It's gotten self-fulfilling. Devon (DVN) does a company offering of shares, and it works. Pioneer (PXD) does one and it works. Marathon (MRO) does one, Hess (HES) does one, Newfield (NFX) does one and now it is Weatherford's (WFT) turn.
I am talking about the insatiable appetite of buyers to snap up "in-the-hold" offerings from cash-strapped companies, something that makes it likely that unless oil plummets again to the mid $20s, these companies will be able to hold out until prices go higher or they are taken over.
This equity market has obviated the need for bank loans. In fact, these deals are done because of existing bank loans.
They are so bountiful that one could argue that even some of the worst of the worst, like Freeport-McMoRan (FCX), which has been doing at-the-money equity selling, could easily sell 150 million shares in the hole and give themselves more breathing room. The higher is goes, the more longevity it has.
It's been a long time since companies have had to tap the equity market for balance sheet purposes, but these remarkable deals are showing how effortless it has been if your stock is down enough and the company's willing to price the merchandise low enough.
Without this fountain of capital, you would see the oils and the banks down big.
Now, this morning Exxon (XOM) comes out with amazing news: higher production, much lower costs and a possibility of a raised dividend. The fact that it could sell $12 billion in bonds so easily is a sign that not everyone over-spent their cash flows with the endless expectation of forever higher oil.
Now there are some stressed out companies like Encana (ECA), Linn Energy (LINE), Chesapeake (CHK) and Ultra Petroleum (UPL), well chronicled by Carleton English, which could use more capital ¿ urgently, frankly -- and that's going to be very difficult.
(Encana, by the way, is the company that settled in an investigation by Michigan state a few years ago, which resurfaced in the Aubrey McClendon Sherman antitrust saga).
In the meantime, though, as long as oil stays up, and the equity offerings work, you are going to see an amazing transformation to where we were less about oil, because the majors are all liquid.
Remember, none of them wants to do this. It's like the banking crisis of 2009. But they did. With these companies, it will be no different.
