Category Archives: $CHK

Oil dips below $60 – some may not survive – be careful if you decide to buy

Credit default swaps in oil companies have been widening as oil prices begin to fall to levels not seen for some time.

There are 3 basic categories in oil: Refineries, Exploration and Drilling.
The refineries such Exxon, Chevron, Royal Dutch and BP should be ok as they have strong balance sheets and the CDS levels do not indicate they willl be severly affected from the drop.

This is not the case of the drillers and the explorers – some like $CHK (Chesapake) the CDS has widened out over 200bp since August.

At some point you should buy into oil stocks – the fall in oil is great for consumers and we all save money so are naturally short oil – when it starts going back up we should buy the oil stocks as a hedge – but there is no rush – the glut in oil (caused by oversupply due to fracking , more fuel efficient cars and planes, slowing growth in China/Europe and the need for certain countries to keep pumping oil to meet the spending needs) will be here until mid 2015 at least.

Wait for CDS levels to stabilise and then start tightening, and EPS Forecasts have been revised – then is a time to buy – keep an eye on the 2CentView tweets for recommendations.