News on Wednesday night showed that Chief Financial Officer Mark Murphy is leaving the company to rejoin a position at Praxair.  The news is on the heels of previous report showing a major loss due to poor solar materials sales. Does the notion that MEMC named Brian Wuebbels as executive vice president and CFO help?  Not really, even if Murphy will act as a “consultant” during the transition period.

Losing a CFO is not as bad as losing a founder and not as bad as losing a CEO, but the problem with losing a CFO is that Wall Street assumes that the CFO has lost faith in the future of the company. In some cases, it could mean something far worse.  With MEMC shares having fallen from over $90 during teh solar boom down to under $2.00 it is easy to wonder if things are going from just awful to even worse.

So, here is where we cannot help but wonder about MEMC’s future.  Thomson Reuters expects a loss of -$0.10 EPS in 2012 on sales of $2.6 billion.  But almost magically in 2013 the consensus is back up to $0.45 EPS on $2.83 billion in sales.  The revenues in 2011 were $2.715 billion, in 2010 they were $2.239 billion, and 2009 revenues were $1.163 billion.  The problem is that sales in the solar sector are getting harder and harder to come by and the solar sector is in total disarray.  The company’s latest loss and decline in revenues also reflected weak demand in the semiconductor wafer markets.  Yep, MEMC is facing a war on two fronts and its non-GAAP margins are getting squeezed.

The sector leaders are looking like hell frozen over.  First Solar Inc. (NASDAQ: FSLR) is effectively at all-time lows if you discount a small 2% gain today.  SunPower Corporation (NASDAQ: SPWR) is down over 75% since Total SA (NYSE: TOT) bought the controlling interest.

If the company was on the verge of a great turnaround then the CFO would seemingly not have pulled the ripcord on the way down here.  The company has what looks to be ample cash reserves to fund operations, but it also has significant amounts of long-term debt. This situation just feels like it is one which is going from awful to far worse.

MEMC is in serious trouble.  Still, it is one of these outfits that has enough cash to fund operations for probably quite some time, but its core businesses are challenged and the company has so far been unable to get its operating costs in order.  It has also forecast a weaker demand for semiconductor materials in 2012 as well as a lower price per watt in solar.  Our big concern is that the projections may have been based entirely upon the CFO forecasts just a week or so ago, and his departure would bring even the lower guidance into question.

For whatever this is worth, Wunderlich Securities cut its target down to $1.00 after it maintained a SELL rating after the most recent earnings.

It is too soon to declare that MEMC will be a total implosion.  It is even possible that there could be a turnaround of major proportion coming here.  Unfortunately, that does not appear to be the case any time in the immediate future.

So you tell me in a poll, no “I don’t know” answers allowed…

JON C. OGG

AAR Corporation (NYSE: AIR) named Bear of the Day at Zacks.

AGCO Corporation (NYSE: AGCO) named Bull of the Day at Zacks.

Akamai Technologies, Inc. (NASDAQ: AKAM) Raised to Buy at Janney Capital.

Amazon.com, Inc. (NASDAQ: AMZN) Raised to Outperform at Credit Suisse.

Applied Materials Inc. (NASDAQ: AMAT) Cut to Hold at Needham.

Colgate-Palmolive Co. (NYSE: CL) Raised to Buy at Argus.

Dominion Resources, Inc. (NYSE: D) Raised to Buy at Jefferies.

Flextronics International Ltd. (NASDAQ: FLEX) Raised to Buy at BofA/ML.

Groupon, Inc. (NASDAQ: GRPN) Raised to Buy at Citigroup; Raised to Buy at Stern Agee.

Infoblox Inc. (NYSE: BLOX) Started as Equal-weight at Morgan Stanley; Started as Overweight at Stephens; Started as Neutral at Goldman Sachs.

Jabil Circuit Inc. (NYSE: JBL) Raised to Buy at BofA/ML.

J.B. Hunt Transport Services Inc. (NASDAQ: JBHT) Started as Outperform at William Blair.

Juniper Networks, Inc. (NYSE: JNPR) Raised to Buy at BofA/ML.

McDonald’s Corporation (NYSE: MCD) Cut to Neutral at Cowen.

Par Pharmaceutical Companies Inc. (NYSE: PRX) named value stock of the day at Zacks.

Phillips 66 (NYSE: PSX) Started as Buy at Citigroup.

Prudential Financial, Inc. (NYSE: PRU) Cut to Hold at Argus.

Royal Bank of Scotland Group PLC (NYSE: RBS) Raised to Equalweight at Morgan Stanley.

Southern Company (NYSE: SO) Raised to Buy at Jefferies.

Total SA (NYSE: TOT) Raised to Buy at UBS.

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JON C. OGG

But if prices fall that low, the big integrated oil companies like Exxon Mobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX), ConocoPhillips (NYSE: COP), Total SA (NYSE: TOT), and BP plc (NYSE: BP) are going to be pinched. Exxon, for example, has based its 2012 budget on an average Brent crude price of $111/barrel. The company’s average production cost for a barrel of oil in 2011 was just under $101/barrel. Chevron’s average production cost for a barrel of liquids was nearly $103/barrel in 2011.

