Tight Oil: Deep Water Driver?

Discussion, critique and analysis of the potential impacts on equity, bond, commodity, capital and asset markets regarding the following:
  • Last Time Out; Whip It; Tight Oil Economics; $50 Deepwater Breakeven
  • 2016 support level; Offshore Breakeven; Onshore Breakeven
  • Declining Deepwater Breakeven; Deepwater vs Tight Oil
Last Time Out?

In our last two missives, Left And Citron: The Boy Who Cried Wolf? and Left, Lawyers, Grizzlies And Money, Oh My!, we Nattered regarding short activists, and their affect and effect on valuations.

Does one still wonder why Ubiquiti? why now? Or what underlying circumstances might have caused the UBNT, Citron situation to manifest itself? Or how investors could accidentally get caught up in such a series of unfortunate events? 
As Violet Baudelaire said, there's always something. After traversing this long and dusty trail, replete with bear activists, shareholders, lawyers, grizzlies and money, Oh my! We are somehow reminded of this.
On Tuesday 09/12 Ubiquiti was $59.81, by that Friday it closed down 8% at $54.95. The following Monday 9/18, upon the release of Citron's report, the stock fell another 13% to $47.78. Ubiquiti (UBNT) has since rebounded to close at $60.32 on 10/14.

Apparently, in light of the Citron allegations and subsequent investor reevaluation of such, the stock has surpassed the pre-report valuation. This constitutes a 21% decline and rebound, or 42% valuation fluctuation in the space of 23 trading days. 


One can only speculate as to who profited from the 8% "pre-report" decline and subsequent 34% in valuation fluctuations.  Who knew?  Moving West...  


Speaking of fluctuating valuations and rebounds, we offer you now a little item called...


Whip It?


"Whip It" is a new wave and synth-pop song by the American rock band Devo, featured on their 3rd album Freedom of Choice (1980). Due to its nonstandard tempo and strange lyrics,"Whip It" was not expected to be a hit.


It's hard to find anyone between the ages of 30 and 50 who does not have a vivid recollection of 'Whip It'... the kind of unusual track that made listeners want to bop their heads and break into a herky-jerky dance.


 


Peaking at #14 on the Billboard Hot 100, "Whip It" became a major hit. Lead vocalist Mark Mothersbaugh wrote the song's distinct riff, which was based on the Roy Orbison song "Oh, Pretty Woman".  The lyrics for "Whip It" appear disjointed and nonsensical. 


Even though most of the listening public took "Whip It" as just a catchy bit of weirdness with nonsensical lyrics about a vaguely sexy topic, the song's actual purpose like much of Devo's work was social satire. 


Putting the somewhat abstract lyrics together, "Whip It" emerges as a sardonic portrait of a general, problematic aspect of the American psyche: the predilection for using force and violence to solve problems, vent frustration, and prove oneself to others. 

"when something's going wrong, you must whip it/when a good time turns around, you must whip it/you will never live it down unless you whip it"
Apropos we think, for tonight's discussion of rebounds in oil prices, fluctuating valuations in related equity prices, and the subsequent whipping of something going wrong (costs and breakevens) into shape.

The Holy Land?


As we have Nattered previously at length (list of missives provided at conclusion), since 2014, shale or tight oil is driving a new paradigm industry wide, resulting in declines in both onshore and offshore costs. As a result, many shale companies have been drilling holes like a sailor in a brothel. 


More holes, more money, some put out, some not so much, some futures (DUC's - Drilled Un Completed) one may never know.  Potential problems include the rights (location, overall play), recon data (intel), well decline rates and drilling skills.


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