Oil Stocks Got Eviscerated This Week

18
Oil Stocks Got Eviscerated This Week

Transcript of Oil Stocks Got Eviscerated This Week

Page 1: Oil Stocks Got Eviscerated This Week

Oil Stocks Got Eviscerated This Week

Page 2: Oil Stocks Got Eviscerated This Week

This was an awful week for the market, which is now off to its worst start...ever. Among the weights pulling down the market were the

price of crude, which plunged below $30 per barrel for the first time since 2004. That led to a very steep drop in oil stocks,

including Williams Companies (NYSE: WMB), Seadrill (NYSE: SDRL), Chesapeake Energy (NYSE: CHK), Denbury Resources (NYSE:

DNR), and Whiting Petroleum (NYSE: WLL).

Page 3: Oil Stocks Got Eviscerated This Week

What:Williams Companies (NYSE: WMB) slipped more than 15% this week.

Page 4: Oil Stocks Got Eviscerated This Week

So What: Key driver: Credit

downgrades and merger concerns

Williams’ credit was downgraded by Moody’s and Fitch this week

These downgrades pushed its credit rating into junk territory

Page 5: Oil Stocks Got Eviscerated This Week

Now What: Making matters worse,

reports surfaced that suggested the Williams’ merger with Energy Transfer Equity was looking shaky

Key takeaway: Investors are gravely concerned that Williams’ deal will fall apart, leaving it a much weaker stand-alone entity

Page 6: Oil Stocks Got Eviscerated This Week

What:

Seadrill (NYSE: SDRL) sank 18% this week.

Page 7: Oil Stocks Got Eviscerated This Week

So What: Key driver: Seadrill’s

market outlook and analyst downgrades

Seadrill CEO Per Wulff said this week that market conditions could remain challenging through 2017

Page 8: Oil Stocks Got Eviscerated This Week

Now What: Meanwhile, analysts were harsh:

Cowen slashed Seadrill’s price target from $8 to $3

J.P. Morgan analysts said that Seadrill will require "major evasive action" to avoid covenant breaches in 2016 or 2017

Key takeaway: Investors and analysts just don’t see any reason to own Seadrill

Page 9: Oil Stocks Got Eviscerated This Week

What:Chesapeake Energy (NYSE: CHK) slumped 22% this week.

Page 10: Oil Stocks Got Eviscerated This Week

So What: Key driver: Debt concerns

and a downgrade One of Chesapeake

Energy’s bonds fell to just $0.29 on the dollar

That price shows grave concern from the market about the company’s ability to pay back its debt

Page 11: Oil Stocks Got Eviscerated This Week

Now What: Meanwhile, analysts from

Guggenheim slashed its 2016 outlook on the company, expecting it to lose $0.59 per share, which is $0.05 per share worse than its previous outlook

Key takeaway: Investors and analysts are worried that Chesapeake Energy isn’t going to make it through this downturn

Page 12: Oil Stocks Got Eviscerated This Week

What:Whiting Petroleum (NYSE: WLL) fell more than 26% this week.

Page 13: Oil Stocks Got Eviscerated This Week

So What: Key driver: Two analyst

downgrades Morgan Stanley

downgraded Whiting from equal weight to underweight, while reducing its price target from $23 to $4

Page 14: Oil Stocks Got Eviscerated This Week

Now What: UBS downgraded Whiting from

buy to neutral, and slashed its price target from $19 to $7

Meanwhile, Barrington gave up covering the entire energy sector, including Whiting, saying that it was just too speculative to recommend oil stocks right now

Key takeaway: Analysts are getting fed up with the continued drop in crude and its impact on companies like Whiting

Page 15: Oil Stocks Got Eviscerated This Week

What:Denbury Resources (NYSE: DNR) slumped more than 26% this week.

Page 16: Oil Stocks Got Eviscerated This Week

So What: Key driver: Trouble with

its bond exchange Denbury Resources’

proposed bond exchange is getting push back from bondholders

Page 17: Oil Stocks Got Eviscerated This Week

Now What: The company was forced

to sweeten the deal to fix some loopholes

Key takeaway: The fact that the company needs to pursue a bond exchange deal has investors worried that it’s financially stressed