What Caused Crude Oil’s Recovery on May 30?
After starting Monday, May 30, 2016, on a weak note due to the strong US dollar, crude oil recovered as the day progressed.
Hedge funds’ net long positions are close to June 2015 highs. They hit their highest level since May 12, 2015, at 249,123 in the week ended April 26, 2016.
US crude oil prices briefly breached the psychologically significant mark of $50 per barrel.
Baker Hughes (BHI) released its weekly US crude oil rig count on May 27. The active weekly US crude oil rig count fell by 2 to 316 rigs.
The API (American Petroleum Institute) reported that Cushing crude oil inventories fell by 0.189 MMbbls (million barrels) in the week ending May 20 from the previous week.
WTI (West Texas Intermediate) crude oil futures contracts for July delivery fell 0.3% and settled at $49.33 per barrel on May 27.
Crude oil was trading lower on the morning of Monday, May 30, 2016, beginning the week on a weak note. The Market is looking forward to the coming OPEC meeting.
Offshore drilling companies are cyclical and volatile in nature. These companies are capital-intensive and have high levels of depreciation and amortization.
Of the 35 analysts covering Diamond Offshore Drilling (DO), 5% gave it a “buy,” 58% gave it a “hold,” and 37% gave it a “sell” recommendation.
The utilization rate is an important indicator to gauge demand and activity in the offshore industry.
For the week ended May 20, 2016, the US offshore rig count increased to 24 from 22 in the prior week.
For the first time in 2016, oil prices touched $50 per barrel on May 26.
Two drilling permits were issued in March 2016 for new wells in the shallow waters of the Gulf of Mexico.
May was a mixed bag for offshore drilling investors. Oil prices hit the $50 per barrel level for the first time in 2016, but the industry also faced many contract terminations.
In this final part, we’ll study Encana’s (ECA) stock price movement with respect to energy prices, the dollar index, and the broader market.
On March 31, 2016, Encana (ECA) paid a dividend of $0.02 per share on its common stock. This was its dividend payment for 1Q16.
In 1Q16, Encana reported an OCF (operating cash flow) of ~$157 million, which was ~70% lower than its OCF of ~$482 million in 1Q15.
In 1Q16, Encana’s EV-to-adjusted EBITDA ratio came in at ~6.4x, slightly higher than its historical average of ~5.5x over the last five years.
Encana’s valuation appears to be at the lower end of the range compared to its peers. The average EV-to-EBITDA ratio for the upstream industry is ~11.1x.
On March 31, 2016, Encana’s total debt was ~$5.5 billion. With ~$222 million in cash and cash equivalents, its net debt was ~$5.2 billion at the end of 1Q16.