Two interesting developments in the last 24 hours worth talking about. Abraxas gets an activist and Range sells an overriding royalty. Let's start with $AXAS. With EQT and Rice behind us (let's just call that company Rice II), I was worried open love letters to Boards were going to be used sparingly in July with vacation season. However, not to fret!! Saltstone Capital sent a beauty which I encourage readers to have a look at. ...

Capitulation is what happens when the market throws up their hands in disgusted and says “I can’t take any more!!” Then there is what is happening in the energy equity market…. In the last year, only Chevron, Anadarko and Dorchester minerals are up. Large caps are down 34%. Small and mid caps are down 63%. But like the weatherman, saying “it’s hot outside” isn’t particularly insightful. The reality is - I don’t know why...

Dear Energy Executives, I would like to introduce you to four letters that you should frame and put on your wall. ROCE. I understand that at this moment you think I misspelled "RICE" but I did not. I am talking about Return on Capital Employed. Let's pretend that you have been living under a rock since I started posting 7 months ago and you don't read many of the helpful morning notes from some of...

Big week!! The EQT Annual meeting is Wednesday and the Prom King and Queen will be announced!! Will it be the Rice group or existing management and, truly, does anyone think it will change the course of the company either way? They still produce gas, right?? One thing I do know- I will miss their letters to each other. Talk about some trash talk. But, I do commend the Rice Group for DOING something to encourage...

According to a recent WSJ article on Pioneer, in the last 10 years - the largest 40 oil and gas companies spent $200 billion more than they generated in cash flow. Not surprisingly, the energy index is down 10% while the S&P tripled. It’s time to change the way our business runs - and to do that - you have to start at the top. So many things companies have done historically are just plain wrong:...

Saudi Arabian...what are we calling it...sabotage? Iranian sanctions. Venezuelan supply falling off a cliff. In the good old days, these events would have driven oil up 10% but with tariff concerns, prices remain in the low 60’s. With so much noise in China-US trade, quietly and unnoticed, energy companies are being given a second lease on life (well, some of them). Budgets were set at $50 oil and activity was front end loaded. Excess cash is being used for stock buybacks and debt management and...

I am seriously considering starting an event driven hedge fund that invests in oil and gas companies. Here would be the rules. If - in investor and quarterly meetings - a company talked about its net asset value under a variety of scenarios; lived within cash flow; paid a great dividend and was actively paying down debt- I would buy it. If - however - a company used the words “weather related delays”; “non recurring (but recurring) operating cost increases”; “we will be cash flow positive...

Earnings season has kicked off, and for once, companies - and the stocks that reflect their decisions - are performing in sync. Show capital discipline and get rewarded. Outspend, and watch your stock get crushed. Tier 1 assets (pronounced Delaware) are allowing companies like CXO, DVN, CVX, XOM to crush expectations. Tier 2 and 3 assets have “weather impacts”, “third party curtailments” and “midstream delays”. Yeah... ok. G&A reductions, share buybacks and free cash flow are mentioned in every...

I wrestled all day yesterday with the subject of corporate share buybacks. Are they “good”? Are they “bad”? What does that even mean? You can spin yourself in circles debating the impact on share prices, companies and shareholders. And then I came across the chart below. To state the extremely obvious - the thing that bankrupts companies are not share prices going to zero - it’s not being able to pay your debt. Executing buybacks and not paying down corporate debt may jack earnings per...

40% of American adults don’t have $400 for an emergency expense if it were to happen today. That’s staggering. 10% of all groceries in America are bought on food stamps. Many have no option but to resort to credit card debt to cover bills which has 18+% interest rates. On the flip side... a 63 year old who had saved all his life; never taken vacations with his family and had a list of all the things he would do when he retired, died his...