I like buying things on sale. I LOVE buying things at a really good sale – whether it’s shirts, shoes or even the occasional piece of real estate.
So the recent disarray in the oil and gas industry has naturally caught my attention. But is it really on sale yet?
Oil and gas expert Alexander Pickens Cordia, founder and managing partner at PICK energy, came on the Fried On Business show recently to answer that question.
And, as I suspected, the answer is yes.
“It’s just like any other market. When times are tough and the industry is distressed, that means things are on sale,” Cordia said.
And the bargains may not last long, he said. The oil producers – namely Russia and Saudi Arabia – are getting together to make agreements on production that they hope will stabilize the free-falling price in crude.
“I think what we’re looking at is 2016 as the year of supply and demand re-balancing,” he said.
For his part, Cordia said he’s going back to basics and looking for opportunities with companies that are doing the same. He’s aligned himself with one oil producer – Alliance Petroleum in Dallas – that is profitable with an oil price of $30 per barrel.
“That – profitable at $30 oil – is something that is not easy to find these days,” he said.
We’re not just talking about deals in oil and gas company stocks or direct investment but anything related to the business of producing the commodity – like real estate in what were the boom towns.
Banks lent big sums to the oil and gas exploration and production companies during the boom, Cordia said. They were buying huge amounts of acreage, and things were fine with oil at $100 per barrel.
Not so much, however, with oil at $30. The banks have been doing re-determinations on the loans since October 2015, Cordia said, and soon we’ll be seeing the results.
“What you’re going to see here before long is, when these companies can’t come up with the cash to return to the banks, there’s going to be a fire-sale on acreage,” he said.
We talked about more, including the investment dynamics behind large, horizontal drilling operations versus vertical shallow wells. The answer may surprise you.
This is a must-listen interview. Click here to listen to the full conversation with Alexander Pickens Cordia of PICK energy.
