running back to test 1.10 and bonds are rallying again. At hand is the question of whether we are to retest the lows of the damage or will find support.

But for me this question is superficial in a sense. BAS in particular was up a great sum and so though we have corrected significantly, it’s nothing I wouldn’t expect from a distressed asset. My positions are derived from non-technical details mostly so while it’s difficult to watch this sort of thing play out, it’s not material.

The summer months are upon us now.

BAS Exhibits Classic 100% Upside Reversal

1,983 views

In December, for like two days, I sold out of BAS. I was done.

And then I was right back in again. I think now I can finally give a small sigh of relief. I mean, my chest is still tight, but at least BAS is a +50% winner for me again (my cost average is somewhere in the $7 range).

I’m sticking around in these names for longer yet. I understand that you do not believe. But I have this strange conspiracy theory ringing in my ears.

That this is all just one big gigantic attempt to fuck retail investors and make off with their toys.

One day, we’re all going to wake up and it will be like oil was never in trouble. The Saudi’s will flip a switch, toast to their good friends in Iran (who will perhaps be sunbathing with Exxon Mobile executives) and everything will be ’90’s summer fun again.

It doesn’t make sense, I know. I don’t have any proof, or evidence, or even anything that looks like “sanity”. But it’s going to happen, mark my words.

Anyway, I’m +16% for the year, sort of 1/3rd-ish of the way out of the hole I made in 2014.

Basic Energy Services (BAS) Didn’t Really Lose Much Money

1,464 views

BAS is up 12% right now following their earnings report. They lost a ton of money on paper and the market isn’t falling for it.

Basically, despite idling equipment and firing 20% of personnel, BAS wrote off more in depreciation than the same quarter a year ago. But properly stored and idle equipment isn’t really depreciating, is it? So there was about $20 million there over my fair guess for what the company’s actual depreciation probably looks like, best estimate. Then they wrote off another $5 million or so in non-cash items tucked into expenses for employee retention and such.

You pull out the write downs and the company lost may $0.19 per share, compared to a gain (after one time items) of $0.11 per share in Q4 of 2014.

Let’s look big picture here; the company saw revenues plummet 35%. I mean, Completion and Remedial Services alone plunged 45%. All of that cost me $0.19? (Cue crude jerking motion of the arm)

I don’t care. We’re fine here. Management knows what they are doing. The company just renegotiated their credit facility, lowering the issue amount by $50 million to $250 million outstanding in order to strip some undesirable covenants, but adding an accordion feature that can get them to +$50 million or $350 million total if it’s an emergency. They have headcounts under total control, and they are defending market share vigorously. They’ll get cash flows to balance in the next 6 months and we go forward from there.

I’m not worried about BAS. BAS’ competition should be panicked.

What A Wonderful Day

900 views

I am 70% long, and this is what my day looked like:

BAS +12.61%
CCJ +7.56%
HCLP +3.42%
ALDW +1.99%
VOC +1.76%
TIS +1.48%
OMAB +0.70%

It’s difficult to scoff at a day like that.

Yes I am still down from 2014. I have no desire to hide behind spin. 2014 was a horrible year. But as I said to those of you asking why I was still hanging around BAS, it was because BAS had 100% of upside…at least. And now here we are, closing in on $10 from $5.

I like all on the list. I’ve carefully vetted these positions and wouldn’t it be something if it was these same positions that ultimately redeemed me? I’m not wedded to the thought (for fear it will kill me) but it’s certainly quite possible.

Previous Posts by Mr. Cain Thaler