Bloomberg today cites Byron Wien of The Blackstone Group LP (NYSE: BX) with a forecast that crude prices will drop this year. Production is up in the Russia, Saudi Arabia, and the US, which should lead to lower prices. Bloomberg’s survey of 30 analysts puts a median price of $115.50/barrel on Brent for this quarter, but 6 of the analysts predicted prices at or below $100/barrel.

The fear premium that pushed Brent prices to more than $125/barrel earlier this year is being wrung out of the price now as the possibility recedes of a military confrontation with Iran. Demand in the developed world is falling, and China, the world’s largest consumer of crude after the US, has slowed both its economy and its oil imports.

These two factors are combining to push crude prices down at a pretty good rate. But a price of $100/barrel would mean that Exxon and Chevron would lose money on every barrel they produce. A $100/barrel price would also mean that all the supermajors would very likely have to scale back their plans for capex spending, which would significantly reduce exploration and future supply. That in turn would likely produce a supply shortfall which could easily cause a spike in crude prices if and when demand picks up.

It’s often said that the best cure for high prices is high prices. OPEC may get its target price, but that won’t cure the underlying cause for high crude prices. The stuff is scarce, even when it seems that there’s a lot of it available.

Paul Ausick

Exxon reported adjusted EPS of $2.00/share, below the consensus estimate of $2.09 and further below EPS of $2.14 in the same period a year ago. Revenue came in at $124.05 billion, also below the estimate of $124.76 billion, but about 8.8% higher than last year’s revenue of $114 billion. Net cash flow improved from $16.9 billion a year ago to $19.3 billion this year, due almost entirely to higher prices for crude oil.

The problem is that Exxon did not produce as much crude this year. Worldwide production totaled 2.214 million barrels/day of crude and natural gas liquids, down -7.7% from last year’s production of 2.399 million barrels/day. Worldwide natural gas production was also down -3.3%, and in the US natural gas production was up only about 1%.

Profits from the company’s upstream segment (exploration and production) were substantially lower:

Upstream earnings were $7,802 million, down $873 million from the first quarter of 2011. Higher liquids and natural gas realizations increased earnings by $980 million. Lower sales volumes decreased earnings by $850 million. All other items, primarily higher operating expenses and the absence of gains on asset sales, decreased earnings by $1.0 billion.

In the downstream segment (refining and marketing), profits rose $487 million, the largest part of which was asset sales of $320 million. International refining profits more than doubled, while US refining profits fell by -13%. And higher costs eroded profits here, too, by $40 million. Fortunately for Exxon, refined product sales of 6.3 million barrels/day at higher prices saved the day.

Both Exxon and Chevron announced dividend hikes earlier this week. Exxon is raising its dividend 21% to $0.57/share/quarter and Chevron is hiking its dividend by 11% to $0.90/share/quarter. Exxon also noted today that it would buy back $5 billion worth of common stock in the second quarter.

The two companies are not feeling particularly generous, of course. They are trying to keep investors happy in the face of lower profits. Don’t expect Chevron to beat its EPS estimate of $3.26 when it reports results tomorrow.

Exxon’s shares are down -1.3% in the pre-market at $85.70 in a 52-week range of $67.03-$88.13.

Paul Ausick

The Iraqi government is auctioning 12 exploration blocks and 47 other companies have been qualified to bid in the leasing round, currently scheduled for May 30-31. Among those companies welcomed into the auction are Royal Dutch Shell plc (NYSE: RDS-A), a partner with Exxon in developing Iraq’s massive West Qurna field.

Chevron Corp. (NYSE: CVX) and Occidental Petroleum Corp. (NYSE: OXY) are the only other US-based companies included among the qualified companies. BP plc (NYSE: BP), Total SA (NYSE: TOT), and Eni SpA (NYSE: E) were also okayed. A complete list is available from Reuters.

Paul Ausick

At this time, the source of this sheen is unknown, and Shell’s priority is to respond proactively, safely, and in close coordination with regulatory agencies.

The company also said that there is no “current indication that the sheen originates” from either its Mars or its Ursa operations.

The mere appearance of the sheen calls to mind the experience of BP plc (NYSE: BP) two years ago when the Deepwater Horizon exploded, killing eleven workers and dumping more than 5 million barrels of crude into the Gulf. France’s Total SA (NYSE: TOT) is currently combatting a natural gas leak from a well in its North Sea Elgin field.

The Wall Street Journal cites one analyst who said, “There is a nervousness over the whole spill situation, following Deepwater Horizon and Total in the North Sea, so people are going to sell first, ask questions later.” That sounds about right.

Shell’s shares are down about -4% in the premarket, at $65.05 in a 5-week range of $57.97-$77.97.

