"They make $7.7 billion from operating cash flow"
This is not true, the company has 7.7billion more expenditures than cash flow for the past 5 years (7.4b positive, 15.1b negative). They may have been building the GLNG project, but that's ultimately whats been their undoing-they built this on assumptions of higher for longer oil prices.
I don't expect them to be making a loss (in cash terms anyway)
This is also not true, for the FY 2014 the company does not have positive cash flows, neither did it have free cash flow in any of the past 5 years. Total cash from operations was 1.8b for 2014 and expenditures 3.3b. Yet they felt the need to pay out 196 m in dividends. Total negative cash flow is close to 1.6 billion.
The company has 21 billion dollars in property plant and equipment on its balance sheet. This is the standout on the balance sheet in addition to the massive long term debt (previously discussed). The market is telling you, it is not worth that amount. How confident can any investor be at what the implied oil price was in generating this asset valuation on the balance sheet.
If STO goes belly up, are you confident Total or Shell or whoever will pay 21 billion for these assets. If they pay anything less than 13.8 billion (total liabilities) for these assets, share holder equity is wiped out. Good luck then to shareholders.
Finally you can only value a company twice a year (when its financial statements come out). No one can predict what the future accounts will look like (this may be good, like lower debt and higher revenue, but may also be bad with asset writedowns!).
Please note I am not a shorter and have never short sold any company. I would not know how to. I have however tried to learn to examine the financial statements of companies I invest in. This is after many years of education at the school of hard knocks!
STO Price at posting:
$3.02 Sentiment: None Disclosure: Not Held
(20min delay)