The whipsaw action in energy equities makes for quite the rollercoaster.  It’s not enough for the sector to be hated and void the long only, generalist investors but it has become a haven for long/short strategies and traders.  What’s the average investor to do?

As you know, RBCRichardsonBarr.com is my go to website for E&P news, commodity prices and stock performance.  So I’ll ask my favorite website hosts for a favor: please add a quote for the most current debt maturity instrument for each stock.

Sure- an equity may LOOK cheap but when you see that their 2020 debt is trading at 65c on the dollar and the bond guys (where the real money is) are betting the company may not pay (and therefore equity is going to 0), you might think twice about how “cheap” that stock looks.

The sector is in a crisis of balance sheets. Don’t be distracted by all the talk of “capital discipline”. That’s essential but only because the banks are tightening standards and want their money back.  So don’t forget to look at Debt/EBITDA, and free cash flow (but use my definition – not theirs- the one that includes interest payments AND capex).

#hottakeoftheday