View Full Version : Hurricane Katrina speculation and thoughts
08-28-2005, 01:48 PM
As I write this Hurricane Katrina is heading towards New Orleans, and I'm reading many articles stating that many of the oil rigs in the Gulf could be in trouble. Since the hurricane has strayed significantly from the forecasted track of Friday, and strengthened, the rigs were not sufficiently secured when workers were forced to evacuate. These rigs are open to significant damage due to this, and therefore the oil production coming from the gulf should be signficantly reduced, if only for a short amount of time. Assuming this is the case, should we expect oil to skyrocket to $70 or higher on Monday!? Will energy stocks (Valero, for instance) shoot up with these prices? If so - this could be a great opportunity to get out of some energy on a high, and follow Cramer's advice.
OR - the reverse I suppose could also be true. Say a BP rig is destoyed (from what I've ready today, it is not out of the question that some of these rigs could be heavily damaged). Will BP's stock get crushed because of this?
Is this a good time for OII or GW perhaps? All interesting things to ponder. Just curious what others are thinking before the storm hits.
08-28-2005, 05:31 PM
I heard there are nine refineries in the path of this hurricane on the news. If you can find one who isn't, that would probably be a good idea.
OII's equipment can be used to repair damaged rigs. Same with CDIS and they also have divers, but they do have some rigs in the Gulf. Not sure where. A lot of people are waiting for GW to go up so they can dump it, including insiders. :wink:
Use limit orders tomorrow and remember that the hot stocks will zoom up in pre-market trading.
You can also go to www.rigzone.com for more info.
08-28-2005, 06:31 PM
Valero (VLO) I believe will go to $100+ as Cramer said a while back in one of his shows. Here are the reasons why:
Remarkable Growth Trend - VLO continues to demonstrate outstanding top and bottom line growth performance. Compared to full year results published three years before, the company's annual revenue grew 259.7% during its fiscal year ended December 31, 2004 while year to year quarterly sales increased 31.1% in its most recently reported quarter. Its most recent full year net income of $1,803.8 million represents a 220.1% increase compared to the same figure three years before, while the company's quarterly net income increased 33.9% to $847 million in the most recently reported quarter relative to the same quarter a year ago. VLO's latest earnings release of July 26, 2005 had an immaterial impact on the price of the stock, as reflected by a 1.5% drop in the days surrounding the announcement. However, the company is averaging a 6.8% earnings surprise (difference between expected and actual earnings) over its last six reported quarterly figures, which means it's consistently managing to beat quarterly Wall Street estimates, an important driver of stock price momentum.
Exceptional Value Indicators - VLO trades at about 10.00 times earnings per basic share (excluding extraordinary items); this compares very favorably to the MarketGrader-calculated optimum PE ratio of 31.7, based on a historical 17.39% EPS growth rate, suggesting the stock is significantly undervalued. Given the company's strong revenue and earnings per share growth rates, VLO may be gaining market share without sacrificing profitability. The stock trades at 4.72 times tangible book value (excluding goodwill) and 22 times cash flow per share. VLO trades favorably at 0.37 times trailing 12-month sales, a 95.45% discount to the Oil & Gas Refining & Marketing industry average price to sales ratio of 8.10. The company's market capitalization of $23,010.02 million is 22.04 times its most recently reported net income, a healthy valuation indicator.
Adequate Operating Results - VALERO ENERGY CORP exhibits very solid operating performance as evidenced by remarkable 26.2% return on equity. The company's leverage, with long term debt accounting for 29.04% of total capital, seems very adequate at these levels and poses no long term risk. The balance sheet looks strong considering the company had $973.00 million in cash on hand in the most recent quarter and $3,877.00 million in total debt. The company's net income of $1,803.8 million (fiscal year ended 12/31/2004) compared to its $19,391.6 million in assets is a tribute to its operating efficiency. Especially important are VLO's operating margins of 8.4%, 4.9% higher than the 8.01% Oil & Gas Refining & Marketing Industry average.
Strong Cash Position Suggests Healthy Outlook - VLO displays very robust year-to-year cash flow growth of 31.8% and a barely satisfactory EBITDA (earnings before interest, taxes, depreciation and amortization) margin of 8.4%. Given the company's current capital structure, its ability to service its debt seems very adequate, as suggested by a 3.5 debt to cash flow ratio, with total cash flow for the most recent quarter ended June 30, 2005 of $1,044 million compared with $792 million for the same quarter a year before. VLO's economic value added is very acceptable based on a low cost of debt and moderate cost of equity, when compared to a 15.31% return on investment. The company is financing its tremendous growth at least in part organically supported by an average 25.35% reinvestment rate over the last four quarters.
08-28-2005, 07:19 PM
Valero's refinery is in St. Charles, about 15 miles from New Orleans, and they evacuated all but a few workers on Sat. Could get significant damage.
08-28-2005, 11:17 PM
When I first heard about oil passing $70 in the futures market, I thought it'd be an excellent time to sell and take profits in anything oil related.
To me, it sounds like a blow off top in the making. When you see this kind of panic in any market, you should always consider doing the opposite of the crowd. There is already an enormous fear premium built into the market. Not to say that it can't go higher, but we're closer to a top than a bottom.
It'll be interesting to hear Cramers take on all this tomorrow.
08-29-2005, 09:18 AM
I'm not sure it's the top of anything, because we still have winter ahead of us, but I'm not jumping on any bandwagons today. If I can buy something cheap, I might do that, this week. Gotta run, keep an eye on the news!
08-29-2005, 10:18 AM
The market is holding up pretty well in light of Crude breaking the $70 barrier. Energy Bubble? There's definitely still money to be made.
08-29-2005, 03:35 PM
NPR and MSNBC are reporting that atleast two oil rigs are currently a drift. Who knows how many more could be damanged, or if any under sea piping has been damaged? Could this/Will this cause more oil speculation tomorrow? Or will the possibility of the opening of the US oil reserves squash that?
08-29-2005, 09:52 PM
I heard an oil rig got loose and rammed right into a large bridge! Hard to say what is going to happen, tomorrow, but energy stocks did go down in the afternoon from their morning highs, when the news came out that Bush was going to release some petroleum from reserves.
09-03-2005, 02:18 PM
Its sad to see what's been going on down there. I hope everyone can find it in their pocketbooks to make a donation.
Powered by vBulletin® Version 4.2.1 Copyright © 2013 vBulletin Solutions, Inc. All rights reserved.