So much for the 2016 recovery. The 4th quarter results will be interesting for ConocoPhillips. COP management is running out of rabbits to pull out of the financial hat. The assets are not selling. The credit facilities are tapped out. What will the CEO whine about next? The oil can now flow freely throughout the world -- two way street!
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WHAMMY - it's the Spring redeterminations based on four quarters of low oil prices that will reduce collateral for bonds. These redeterminations are done twice yearly and this is the first with four quarters of low oil prices. WHAMMY ... COP is the outlier financial health among the mahor oil companies.
The credit facilities are based on the value of the oil in the ground. As the price of oil goes, so goes the credit facilities. And if the cost of producing the barrel exceeds WTI the value is zero and the oil in the ground is not longer an asset. Note the billions of write offs in thew news. ConocoPhillips will follow shortly... Expect a loss of $15 billion.
I doubt COP's credit facility are ANYWHERE NEAR tapped.
WHAMMY ... It's worse - choosing not to drill unconventional acerage moves it out of proved. That reduces the available debt capacity as the collateral for our bonds is lowered. A double whammy as four quarters of low prices also hit too in Q1, just when cash prices no longer cover operating costs ...
The recovery will start once everyone loses hope and capitulate - we are yet to reach that point. They do not ring bells in tops and bottoms