Peter, If it is any consolidation most people in almost any O&G stock at the moment are likely have similar experience. The other day Cmonaussie on another forum made this comment which I think gives a good insight.
"IMO the oil price has thrown flowing boepd multiples and Reserves multiples into disarray. More than ever location, location, location and netback, netback, netback are more important than ever" Fwiw I think the poster is probably one of the best O&G commentators on HC.
If we look over the past few years I think many/most O&G were overvalued due to reserves but the bottom lines were pretty ordinary, capital markets were tight and the sentiment has rubbed off on all in the sector both good ones and bad ones. The low oil price now highlights the vulnerability in many of the plans and will probably be blamed by most for sp decline but imo that is superficial and an excuse for not having sounder business plans.
The best we can do is look at the fundamentals, review decisions made by mgt and work out if the decisions made were good and protected future growth.
For PSA I think some good decisions have been made in the past year which makes them a good defensive stock.
Sale of Marathon & Main Pass 270 - This monetised the future earnings in June before the price drop and gave coy the opportunity to participate in new conventional exploration prospects
Not entering Unconventional and focus on GOM.
Company had US $36m cash in Sept, if we subtract the planned drilling campaign cost $7.3m it gives around $29m or AUD $35m cash. (US$5.m is restricted though for future rehab work)
Some other positives
Jeanerette appears to be consistently producing (9% NRI of roughly 100boed)
Drilling 4 conventional exploration wells, one due to spud soon. This could mean coy will be drilling when others are cutting back on capex and may attract onlookers
Opportunity to look for further acquisitions in a depressed mkt. With this in mind if OP stays low there could be some good prospects very cheap
Some obvious negatives
Low OP imo will dominate discussions, gas price is not helping either unfortunately so sentiment likely to be negative. Low liquidity and poor sentiment is a heavy weight for even the better companies to carry. Announcements will need to hit the mark and be on message to maintain price or attract contrarian investors.
PSA has a small HC following so there is not a lot of stock based discussion. This is not such a bad thing in this environment but a shame really as there are some good things going on around the areas the company operates.
IMO we O&G folks are in the same position as most O&G companies today. They can do nothing and tough it out if confident they are on the right path, sell some less profitable assets or purchase more attractive ones. The cycle will turn one day and every day the parameters change making yesterdays analysis less applicable. If we look beyond the obvious, diversify and ensure we are buying "value" these times are more exciting for the future. FWIW companies in PSA's position imo are more likely to be able to tough it out and grow. Eventually with good communication they will attract investors less focussed on the daily movement of SP.
As always this is my opinion, for me the logic works but there are many views to be considered and we all have different circumstances and outlooks which can create bias.
