$60 Stress Test
Re: $60 Stress Test
First let me say that I think there is very little chance that oil will dip down to $60/bbl. Brent closed at $103.97/bbl yesterday and I can't see OPEC allowing Brent to go below $100/bbl for long before they adjust production. Also, global demand for oil is going up in Q4.
That said. You can see what different oil and gas prices do for each of the Sweet 16 by downloading my Net Income and Cash Flow Forecast models from the website (you must be a member to access them) and changing the oil, gas and NGL prices used in the forecast. Any changes you make in the commodity prices at the bottom of the Excel spreadsheet will automaticly change the calculations above.
Obviously, you must be in Excel to do this.
Also, most of my forecast models have a table at the bottom showing the company's hedges in place. It is VERY IMPORTANT adjust realized prices for their hedges and that you know where the individual company is selling its oil. For example, California Spot and Gulf Coast markets are paying close to Brent.
For example, I sent out a company profile on PXP yesterday to all of our members:
> They have 70% of Q4 oil and 62.5% of projected 2012 oil production covered by Puts at $80/bbl
> These Puts are financial derivatives tied to WTI (i.e. the counter-party must pay PXP in cash if WTI dips below $80/bbl regardless of what they sell their physical bbls for.)
> Most of PXP's physical bbls sell in the California and Louisiana markets at significant premiums to WTI
That said. You can see what different oil and gas prices do for each of the Sweet 16 by downloading my Net Income and Cash Flow Forecast models from the website (you must be a member to access them) and changing the oil, gas and NGL prices used in the forecast. Any changes you make in the commodity prices at the bottom of the Excel spreadsheet will automaticly change the calculations above.
Obviously, you must be in Excel to do this.
Also, most of my forecast models have a table at the bottom showing the company's hedges in place. It is VERY IMPORTANT adjust realized prices for their hedges and that you know where the individual company is selling its oil. For example, California Spot and Gulf Coast markets are paying close to Brent.
For example, I sent out a company profile on PXP yesterday to all of our members:
> They have 70% of Q4 oil and 62.5% of projected 2012 oil production covered by Puts at $80/bbl
> These Puts are financial derivatives tied to WTI (i.e. the counter-party must pay PXP in cash if WTI dips below $80/bbl regardless of what they sell their physical bbls for.)
> Most of PXP's physical bbls sell in the California and Louisiana markets at significant premiums to WTI
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
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bearcatbob
Re: $60 Stress Test
Thanks Dan.
I think in a market sell off the hedges do not matter. My sense is that the market will price the venture on the current POO and things like cash flow and earnings will get lost. Hedges in the like IMO become safety nets for company safety.
Bob
I think in a market sell off the hedges do not matter. My sense is that the market will price the venture on the current POO and things like cash flow and earnings will get lost. Hedges in the like IMO become safety nets for company safety.
Bob
Re: $60 Stress Test
if oil did go to 60, what happens to the fundamentalsf each co, imo, would not be relevant to the psychology of the mkt--at least initially the mkt would over react as usual.