Investment or a gamble. What would Buffett do? Mind you, he has a bit more cash than me
...and me! We are in junk bond territory here, it seems. PMO1now at about 49.75(buy) on HL, lower than what I paid for them in june 2016. Looking into my crystal ball, the future trajectory of the oil price and with it Premier's and Enquest's fortunes is murky to say the least. However, the end of oil as we know it along with a price never again higher than the sustained $25 or less that was being forecast back in 2014. By 2016, when I bought those PMO1 I was wishing that I had moved earlier. Mind you, I also looked at PDVSA bonds, which were selling at around 30c on the dollar, but fortunately the difficulties for private investors to trade in them put me off and we all know how that ended!
Another question is - what would happen to the assets of a company like Premier if they did run out of cash? That would imply sustained OP below $35 for another year or so, until Premier's hedges expire. Normally there are buyers waiting in the wings for such things to happen, but the producing assets are basically almost worthless at that level when decommissioning is taken into account and these days the oil industry is such a pariah that I wonder who would take it on.
Difficult to say which is better (or worse). Both ENQ1 and PMO1 have similar running yields over 14%, with PMO1 maturing a year or so earlier for an almost 100% gain, if it lasts that long. I would classify both as gambles rather than an investments, but compared with betting on the Gee-Gees the odds are still not bad.