Vladimir Zernov

Long/short equity
Vladimir Zernov
Long/short equity
Contributor since: 2013
Andrew, thanks for pointing this out. This further complicates things for ORIG.
1. Contracts 2. Decisive upside with rapid change in fundamentals in oil prices 3. Debt buyback supported by a new credit line which matures past 2020 (sci-fi, in my view)
Agree, full articles are more interesting than individual posts which are easily buried among notifications and the whole daily routine. With OSD and, perhaps, oil industry as a whole, we are in unchartered waters.
It's really intriguing to see how things will develop, and, in my view, appropriate risk management techniques could help mitigate the outcome of a wrong-sided positions - be it long or short. It goes without saying that anyone willing to short any offshore driller must put a stop - an actual or a mental one.
Trading is much easier on the long side and I wish well for any OSD out there - there will be much more money to be made if things don't go totally bust.
I'm constantly questioning my own scepticism and try to find out whether I created a gloom and doom religion for myself and ignore the facts. So far, I come to the conclusion that my thesis is rather unbiased. However, it's very important to periodically read the counter-arguments. It's good that here on SA readers can read views from both sides and make up their mind.
As for the ORIG case, I sometimes wonder whether the company's awful PR has an influence on the stock price.
Best,
Vlad
$40 is a big stretch, in my view, even in the best-case scenario.
Interesting article as always, Fun Trading! I agree that I take a kind of an extreme stance on ORIG, but this makes the debate more interesting, doesn't it? Ultimately, the market will decide who was right and who was wrong on this one. A side note on Moody's - I look longer than 12 - 18 months. Look at almost every driller for 12 months and you'll find little problems. However, the world does not end neither in 2016 nor in 2017.
Thank you for your comment. It's really interesting to see whether supply cuts will be big enough this year.
You have to look at contract prices. Realized potash price for Q4 was $238/ton. If it were $295/ton, nobody would talk about a dividend cut. The biggest driver for this year's prices will be negotiations with China.
Dimitry Ratz,
That's interesting. How do you come up with $9? Chart? Valuation? A mix of both? Also interested in what oil price estimates do you have for your price target to be realized.
Thank you Henrik, that's exactly what I meant. Just was in a hurry and put it very short.
If you are not speaking about shale, investment cycles are longer.
It's always very tricky with bottoms. For practical purpose, it's better to miss the bottom and invest later than to try and predict the very bottom only to see that another bottom comes, and then another, and then another...
Generally, people were too relaxed with this multi-year bull market. Buy the dip and it rises. This is not going to be like this for some time - in commodities and elsewhere.
So far, the tide drowns all boats. Need to take a closer look at TDW before being more specific.
Time will tell. Anyway, it's a very interesting story to watch and participate.
Saudis now have to deal with Iran. In Iran, people have been living ve-e-ry modestly for years. They can surely tolerate some more hardship. Iran's thinking may be that Saudis were awash in money and this made them weak. I don't think Iran will cooperate with anyone on production cuts. They will likely try to attract as much investment as they can now - and this investment will come regardless of political risks, because Iranian oil is cheap to develop and will be present in any price environment.
By the way, I see nothing wrong with that. The faster it rises, the better. Assuming positive results, turnover speed is important for the account growth. Also, a long wait exposes investor to many risks that were not present at the beginning, like a technological change or a stupid management move.
The whole country is a rather cold place right now - it's winter in Russia. Actual numbers wary. It's -6C now in Surgut, a mild weather. In Yakutsk, it's -43C now and they expect around -50C on Friday.
Agree, USD is very important.
Dimitri Ratz,
First, I don't believe in Russia/Turkey war. Second, the whole oil industry might go through some changes. The price of services was inflated because of debt. Eliminate debt and you cut costs. Yes, this means that shareholders will be wiped out, but such things happen. Next, consolidation. There's been no consolidation in offshore so far, but it is almost inevitable.
On lack of investment. In my view, oil industry can easily leave without several years of investment. Surely, each oil executive will say the opposite, but the cumulative work on development and discoveries ensures years of production to come. If there is a serious lack of investment for a number of years - then yes, there will ultimately be severe shortage and prices will skyrocket. However, for companies like ORIG time is precious. What's good if prices are, say, $200 per barrel in 2022 if the company needs improvements now?
It depends on your broker.
As for press releases, bad IR perhaps? Such things happen. ORIG is surely not the king of press releases. Perhaps, this fact adds to the market sentiment towards the company.
As for trying to run the stock in the dirt - who knows... I see little practical value in conspiracy theories. The market itself currently votes NO for big debt in combination with UDW assets.
The same for UGAZ - 3x, trading vehicle, better for shorts I believe.
UPL - I'm a skeptic. UWTI - I do not believe in 3x ETFs, the concept is flawed. Trade the chart if you want to go into them.
Thank you for kind words! Looks like most people are long the most beaten stocks and are not happy to read articles that point to risks.
Too much debt that comes too fast.
Bulldog67, I understand your point of view. If there was zero chance of survival, ORIG would have already been near 0. There's uncertainty - and that's the most interesting part of the stock market.
ORIG -50% since November. Perhaps, I was right in my negativity.
Sanctions or no sanctions, HE was the first victim of low prices. UDW is naturally the next in line. Add debt and that's why I'm that bearish. Oil is anybody's guess, but you have to have an opinion if you are going to invest in or trade drilling stocks. What's good in the life of a private trader/investor is that your position is not big enough to cause any problems with entry/exit/re-entry. If tomorrow brings bright news for ORIG, I'll allign with others to participate in a giant short-squeeze. However, I currently see no signs that this will happen.
To state "going to be" I'll need to devote more time to HK. However, when I was looking for very beaten stocks for trading opportunities, I labeled HK as a "miracle suvivor", which for me means that if I'm ever long HK based on technicals, I'll be out of the position at first signs of the downtrend continuation.
Depends more on the contract activity in the industry rather than some firm price. It should be above $50 for sure, the more the better of course.
This is my opinion. Why it is irresponsible? What is your target price and why?
What trash commentary? I just asked you to point out the facts that supported your view - there's no offense in this.
Show the facts that support your view.