2016 is the year MAD is going to have to make it's move,...

2016 is the year MAD is going to have to make it's move, probably the first half.

Most analysts see particularly the first Quarter as being very bad for the O&G industry with the POO testing previous lows and then recovering to some extent towards the end of the year. Many companies have weathered the storm through (bank required) hedging, however that hedging has either run out or soon will. US refineries go into maintenance in March/April which will add to oil stockpiles and put more pressure on the price, sanctions should also be lifted on Iran in 1Q. Bank revaluations occur in April just when the POO could be at it's lowest.

As I mentioned in a previous post, the world uses about 95m boe/d & we presently have a surplus production of 1-2m boe/d - about 2% which has caused the POO to crash. If that 2% were to go the other way prices would skyrocket. Yeager has been around long enough to know the cycles and how quickly things can turn. With the bankruptcies & defaults well and truley underway, I can see opportunities meeting MAD's criteria coming along in 1Q. Most analysts believe any drop below $32/barrel would be very temporary so we are very close to what most believe to be the bottom.

In 2015 O&G capex was down US$200b and a larger drop is expected in 2016. They say that $200b reduction wont be reflected in production figures till 2017. Decline rates in conventional wells are in the 5-10% range (unconventional shale much higher). You don't have to be Einstein to see what will happen to prices with the lack of investment combined with normal decline rates. It wouldn't surprise me at all to see OPEC - Russia reduce production as soon as shortages begin to appear, further adding to price pressure. And of course a geo-political event is always a possibility in the O&G industry.

Originally MAD envisaged 1 major acquisition per year, if they can make an acquisition in the first half of 2016 or even 2 acquisitions they'll be in the box seat for the inevitable recovery. The leasing program is a plus, but I don't expect it to be as big as the planned acquisitions. I doubt we'll hear anything re the leases for the mentioned 2-3 months, in the mean time the sp will stay depressed presenting buying opportunities for those with a 2 year plus horizon.