Here’s a fun article. I expected this sometime last year, as it shows the largest oil sector firms understand what must be done.
In order to regain stability of the oil market, production needs to be brought in line with consumption. That is not rocket science. What is considerably more difficult is how that process is permitted to play out.
It’s the overpopulated island problem. Two men are stranded on an island with just enough food for one to survive. How many men survive?
No men survive. They both eat just enough food to ensure they both die, fighting each other the whole way. That’s just instincts.
Baker Hughes and Schlumberger are two of the biggest players in the services space. And they’re old and well connected and staffed by pretty smart people. I’m comforted that someone is finally forcing the weakest hands to wrap up their deaths, as in the long term this is going to minimize the damage to the US energy sector.
Hopefully the more stable services firms can come together, pick the US supply that needs to be idled, and shut it down. Waiting for these zombie oil companies to keel over themselves is growing tiresome.
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I believe that the 32.10 print in the o/n market needs to be tested before the spring short squeeze.
HAL is buying BHI so your comment “Baker Hughes and Schlumberger are two of the biggest players in the services space” is incorrect.
iBC is getting their clocks cleaned trading oil because they don’t understand the business.
Hartman, that is idiot logic. BHI is explicitly listed in the article I linked to and are still actively traded (and separate). Don’t waste my time with such low brow input.
HAL has a $28 Billion market cap
BHI has a $18.5 Billion market cap
Both companies are plenty large. Together they’ll be larger.
SLB dwarfs both with a $83 Billion market cap.
The point is, neither BHI or SLB is a BAS with a (now) $82 million market cap. Or a KEG with a pending bankruptcy.
If I want to describe BHI and SLB as two of the biggest players, I will. The fact that there exists some third (or fourth or however many) company between them in size is immaterial to the claim, because I didn’t say “SLB and BHI are exactly the two biggest oil services companies”.
Cain that is not Hartman he doesn’t even have a log in to the site. Hartman is blunt but not a troll. That guy is just trying to get a rise out of you.
With that said- Do you think BAS is now a bankruptcy candidate giving it’s D/E ratio now and the fact Oil keeps plummeting to its impending death?
I don’t know, I need to see the most recent cash burn rate.
BAS’ entire cash burn from last quarter was from their eccentric CEO deciding to buy a company. And that purchase allegedly produced cash.
They have no debt coming due until 2019 I believe (I don’t have time to check the SEC filings), so what would spark a bankruptcy?
This is a game of chicken being played. Only so much supply can be destroyed in the US without corresponding supply losses elsewhere in the world. And it only takes 2 million barrels per day of losses to shore the oil market up.
My best guess, looking at the data, is that although BAS looks bad…EVERYONE looks bad. They’re still in the middle of the pack and it’s the outliers who are going to actually go under.
Remember that as stock goes to $0, debt to equity ratios approach infinity. That’s a good measure in a normal environment, but not necessarily as good of one in our environment today, where everyone’s share price is getting cut in half every 6 months.
Someone is going out of business here. But so far, I have not been convinced it will be BAS. And since the damage is frankly done, it makes sense to bet on recovery here for me. What’s another 1% or so in net losses on top of what I already have, really?
Sorry, BAS didn’t buy a company. They just bought out all the equipment of a company. Big difference.
This man speaks the truth.
http://www.forbes.com/sites/rrapier/2016/01/08/opecs-trillion-dollar-miscalculation/?utm_campaign=yahootix&partner=yahootix
Thank you I appreciate your insight. I want to start legging into a long position and feel BAS could offer substantial gains this low. Obviously this is predicated on an oil recovery; hopefully it starts soon. I was thinking $50-$70 in 2016 would be a great target.
Thanks for the article
I’m going to be completely frank with you; starting a position in BAS here may not be the wisest move.
I mean, maybe a small one. But if I were just getting started, I would be concentrating exclusively on the oil majors.
Why buy a company like BAS and risk losing all your money when any purchase into HAL, SLB, CVX, XOM or APC are all going to be up 50-150%?
I think BAS is going to make it but it’s a pretty volatile move. And there is so much “sure thing” quality going for so cheap.
Maybe construct a portfolio that’s 80% oil majors (traditional companies), and 20% chaff (BAS, HCLP, EMES, SLCA, etcetera…names from the fracking boom). That way, even if half the 20% dies out, you’ll still be up huge in a recovery.
And if the names in the 20% recover, then that 20% grows 5-10X less any bankruptcies and you’re even better off.
Mr Cain – are you also legging into the majors?
Baker Hughes is one of my main service providers. They may have smart people working for them somewhere in the world, but it’s not here. Having worked for a service company in the past I have been shocked at just how piss poor they are at running their local operations.