Wednesday, January 20, 2016

Naming Names: Cash Flow Negative Energy Companies With Big Debt (XLE; XOP)

The proxies we use for 'the industry' are the S&P Energy Sector ETF (XLE) for the integrateds and the SPDR Exploration and Production ETF (XOP) for the smaller guys.
Both set new multi-year lows again today, XOP currently down 5.78% at $22.49 and the XLE at $50.23, down $2.95 (5.55%)
From ZeroHedge:

America's Cash Flow Negative Energy Companies Have $325 Billion In Debt Among Them
With the topic of distress among U.S. oil and gas exploration and production companies becoming more important with every passing day that oil not only continues to drop, but certainly fails to rebound to levels that allow US energy companies to return to a cash flow positive state, we would like to show just how much debt is at stake.
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To do that, drawing inspiration from a tweet by J Pierpont Morgan, we have conducted a quick CapIQ sort through all US energy companies - both public and private - that have at least $100 million in annual revenue, and whose EBITDA less CapEx was a negative number in the LTM period.
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To be sure, this gives listed companies the benefit of not only higher EBITDA in the early quarters when the drop of oil was not as severe, but also of oil price hedges. As such as the true negative cash flow going forward assuming no rebound in the price of oil for the foreseeable future will be far worse as the benefit of the base effect dissipates with every passing quarter and as oil price hedges, which have so far cushioned the oil price blow, are unwound.
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Here are the results:
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There are roughly 80 U.S. companies that had $100mm in LTM revenue and that had negative FCF or EBITDA less CapEx.
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The combined market cap of these 80 companies is just shy of half a trillion dollars.
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The combined Total Enterprise Value of these 80 companies is $775 billion.
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The combined debt of these 80 companies is $325 billion.
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None of these companies are bankrupt, yet. As a reminder, putting as many of these companies out of business, and thus slashing non-OPEC oil production (as OPEC forecasted in its latest bulletin earlier today), is the primary motive behind Saudi Arabia's relentless pumping spree....MORE

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Nov. 30 2015
Always remember: In the short run balance sheets don't move stocks, in the long run they rule.