Monday, December 15, 2014

How's That Oily, Liquidy Thing Working Out for Ya?

In my best Sarah Palin voice, I've got to ask, "how's that oily, liquidy thing working out for ya?"  Not to dance on anyone's grave, but the plummeting price of oil has got to have executives of the independent formerly-natural-gas-now-oil-and-liquids companies banging their heads into a wall.  It's like 2012 in the natural gas market all over again.  They spent billions of dollars to forcibly shift into liquids and now the price oil makes those expensive acquisitions uneconomic.

For the past several years, I've mocked the wholesale shift away from natural gas as a case of the tail (stock analysts) wagging the dog, not because I foresaw the price of oil dropping 40% in four months.  I was more concerned with the lemming effect of gas guys piling into liquids, arriving late and paying too much.

A quick glance the stock charts of many of these independents is scary:






This morning, I saw that EXCO Resources killed its quarterly dividend:  it's hunker down time in the oil patch right now.

Since the Haynesville got rolling eight years ago, several of the bigger independents, notably XTO and Petrohawk, have been gobbled up by deep pocketed operators.  They're going to be OK.  But it's disconcerting to see many of the operators in the Haynesville suddenly treading water - and it's not even the fault of natural gas!!!

Look for some acquisition deals coming soon.  There is a ton of private equity money sitting on the sidelines ready to pounce.  They've been waiting for a buying opportunity, and they don't come in any prettier wrapping than this.  Merry Christmas!

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