PeakOil is You
How the oil and gas industry manipulates investors & public
Re: How the oil and gas industry manipulates investors & pub
by kuidaskassikaeb » Thu 05 Sep 2013, 16:19:58
$this->bbcode_second_pass_quote('', 'k') - I don't think the oil patch is probably any worse than other businesses. It boils down to human nature more than what type of business you're in. People cheat/lie. I've refused to sign off on bogus reports. I've lost two contracts because I wouldn't swear falsely. As a general rule those that push breaking the rules do their best to get someone else to sign the paper work. A bit of dark humor: Here...sign this...I don't want them coming after my butt. LOL. Usually said as a joke but there is some truth behind it.
No I agree. The spotlight is now on oil companies, and when they screw up it usually more spectacular than average, but the rules of human nature are the same. I really thought that this was more from desperation, rather more than pure greed.
I looked up weather CHK is going broke, but after a lot of speculation last May it looks like maybe they will survive. But anyway what does happen when an oil company goes broke? Do they turn off the well.
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kuidaskassikaeb - Coal
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Re: How the oil and gas industry manipulates investors & pub
by ROCKMAN » Thu 05 Sep 2013, 16:49:54
k - Actually with companies that have the mass of a CHK they neither go broke and rarely file bankruptcy. They simple get acquired by another company. The day comes when the shareholders are made an offer for the their stock they can't refuse. Right now CHK looks like they are trying to get their debt in order by continuing to liquidate assets. Not predicting it but I wouldn't be surprised if in the next 18 months or so, if CHK can't get the house in better shape, they are acquired by ExxonMobil or another Big Oil. It's physically impossible for Big Oil to grow assets via the drill bit. Just not enough places to poke enough holes. XOM likes to brag how they are always replacing their produced reserves. They don't like to point out such facts like when they bought out XTO a few years ago that one acquisition accounted for 88% of their reserve "growth" that year.
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ROCKMAN - Expert
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Re: How the oil and gas industry manipulates investors & pub
by rockdoc123 » Fri 06 Sep 2013, 10:18:17
$this->bbcode_second_pass_quote('', ' ')Right now CHK looks like they are trying to get their debt in order by continuing to liquidate assets.
not the case according to their investor presentations. Although they are paying down some debt most of the funds from asset sales are being applied to their growing capital programs directed at liquid rich areas in the Eagleford trend and Andarko basin. They seem to be retiring debt on schedule and not in advance.
Although there is nothing to keep an interested party from making an offer on any publicly traded company at any time with the requirement being the board of directors must evaluate said offer and make a recommendation to its shareholders, companies that are preparing for a sale behave quite differently than companies who are on a growth path.
If CHK was seriously entertaining prettying themselves up for a sale they would be talking more about the upside in their new basin entries rather than about production increases, EBITDA improvements, cost improvements etc. An interested party would not buy the company for its production simply because that is nothing more than a recycling scheme (current M&A metrics suggests you would pay full value for producing assets). What they would be interested in is acreage that has great potential, has been proven up but has not yet been developed as that provides considerable upside to the acquisition price. CHK in their presentations behaves more like a company that is trying to convince existing and potential shareholders that they are working hard to improve cashflow/share a key metric to investors.
A good friend of mine runs a company that is involved in shale E&P. They are hoping to sell to a larger player withing the next 24 months and believe they have made themselves attractive by acquiring acreage in the best parts of two separate shale plays and drilling up enough wells to prove up the extent of the plays. In this case a potential buyer is paying for contingent resources, the metric for which allows the purchaser to achieve considerable upside through development. Their presentations focus on potential resource/reserve size and the technical results of wells, not on production nor cashflow.
Now that doesn't mean that someone like Exxon might take a run at CHK more to improve their technical knowledge of shale but I think they have learned from their previous purchase of XTO which they did for similar reasons. My understanding is that within a year or so of that purchase almost all of the XTO people had left Exxon due to the big company approach to things.
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rockdoc123 - Expert
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