Let's assume prices do not recover in 18 months, will we be going BK? Any finance people here?
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ConocoPhillips, ain't what it used to be,
Ain't what it used to be, ain't what she used to ,
ConocoPhillips, it ain't what she used to be,
Many long years ago (prior to spinning off midstream and downstream.
The current ConocoPhillips has been around only since the spin off of P66.
http://www.grimsbytelegraph.co.uk/Major-leak-ConocoPhillips-gas-field-caused-fatal/story-28586414-detail/story.html
No, COP will not be filing Ch. 11 or 7. Grow up. Maybe educate yourself on cyclic trends in the oil industry-it's nothing new and they've been around longer than you and likely your parents and will be after you pass on.
Our expected Default Frequency is <1% for the next year.
We are "A" rated and far from losing our investment grade seat.
Our liquidity is strong and over $9B.
Even if our cash from ops falls to zero we can still service our debt <$1B.
Current ratio is over 1.
We can operate in this environment for several years if we continue to control cost, cut growth capex, sell non-core assets, and cut dividends.
#AssetSales to the rescue
ConocoPhillips can only continue to operate via asset sales and tapping into credit facilities. Discontinuing the dividend is one positive step but ultimately the cost to pull the oil out of the ground exceeds the value of the product. The company will only continue with tapping into credit facilities due to the lack of buyers of the assets. But the credit facilities are based on the oil and gas assets, or lack of.
Cash flow is the determining factor in solvency. Many companies operate at a loss every year but remain in business because they have positive cash flow. Earning are affected by several non-cash items such as depreciation (the biggest non-cash item). COP could operate for several years in this environment as long as they use cash wisely (key word).
COP IS bankrupt. They just haven't filed yet.
EBIT is negative, why would someone buy an asset producing negative cashflow? If COP sell assets that are making a profit we just accelerate the demise of the whole.
As many as a third of American oil-and-gas producers could flirt with bankruptcy and restructuring by the middle of next year unless oil prices stage a big rebound (per that WSJ article)
How about value of our assets?
Some info: http://www.wsj.com/articles/oil-plunge-sparks-bankruptcy-concerns-1452560335
I find it hard to imagine the company will exist in six month, let alone 18 months. The price of oil will not recovery quickly.
The cost to produce the barrel of oil exceeds the price of the barrel of oil. No reason to continue. The individual business units can be sold off individually.
50/50