When oil went bust, I honed in on the debt/equity levels of the energy sector, knowing that it would be their sole source of capital once credit markets seized up. Lo and behold, this trend is beginning to take shape, especially as the 2017 debt wall looms.
Here are some opinions on the topic, which is being echoed through Wall Street now.
“The whole name of the game is trying to survive until oil gets back up to $60 or $70,” said Spencer Cutter, a credit analyst with Bloomberg Intelligence. “That may take a year or two. Nobody knows.”
“It’s all part of the same theme of de-levering,” Subash Chandra, an analyst at Guggenheim Securities LLC in New York, said of the share sales. “Part of that tool-kit is ‘backdoor equity,’ which adds inventory and obscures the dilution by adding something new.”
“Investors are looking at this and saying, ‘I know it’s not great now, but I think it’s going to get better in the future so I’m in,’” Wangler said. “It’s a bet on better days ahead.”
But what if oil prices don’t come roaring back? This idea that we need to hang in there because brighter days are ahead is gambling, 100%. No one can accurately predict where crude will be in a month from now, let along 1-2 years. If you’re investing in heavily burdened energy stocks now, you’re gambling–nothing more or less.
I’ll show you exactly what I’m talking about.
Should crude fail to rally, or God forbid fall from current levels, all of the companies below will find themselves in a credit crunch and will likely need to restructure their debt.
Once this happens, losses will be absorbed. The banks who lent the money will take hits. Hence, the ripple effect will be noteworthy.
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Boe carney tomorrow
Opex friday – friday
Should end this fake bullshit week of trading
They’re going to try to keep the plates spinning in the air a while longer. They’re not doing very well yet at getting erl to rise, and who knows if they can. But they may be able to keep it trading in a range for a while, or keep it from falling too far. As you note, Fly, there’s a lot hanging in the balance. Time will tell.
For once I agree with Frog. Why? Just my guess and opinion, at least until after November elections do they not hope DemoCRAPs are elected? lest the people see the emperor has no clothes?
In that scenario either way they win; IF the Democrat-Socialist-Islamist party wins do they need to care what happens later to a wrecked economy? but if the GOP wins and everything tanks later, can’t they can blame the GOP for their own failure?
There is no Democrat-Socialist-Islamist party. You must have been watching Faux News or reading Right Wing web sites again.
I wouldn’t say it’s because of the elections, but yes, oil will be kept within a range if it’s possible. There are plenty of people who don’t want huge oil company bankruptcies for many reasons, not just political ones.
So many people are so election focused now. Did you see the article on Twitter about why Pokemon will determine the outcome of the elections? It appears to have been written by a cat.