Sept. 19, 2020
I like to figure out the calculation in the following:
Unreal MRO is not $7 bucks now. When you look at MRO`s break even of $35 a barrel and then look at WTI prices from July to Sept with 12 days left in this quarters you see we have averaged about $41 a barrel. So if we are producing 190,000 barrels a day(bopd) x $6 of free cash flow that is $1.14 million everyday. That is $103.74 million this quarter of free cash flow. That means to pay bills MRO makes $605.15 million plus free cash flow of $103.74 = Revenue of $708.89 million. Now here is the interesting thing. MRO has cut capital expenditure budget to $1.2 billion for 2020. If MRO has cut cost across all basins that $35 breakeven could be lower. Let`s say they got it down to $30 per barrel. That is $190.19 million free cash flow.
Yes maybe that is to low but look what happens at $35 if WTI hits $50 . Free cash flow is $259.35 million per quarter. Citi had oil next year at $60 by year end. Let`s say $55 WTI. Free cash flow is $345.8 million per quarter give or take.
Bottom line with that much free cash coming in no way MRO stock sits at $4.68. Your looking at the low end of $12 per share next year to high end of $22 per share.
Now MRO has a tender offer of $500 million of it`s bonds 2.8 percent. Expires Oct 14 2020. It will cost them $525 million. I don`t know what to think about that. Are they selling a asset? Did they win the lotto? Did they get a lower interest government loan? Why clean up the balance sheet ?
One thing for sure, now is the time to buy MRO before the big run up. If not many of you can say BK all you want . We that bought will wave at you as we pull up to the bank in a armored car because this stock is going to make us rich.
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