Q3 Alert

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dan_s
Posts: 37313
Joined: Fri Apr 23, 2010 8:22 am

Q3 Alert

Post by dan_s »

3rd quarter results will be ugly for a lot of upstream companies, including our Sweet 16 and other portfolio companies.

Ignore earnings per share because GAAP / SEC accounting rules distort what is actually going on during periods of rapidly moving commodity prices. Ignore impairment charges (the companies still own the properties and the oil & gas is still in the ground) and those very confusing mark-to-market adjustments on hedges. The E&P companies that have a lot of oil hedged will report big non-cash gains on their hedges ("derivatives").

Focus on:
> Production growth and guidance for future periods
> Cash flow from operations
> Balance Sheet / Liquidity
> How well they are doing getting drilling & completion costs down.
> How well they are reducing lease operating expenses and cash G&A

Strong cash flows and access to capital is what gets them through the commodity price cycles.
Dan Steffens
Energy Prospectus Group
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