Paul Ausick

CEO pay jumps for last year as stock options rise. (Reuters)

Avon (NYSE: AVP) turns down a $10 billion offer from Coty. (Reuters)

Strong U.S. economic data push Brent crude above $125. (Reuters)

Christian Brothers Investment Services, a News Corp. (NASDAQ: NWS) shareholder, wants an independent chairman. (Reuters)

Fund Third Point presses its proxy war against Yahoo! (NASDAQ: YHOO). (Reuters)

The Securities and Exchange Commission probes a Groupon (NASDAQ: GRPN) restatement of financials prior to last year’s IPO. (WSJ)

Avon becomes a target for takeover by several companies. (WSJ)

Express Scripts (NASDAQ: ESRX) and Medco (NYSE: MHS) get government approval for their merger. (WSJ)

People’s Bank of China Governor Zhou Xiaochuan says the global recession has not ended. (WSJ)

Illumina (NASDAQ: ILMN) rejects a new offer from Roche. (WSJ)

Vehicle sales rise 78% in Japan in March, compared to in the month of last year’s earthquake. (WSJ)

U.S. consumer demand helps the fortunes of U.S. factories. (WSJ)

China eases a ban on Twitter-like messages. (WSJ)

Poor manufacturing and employment data show a deepening eurozone recession. (WSJ)

Dell (NASDAQ: DELL) will buy Wyse Technology, a cloud tools company. (WSJ)

NYSE Euronext (NYSE: NYX) cuts a cost reduction plan after a failed merger with Deutsche Borse. (WSJ)

Some large investors may buy homes by the thousands. (NYT)

Several Germany towns would suffer greatly if Opel closes plants. (NYT)

Total (NYSE: TOT) says natural gas leaks in the North Sea cost it $2.5 million a day. (NYT)

The SEC wants boards of banks to be more accountable for risk. (FT)

Douglas A. McIntyre

The company is reporting today that the flare has extinguished itself, relieving the most serious danger to workers who will now be able to get to the platform and try to plug the leak from there by pouring heavy mud down the well bore. That solution would be both quicker and cheaper than drilling relief wells to staunch the flow.

The gas condensate (liquids) leak at the well has coated the sea with a sheen over an area of about 38 square miles.

The company’s managing director for UK E&P operations made this statement at a press conference earlier today:

With respect to stopping the leak, we have launched two main actions which we are progressing in parallel. The first is to carry out the well kill operations using a floating support; the second is to drill two relief wells and, to that end, we have suspended operations on two of our drilling rigs in order to make them available for work on the relief wells. We have notably mobilized a strong team of internal and external experts and a number of specialized support vessels.

The gas leak is putting out about 7 million cubic feet of natural gas per day according to a Total estimate.

Paul Ausick

Research In Motion’s (NASDAQ: RIMM) CEO says the firm’s struggles will continue as more management leave the firm. (Reuters)

Japan’s Nikkei has its best first quarter in 24 years. (Reuters)

Verizon (NYSE: VZ) to create a wireless video system. (WSJ)

U.S. firms with junk bond ratings raise money at record levels as rates stay low. (WSJ)

A scam to collect Social Security numbers of Puerto Rican citizens earns billions for thieves. (WSJ)

An audit firm finds labor problems at Foxconn factories that supply Apple (NASDAQ: AAPL). (WSJ)

Google (NASDAQ: GOOG) to launch its own tablet. (WSJ)

Best Buy (NYSE: BBY) shutters stores after weak earnings. (WSJ)

Natural gas reaches a 10-year low. (WSJ)

Economists do not think warm weather has helped gross domestic product or employment much. (WSJ)

A Wall Street Journal study finds the numbers of murders fell in most large cities last year. (WSJ)

Congress passes a highway funding bill that covers the next 90 days, but another extension may be a problem. (WSJ)

Germany’s Social Democrats attack Merkel’s austerity plans, which are meant to solve the EU debt crisis. (WSJ)

A leak at Total’s (NYSE: TOT) Elgin platform in the North Sea is more proof of how unstable deep water drilling can be. (WSJ)

Former CEOs of Avon Products (NYSE: AVP) want its board to elect former COO Joe Ferreira as the firm’s new leader. (WSJ)

Foreign investors aggressively sell Japanese debt. (WSJ)

Moody’s may sharply cut ratings on Morgan Stanley (NYSE: MS), Citigroup (NYSE: C) and Bank of America (NYSE: BAC). (NYT)

The FDA asks for longer test periods for some obesity drugs because of the potential they could cause heart problems. (NYT)

Ray Dalio, head of Bridgewater, a huge hedge fund, made $3.9 billion last year. (FT)

BRIC nations may pull funding from the International Monetary Fund if they do not get a greater say in policy. (FT)

Leveraged U.S. firms become a large part of the IPO landscape. (FT)

Spain will make the greatest cuts to it budget in 30 years. (Bloomberg)

German retail sales fall in February. (Bloomberg)

Douglas A. McIntyre