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HubU
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HubU
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 Posted: Wed, 27th Jan 2016 08:24 Post subject: |
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So I've been briefly looking into Energy XXI-s fundamentals and overall very bullish towards the stock. I am hoping for a downswing after February 8th to open the position. Obviously there won't be anything positive seen from the quarter earnings, so this is where the opportunity is at.
By no means is the company underpriced given the circumstances. Rather it offers an incredible risk/reward ratio. Be prepared to lose everything when youre with me.
Essentially we will be gambling for a rapid increase in WTI Crude prices, there is absolutely no way EXXI will be able to service its 3,6 billion bonds at current oil prices after 2016. The company will go bankrupt, simple as that. You can already purchase its junk rated bonds cents for a dollar. http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C560633&symbol=EXXI3694681
So lets talk about the upside. The company had about 500 million dollars liquidity by September 30th. That's enough to survive through 2016. Most of the huge losses you see in the income statement are paper losses (non recurring depreciation of assets). The land, oil and rigs are still there, so this really doesn't matter at all.
The management has done incredible managing its debt. Recently they repurchased about 892 million dollars worth of their own bonds at a huge discount, paying only 196 million in the process. This will save them 65 million dollars annually alone, remeber EXXI is only worth about 80 million dollars at current stock price. Their strategy is keep cutting down cash cost of interest by 5-7 dollars per barrel this year.
10 dollar increase in WTI crude price generates about 120 million dollars EBITDA more for the company. The company is easily worth 500 million dollars at mid 50s crude prices. The upside is fucking huge, noone can deny it.
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couleur
[Moderator] Janitor
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HubU
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| Posted: Wed, 27th Jan 2016 13:49 Post subject: |
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Actually the FOMC meeting is today and the chance of a rate rise is very low, because the markets have been very volatile lately. Same applies to March 16 meeting, no rate change in my estimation.
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| Posted: Wed, 27th Jan 2016 15:59 Post subject: |
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| vitupuuks wrote: | So I've been briefly looking into Energy XXI-s fundamentals and overall very bullish towards the stock. I am hoping for a downswing after February 8th to open the position. Obviously there won't be anything positive seen from the quarter earnings, so this is where the opportunity is at.
By no means is the company underpriced given the circumstances. Rather it offers an incredible risk/reward ratio. Be prepared to lose everything when youre with me.
Essentially we will be gambling for a rapid increase in WTI Crude prices, there is absolutely no way EXXI will be able to service its 3,6 billion bonds at current oil prices after 2016. The company will go bankrupt, simple as that. You can already purchase its junk rated bonds cents for a dollar. http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C560633&symbol=EXXI3694681
So lets talk about the upside. The company had about 500 million dollars liquidity by September 30th. That's enough to survive through 2016. Most of the huge losses you see in the income statement are paper losses (non recurring depreciation of assets). The land, oil and rigs are still there, so this really doesn't matter at all.
The management has done incredible managing its debt. Recently they repurchased about 892 million dollars worth of their own bonds at a huge discount, paying only 196 million in the process. This will save them 65 million dollars annually alone, remeber EXXI is only worth about 80 million dollars at current stock price. Their strategy is keep cutting down cash cost of interest by 5-7 dollars per barrel this year.
10 dollar increase in WTI crude price generates about 120 million dollars EBITDA more for the company. The company is easily worth 500 million dollars at mid 50s crude prices. The upside is fucking huge, noone can deny it. |
Earnings could announce debt swap which is something people aren't taking into account when looking at the bonds being purchased in relation to the rest of the debt. It makes zero sense for Franklin templeton to have bought all the bonds on the unsecured debt if a debt swap deal wasn't being worked out. This is why I'd be hesitant to wait before any earnings report on this stock. When the deal is officially confirmed / announced the stock price will have a couple hundred percent surge in a trading day like CRK underwent back 6 months ago.
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| Posted: Wed, 27th Jan 2016 16:38 Post subject: |
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I haven't really paid attention to the drama Franklin Resources is creating. Obviously they have a huge exposure and want work out a deal. Restructuring the 2017 unsecured to equity isn't a miracle solution in my opinion. It all comes down to oil prices.
