If Cimarex Energy (XEC) doesn't know, maybe no one knows.
When you are dealing with one of the great independent operators -- one that sold off $460 million worth of non-core properties last year, one that has cut its rigs from the twenty or so to a half dozen -- you know you can trust that company's judgment.
Yet there's Tom Jorden, the CEO, and a board that's as star-studded as I have ever seen, and he admits he doesn't have a clue of what will happen. That's just not his forte.
But he doesn't have to know. He has the cash. He has the balance sheet. He has the properties. He has the ability to move quickly. Which is perhaps all that matters.
As we get into this murky mid-$40s area of oil, where there might or might not be an emergency OPEC meeting, what you have to look for are companies that are not going pedal-to-the-metal to drill. You need companies that can go there if they have to and, so far, the only ones that I am comfortable with are EOG Resources (EOG) and Cimarex because both have ample room to spend if they have to and can continue to pump to meet obligations.
You are probably going to start hearing from companies that need to raise cash. You will hear from other companies that are getting that cash from private-equity firms. That's all well and good, but you have to understand that you are not going to get the kind of return you used to get from them. That will go to the private-equity firms.
And, you may not get anything dire in the near-term. As John Chisholm, CEO of Flotek (FTK) -- a terrific little oil-services company that helps get that last drop out of the ground -- points out, the fractured wells are depleting rather quickly and by the fourth quarter it will be obvious that we are shrinking production at these levels.
That means you have to be with companies that have the flexibility to wait things out with the properties that are premium and the managements that have the ability to swing into action with their own money and don't need to raise equity or debt.
That may be EOG, and it is definitely Cimarex.