crude tops $50 a barrel sending oil stocks surging this week
TRANSCRIPT
Oil topped $50 a barrel this week, though it did close down below that key price point.
However, oil was still up 1.9% for the week due to continued global supply disruptions as
well as the looming OPEC meeting. That helped ignite a rally in oil stocks.
So What: Key driver: Royalty settlement
and another debt-for-equity swap
Chesapeake Energy and Total agreed to pay $52.5 million to 13,000 people in the Barnett Shale to settle a royalty dispute
Of that amount, Chesapeake will pay $29.4 upon court approval of the settlement and another $10 million in three years with Total paying the other $13.1 million
Now What: The company also completed
another debt-for-equity swap issuing 5.2% of its outstanding shares in exchange for some debt
This is the second exchange in a month, with the company swapping a total of 10% of its stock for 4% of its debt
Key takeaway: The increasing financial certainty has investors breathing a little easier that Chesapeake Energy might just make it through the downturn
So What: Key driver: Upsized
tender offer On May 12, Crestwood
commenced a cash tender offer to purchase up to $250 million of its notes at a slight discount to the principal amount
Now What: However, after investors
tendered nearly $480 million in bonds, the company decided to amend the terms of its offer and increase its aggregate purchase price to $312 million in order to take out more debt at a discount
Key takeaway: Investors are glad to see that this tender offer was a success
So What: Key driver: Analyst upgrades RBC upgraded the company
from sector perform to outperform, while also lifting its price target from $4 to $10
It cited increasing proppant intensity driving upside to analyst expectations
Now What: Morgan Stanley followed suit,
upgrading the stock from equal weight to overweight, while giving it a $9 price target
It cited the elimination of the company’s near-term debt overhang as well as increased conviction in a frac sand recovery
Key takeaway: Investors are buying into the potential that analysts are pointing out
So What: Key driver: Oil prices and a
presentation at an analyst conference
With oil touching $50 a barrel, it is increasingly likely that drilling rigs will start to go back to work, which bodes well for Pioneer
Now What: In fact, at an analyst conference
this week the company noted that it is already starting to see an increase in utilization
Drilling utilization is currently 42%, up from 40% last month, while well servicing utilization is 40%, up from 37% last month
Key takeaway: Investors are starting to see some green shoots now that oil is around $50 a barrel
So What: Key driver: Capex and
restructuring update EXCO is cutting its 2016 capex
budget to just $85 million, which is 69% below last year
The company also said that it has now reduced net debt to $1.1 billion, which is down 28% since last September
Now What: Finally, the company
noted that it has $250 million of liquidity and only expects a liquidity burn of $10 million a month this year
Key takeaway: Investors like the progress the company has made
This could be the next billion-dollar iSecret