I have my thesis set and thats how I will follow through. Looking at EXXI orderbook, the spread is wide and the depth often nonexistent. I don't dare to entertain myself with the idea of timing the bottom perfectly. I will jump in after the earnings, probably will average down if the price falls further, sort of in a martingale system.
On the other hand, if some of you have fat throbbing cawks so your wives will adore you even when your broke, then you might aswell go all-in now and forget about it.
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| Posted: Wed, 27th Jan 2016 16:43 Post subject: |
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| vitupuuks wrote: | I haven't really paid attention to the drama Franklin Resources is creating. Obviously they have a huge exposure and want work out a deal. Restructuring the 2017 unsecured to equity isn't a miracle solution in my opinion. It all comes down to oil prices.
I have my thesis set and thats how I will follow through. Looking at EXXI orderbook, the spread is wide and the depth often nonexistent. I don't dare to entertain myself with the idea of timing the bottom perfectly. I will jump in after the earnings, probably will average down if the price falls further, sort of in a martingale system.
On the other hand, if some of you have fat throbbing cawks so your wives will adore you even when your broke, then you might aswell go all-in now and forget about it. |
If it all comes down to oil prices as we agree buying after earnings is no more safe then buying a month ago. Either you believe oil will go up or it won't. The debt deal is likely happening and I wouldn't want to miss out on it.
No one has suggested going all in on this stock. If you had 10k to invest I'd only put 1-2k at most.
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| Posted: Wed, 27th Jan 2016 18:53 Post subject: |
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I'm also waiting for some news about their current debt and liquidity state, the low oil price must've hit them hard. Going in at this time is a full gamble IMO, a risk I can't take sadly. Even the World Bank lowered their prospects for oil prices, and judging by their predictions it'll take a lot of time to recover. I doubt the very warm winter in Europe helps with all of this.
What do you guys think of Ali Baba? Are they on the verge of a massive global expansion? Couldn't the value explode?
Last edited by Mister_s on Wed, 27th Jan 2016 19:00; edited 1 time in total
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| Posted: Wed, 27th Jan 2016 19:30 Post subject: |
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Guys just to make one thing clear: Even if all of the posters here were the biggest financial experts, none of them will ever be responsible for any outcome of their predictions (true or false), so you act on your own risk.
From a personal point of view I really appreciate the details in which you guys explain your stand points, thanks!
I'm still waiting for my sob bank to activate my depot as I'll most likely buy some hundred euros worth of exxi stock 
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Il_Padrino
Posts: 7573
Location: Greece by the North Sea
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| Posted: Wed, 27th Jan 2016 20:35 Post subject: |
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If you guys are almost certain on EXXI (and assuming oil will go up this year), is it even worth it to spread your wallet with other oil companies?
How about CRK? The stock's been hurting a lot the last months, it seems the gains could be even higher than EXXI, and from what little I know, they seem financially stronger.
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| Posted: Thu, 28th Jan 2016 20:50 Post subject: |
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Looking at todays action, I'm more than confident with my plan (bullish after weak earnings). Oil is slightly up because of Russia&OPEC negotiation rumors, but whats been happening to the stock price is not for the faint hearted. The market is SATURATED with small time speculators who drive the volatility to insane levels. The stock is down more than 20% from opening highs. Most of those guys have little to no idea that the breakeven point for Energy 21 is about $49 BOE (not like high 30s Mchart is claiming). I expect an significant downfall in February, which gives the cool headed a good opportunity to make some dough.
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HubU
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| Posted: Fri, 29th Jan 2016 03:27 Post subject: |
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| vitupuuks wrote: | | Looking at todays action, I'm more than confident with my plan (bullish after weak earnings). Oil is slightly up because of Russia&OPEC negotiation rumors, but whats been happening to the stock price is not for the faint hearted. The market is SATURATED with small time speculators who drive the volatility to insane levels. The stock is down more than 20% from opening highs. Most of those guys have little to no idea that the breakeven point for Energy 21 is about $49 BOE (not like high 30s Mchart is claiming). I expect an significant downfall in February, which gives the cool headed a good opportunity to make some dough. |
That price has the caveat of a debt swap being worked out, which given what we saw last quarter is likely going to be committed. Understand that even if oil rebounds to $50 that without a debt swap by the end of the year the company cannot survive without declaring BK. Given what we saw on the bond market last month and Franklin Templeton's own Q4 data a debt swap is all but confirmed given the massive purchases of the unsecured notes.
