This has frustrated yours truly. When I go into the Monday meeting and say, "No, really, the equities should be trading lower." and I get "Or crude trades higher?"Well, come Monday it's probably going to be the reverse.
Brent $82.84 down 2.13%, WTI $76.77 down 2.55%; XLE $83.99 down 2.38%....
ICE Brent $56.01 down $1.03; WTI $49.13 down $1.73; XLE $70.84 down 67 cents
As Jim Cramer watches one breakdown after another of high quality oil stocks and master limited partnerships, he is completely boggled. How could he have been so wrong about oil stocks?
"I wonder how I could have been so wrong because these stocks are now so far below where they were when oil was trading in the low $40s, and the oil companies were fighting for their lives," the "Mad Money" host said.
As an example, Cramer outlined the case of Whiting Petroleum, which was once thought to be a perfect takeover target because of its attractive Bakken shale holdings.
About a year ago Whiting purchased Kodiak Oil and Gas for $3.8 billion in stock, making it the largest producer in the North Dakota shale region. Back then, the Bakken was rockin'. Whiting clearly thought that oil was about to get stronger, not weaker.
As a result, Whiting's stock dropped dramatically when the price of oil plummeted. It still purchased Kodiak though, and inherited approximately $2 billion in Kodiak's debt.
This pile of debt prompted Whiting to issue 35 million shares of stock at $30 on March 24, in a desperate move for liquidity. On that same day, West Texas Intermediate traded at $47 a barrel. Whiting's stock then shot up to $37 a month later, just as oil hit $59.
Since that time crude has fallen to $50 from $59, just $3 above the price of oil back when Whiting issued 35 million shares. In the meantime, Whiting has fallen to $25 from $37.
What the heck? How could the price of Whiting drop so dramatically when the price of crude has gone up since March?
"That gets to the guts of where I think I got confused, or early or wrong. Let's just call it wrong. I didn't think that a stock like Whiting would collapse from where 35 million shares were offered, even as the price of oil was up from where the secondary occurred," Cramer explained....MORE