@sailnyssa the climate crisis is terrible, drilling 12000 ft...

@sailnyssa the climate crisis is terrible, drilling 12000 ft under the ocean is inherently risky cost cutting led to tragedy in the thread above.

We need the entire oil and gas industry to shut down tommorrow to preserve a viable ecosystem for ourselves and the other species which make up our living planet.

Yet the global economy is still utterly addicted to fossil fuels - fully enabled by governments who take no credible action to create change. Just more bullshit - subsidies to rich people and promises for 2030.

The U.S. fracking industry oversupplied the oil market for the last 5 years with a number of misleading claims about returns - that haven't worked out for shareholders.

Then COVID hit, most of them went bankrupt along with every offshore driller but RIG.

In 2020 on the precipice of bankruptcy RIG forced it's lenders to take a haircut, then successfully fended off the resulting legal challenge extending their "liquidity runway" to Dec 2022.

In 2014 the world used 93m bpd of oil and the price was $100 per barrel - the narrative was the price wasn't high enough.

In 2020 the world used 92.4 mbpd of oil and as we enter 2021 the narrative is that $50 per barrel can sustain the world's needs. Not if you roll out a vaccine and relaunch the global aviation fleet.

Not after you've laid the industry to waste and blown big holes though your supply chain.

The unsubstantiated promises of a certain battery car manufacturer has contributed to a raging a stock market mania in the U.S. Combined with 0% interest rates, and the natural tendency of people to speculate - making money "free" is a mistake.

I think this is the biggest disconnect in markets today.

Transocean is barely hanging on after slashing to the bone, perhaps 2.8bn in revenue. In 6 or 12 months they need more contracts or it's game over.

I think these contracts are presently being negotiated.

In 2021 I think Mr Market will realise RIG is not going bankrupt and rerate to say $10/ share or 0.5x book. At that price maybe you're assuming they break even and return depreciation to shareholders.

Then I think we will enter an era of high oil prices - say $100/bbl again.

The cost structure of the business doesn't change much, the competition has been obliterated and the company goes back to $5bn revenue $1.5bn per annum profit - $40 per share ++.

Not for the faint of heart but that's how I like 'em.

We've seen the market in cyclical commodities turn - as it did with iron ore. Any assumption that a commodity will remain below it's cost of production indefinitely is on shaky ground - pricing securities on that basis is a mistake/arbitrage opportunity.

The safe bet is with a producer rather than offshore drilling.

This is the same as the difference between Fortescue and BHP, you're certain BHP has the lowest cost production and can survive a depressed period for Iron Ore.

Better not buy Arrium though.

If you are willing to make a call when low prices will end then you would rather buy the one with greater operational leverage. We've seen this story before and know how it ends - I am keen to back myself into a "crazy" decision.

If it doesn't pan out I will console myself with making 4x my money on CDD