The positive side is that with all the debt buyback and debt swap EXXI will be making the same profit at around mid-70's a barrel that they were at $110 a barrel before all of this.
I'm not sure why you downplay the importance of the swap, but it is absolutely vital to the survival of the company. If you don't believe said swap will happen or don't account for it i'm not sure how you could be looking at the numbers and think this is a stock worth buying.
I do think it is a safe plan though. Although I will point out that extreme volatility like this usually indicates bottom.
Last edited by Mchart on Fri, 29th Jan 2016 04:45; edited 6 times in total
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nouseforaname
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| Posted: Fri, 29th Jan 2016 14:03 Post subject: |
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Lets see what the Baker Hughes rig count tells us later tonight. If it keeps declining, we have probably reached a bottom @27$
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| Posted: Sun, 31st Jan 2016 00:03 Post subject: |
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| Posted: Mon, 1st Feb 2016 16:00 Post subject: |
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Is it, though?
OPEC has no reason to cut their production. The big baron in OPEC, the Saudis are profiting greatly by tampering with the russian economy that are bombing their ISIS boys in Syria.
We'll see what happens the coming days, but it may be a red week. A good time for some shorts.
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HubU
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| Posted: Mon, 1st Feb 2016 16:13 Post subject: |
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| farne wrote: |
Is it, though?
OPEC has no reason to cut their production. The big baron in OPEC, the Saudis are profiting greatly by tampering with the russian economy that are bombing their ISIS boys in Syria.
We'll see what happens the coming days, but it may be a red week. A good time for some shorts. |
A lot of the rebound was associated with the news of a meeting between Russian and OPEC, or "just" with struggling OPEC members (Venezuela is going down fast).
IF it happens, it won't be in the near future though, so my bet is bearish.
"Music washes away from the soul the dust of everyday life." ~Berthold Auerbach
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HubU
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| Posted: Mon, 1st Feb 2016 16:37 Post subject: |
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Exactly. They know their policy hurts others way more than them at the moment.
"Currently, Russia produces about 10.1 million barrels of oil per day. OPEC predicted in mid-January that the average daily production of the Russian Federation would amount to 10.74 million barrels of oil in 2016."
"Figures on Iran's preliminary tanker loading schedules show that overall exports will total around 1.44 million barrels a day (bpd) in February and about 1.5 million bpd in January."
Nigeria's boosting production by 100k barrels a month, Chinese economy is giving poor signals.
Again soon, even now, buying solid oil stocks and superb prospects such as EXXI will pay of big time. In the US alone 900+ wells were closed recently, so pressure if being felt, and prices are bound to explode.
"Music washes away from the soul the dust of everyday life." ~Berthold Auerbach
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| Posted: Mon, 1st Feb 2016 16:42 Post subject: |
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I wouldn't exactly call Exxi a good bet on the long run, these prices will eventually make them fold. Best for shorts, really.
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| Posted: Mon, 1st Feb 2016 17:01 Post subject: |
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EXXI for shorting is pretty much a horrible decision. Would never leave it overnight.
Your gain is limited to 30-50%, but losses are unlimited (stops aint helping much when a stock opens +50%)
What kind of shitty news arent in the price already?
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HubU
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| Posted: Mon, 1st Feb 2016 17:55 Post subject: |
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| vitupuuks wrote: | EXXI for shorting is pretty much a horrible decision. Would never leave it overnight.
Your gain is limited to 30-50%, but losses are unlimited (stops aint helping much when a stock opens +50%)
What kind of shitty news arent in the price already? |
I see no points in shorting EXXI either. Way too volatile at the moment.
"Music washes away from the soul the dust of everyday life." ~Berthold Auerbach
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| Posted: Mon, 1st Feb 2016 22:23 Post subject: |
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Any thoughts on UWTI/DWTI?
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