What is worthless?, page-170

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JCoure

35,920 Posts.

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21/01/15

20:59

Post #: 14619612
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Originally posted by goldbear77 ↑

yes a lot could happen, travel. the safe view would be to say 12 months. and i should caveat that im assuming no trickery in restrucuring asset and capital base. ie. no 2:1 share consolidation etc

but the longer view is well based and turns on the following
1. kondratiev wave

2. shale oil now effectively caps oil price below $75-85 US for next 5 years at least - all those rigs now being shut off will be put back on pronto as soon as there is any potential to meet marginal production costs.

3. all the while, as ive said, the bigger, lower cost companies will continue to lower their production costs and expand output to get further economies of scale

4. china - soon to be world's largest oil importer - is going through a slowdown and shift from manufacturing and construction to consumption. It had been a major factor in sustaining higher brent prices. Its likely this will nwo work against the oil rpice because some of that heavy industry demand simply wont be replaced for a long time.

5. at $13+ STO was priced on $100+us and on oil/gas sector multiples of 15x approx. Following this normalisation its extremely unlikely we will see those multiples and margins again within the next half of the economic cycle

Add to this the strong possibility the world will go into a global economic recession in next 2-3 years - and m comfortable with what I've outlined.

What it might do is oil bounce back into low 80s and mutliples get back to 12-13x if global recession is avoided and we instead leap into global growth round triggered by low oil etc.

That would take STO back to around maybe $10-11 if things worked out well and it happens soon enough.

Last year for oil was the equivalent of 2007 for copper, i would suggest.

It will solidify and improve from these levels - but its likely to take another global economic cycle (usually 7+ years) before that peak global +china oil demand of 06-07 is repeated.

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STO & ORG r entering the fear zone when the only ones selling r "buy long & hold" types who have had enough & short term arbitrageurs, mainly shorters, covering themselves if POO goes up having had their P&L gains, IMHO a good buying opportunity.

WPL Price at posting: $32.60 Sentiment: Hold Disclosure: Not Held

ORG Price at posting: $10.40 Sentiment: Buy Disclosure: Held

STO Price at posting: $7.33 Sentiment: Buy Disclosure: Held
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