Quote:
Originally Posted by GGG
I don’t really think the government should be throwing additional money at oil companies outside of what all other industries are getting in terms of salary support.
Where I think the government could help is to buy debt as it comes up for renewal in exchange for shares of the company. If a company fails on cash flow then it may not make sense throwing good money after it. If it is failing because of an inability to renew debt Because of current prices then getting it through that point would be helpful.
WCS is $30 US today. If you aren’t cash flow positive at this point you are in real trouble long term.
|
Buying debt (or backstopping debt) could be an effective solution. One issue I do see with debt in direct exchange for shares (if it's 1 for 1) is that shares for many service companies have fallen so low that the amount of cash injected would be so low that it would be almost meaningless unless the government purchased a large portion of the shares. Which is not idea. For example if the government ended up with 10% of my employers shares in exchange for debt it would mean about $300k to us which would barely keep us going another quarter, maybe less.
Second issue with this is that non public companies would not be able to participate in this either and they make up a large portion of the service industry too.
I don't know what the answer is. Debt purchase or backstopping would help but more is needed.