Alcoa kicked off this year's Q1 earnings season last week.
In this clip from the Industry Focus: Energy podcast, Taylor Muckerman and Tyler Crowe talk about two areas they'll be watching as the energy sector shakily gets back up from the terrible lows it had sunk to.
A full transcript follows the video.
This podcast was recorded on April 14, 2016.
Tyler Crowe: So, now that Alcoa's kicked off the earnings season, what is the theme, the stock, what's on your radar for the next couple weeks, month, or so?
Taylor Muckerman: I'm looking at who's going to jump the starting gun on spending in oil, now that prices are back up.
Crowe: Oh, it's to $40!
Muckerman: It's gonna stay here forever again.
Crowe: A year ago, $40 was a death kiss, but today it's the kiss of life.
Muckerman: This whole week has been pretty nutty in the oil markets, in terms of appreciation in the markets. So, I'm looking at who's going to jump off the blocks a little bit too soon. Maybe not sign on the dotted line to commit to spending, but at least just bringing up the idea of putting rigs back to use or of going out there and spending money to get oil production back up, not to where it was previously, but who wants to raise the needle first?
Crowe: I'm kind of with you on the same thing, but I'm not necessarily looking at it from an earnings or management call perspective. I'm actually watching it from the spring bank redetermination. So, every six months or so, banks look at the credit status of all of these companies and normally, what happens in down times like this is they cut the amount that's basically available on somebody's credit card. And companies can say what they want, be like, "Oh, yeah, we want to spend more money, we're going to put some new drilling rigs out there because it's getting a little better," but you have to have some money to do it. And if the banks decide to cut everybody's spending, where the heck are they going to get the money to do it? We've seen a couple happen already. Like we were talking in the beginning, Chesapeake Energy has basically committed every single asset they own to protect their liquidity.
Muckerman: The garage sale is still open, if need be.
Crowe: Yeah. So, that'll be an interesting theme, I think, and one worth watching, because it could impact what happens over the next six months in terms of production increasing pricing and things like that.