Author Topic: Future strategy to survive discovering 1 out of every 20 bbls of oil we now use.  (Read 85966 times)

SafetyinNumbers

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I really hope that they win because when a company is willing to pay 15% interest on 4 year notes to drill mostly for gas at Wheatland to honour a commitment to a royalty company, it is pretty screwed up.

If at least they were running a tight ship, the situation could be explainable but, that is not the case. While G&A has somewhat improved it remains too high vs peers.

There is value in this company but, I am really unclear on the leadership to make it surface.

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The debt structure is interesting because it is a blended rate of 8.2% but the structure incentivizes having more debt on the balance sheet. Perhaps it's worth having funding security as opposed to having to go back to the banks every 6 months.

You are right about management though. I just don't understand why they don't market the Utica Shale opportunity and the NAFTA lawsuit. Just the optionality on those events incorporated into valuation would reduce the cost of capital significantly. One only has to look at Questerre to see what promotion can do for valuation.

That being said, I have to think if they are allowed to drill in Quebec, a buyer will show up and put the management team out of its misery.
ELF IAM GCM.DB.U/DB.V/DB.X PIF C.N


LC

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"Lethargy bordering on sloth remains the cornerstone of our investment style."
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Cardboard

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Despite the stupid talk that we have heard over the past 2 weeks that Russia would not join into a 9 month extension, that is exactly what they did:

https://finance.yahoo.com/news/opec-allies-set-agree-oil-074724500.html

Another very large recent move in the energy world is Cameco cutting worldwide uranium mine supply by roughly 10%:

https://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aCCO-2527905&symbol=CCO&region=C

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SafetyinNumbers

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Despite the stupid talk that we have heard over the past 2 weeks that Russia would not join into a 9 month extension, that is exactly what they did:

https://finance.yahoo.com/news/opec-allies-set-agree-oil-074724500.html

Another very large recent move in the energy world is Cameco cutting worldwide uranium mine supply by roughly 10%:

https://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aCCO-2527905&symbol=CCO&region=C

Cardboard

Any thoughts on Uranium exposure? I own EFR.DB which is a convertible piece of paper with an 8.5% coupon trading at par. While EFR is still losing money, the debt is small compared to the market cap and it has tons of leverage to the uranium price if it moves. I think the debt protects me from more dilution in the equity. I also bought a little CCO post the announcement.
ELF IAM GCM.DB.U/DB.V/DB.X PIF C.N

Cardboard

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I have not researched the uranium companies recently. From past research, there are very few companies with operational mines worth investing in with CCO being the main player.

U or Uranium Participation Corp. is an interesting alternative to gain exposure as they are basically a closed end fund holding uranium inventory trading at a discount to NAV.

While you would have no leverage to a rising uranium price, at least you would be more or less guaranteed to have a 1:1 correlation which is often not the case with companies where leverage is often killed by managers stupidity.

Since Fukushima in 2011, uranium has been in a bear market. Interestingly, most commodities have seen the same so it does not appear totally related to the incident. There has been very large divestments from large funds of all things related to commodities. You no longer hear about them being an alternative investment, hedge or all the reasons stated for owning them prior.

Specifically to uranium, you have Japan restarting its reactors, China adding roughly 30 gW by end of 2020 from today or a double in capacity, India adding some and the supply from disarmement is no more.

I own nothing in that area yet but, definitely looking.

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Cigarbutt

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Here is an article and a relevant study questioning conventional wisdom of shale "sweet spots" economics.
The cost curve may need some adjustments (up).

https://mrtopstep.com/crude-all-fracked-up/
https://erlweb.mit.edu/sites/default/files/23%20Justin%20Montgomery.pdf

"If it ever gets cold, you better watch out, you better not cry, you better get long, Iím telling you why..."
Santa Claus may be coming to town.

Cardboard

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Another very positive EIA report again this morning if you are in the bull camp. Inventories of almost everything are down big time since last year and the trend does not seem to be stopping.

And it is certainly not being reversed by EIA arbitrarily indicating Lower 48 States production growth at 20,000 boe/d vs the week before! Almost always like that. Up 20,000 or 0... What a hunk of bs!

Unfortunately, if you have been investing in producers, you have likely not seen good returns this year unlike for the price of oil. I would think this should change over coming months if oil stays above $55 WTI and with the end of tax loss selling. On oil, here are some notes from a presentation by Pierre Andurand at the London Sohn conference who has been right on with his calls, including the crash:

http://www.marketfolly.com/2017/12/pierre-andurands-presentation-on-oil.html

Someone was asking previously about Canadian producers more oriented towards natural gas. I believe that the situation will change with TransAlta's plan to convert its coal-fired power plants to natural gas and eventually this should get reflected at least in future long term prices:

https://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aTA-2542466&symbol=TA&region=C

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SharperDingaan

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http://www.petroleum-economist.com/articles/markets/outlook/2017/oil-the-price-is-not-right

Good analysis.

We find it useful to look at the US housing collapse of the mid 2000's, & ask 'why could insiders not see the danger of the widespread securitization of high ratio teaser rate, non-recourse mortgage loans?' We know today, that insiders DID see the dangers; but did little about it - because the money was too good to 'look the other way'. It created a 'bubble', and so long as nobody popped it - there was no reason for the party not to continue.

We look at oil/gas today, and can't tell the difference.
Hard to believe that insiders cannot see the developing imbalance, and easy to imagine that the money 'to ignore it' is very good.
More for the astute.

SD

 

 
« Last Edit: December 09, 2017, 07:01:18 AM by SharperDingaan »