Author Topic: Future strategy to survive discovering 1 out of every 20 bbls of oil we now use.  (Read 181903 times)

Gilp

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I feel for you Canadians, JT gotta go home.
The good thing is many people hopefully will get frustrated enough with current government and will elect someone capable next term. Is it possible?
Second good thing, it's a great buying opportunity. Accumulate, feel the pain short term, much more upside from here, can't get worth right? Or can(oil price going down)?


Cardboard

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Cardboard

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Trouble developing in Southern Iraq:

https://www.reuters.com/article/us-iraq-protests/unrest-spreads-in-iraq-as-iranian-mission-stormed-oil-workers-held-hostage-idUSKCN1LN1M9

What happens if you have attacks on oil infrastructure such as what we have seen regularly in Nigeria?

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Joe689

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They already did:

https://sputniknews.com/middleeast/201809091067873831-kirkuk-daesh-explosion-iraq/


Daesh militants have blown up an oil pipeline in the Kirkuk province in northern Iraq, Rudaw reported, citing head of Kurdish security forces Idris Rafaat.


Uccmal

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I feel for you Canadians, JT gotta go home.
The good thing is many people hopefully will get frustrated enough with current government and will elect someone capable next term. Is it possible?
Second good thing, it's a great buying opportunity. Accumulate, feel the pain short term, much more upside from here, can't get worth right? Or can(oil price going down)?

To be fair the conservatives had several years chance to get this righted, and the last 4.5 with a majority, so I wouldn't expect much from a change in gov't.  All of us here invested in the companies in the Western Cdn. oilpatch knowing the backdrop with governments, protestors, and so forth.  Or at least we shoud have.  For example I hold a 20% position in Enbridge: I am well aware of the difficulty in building pipe and the incredible moat that Enbridge has as a result. 

Ultimately, none of us here needs to be invested in this space.  We are doing it because we see the potential for outsized returns.  Once my investments in this space work out I will likely be elsewhere in another beaten down sector where I can gripe about the government not helping me out.
« Last Edit: September 10, 2018, 06:54:36 AM by Uccmal »
GARP tending toward value

Gilp

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To be fair the conservatives had several years chance to get this righted, and the last 4.5 with a majority, so I wouldn't expect much from a change in gov't.  All of us here invested in the companies in the Western Cdn. oilpatch knowing the backdrop with governments, protestors, and so forth.  Or at least we shoud have.  For example I hold a 20% position in Enbridge: I am well aware of the difficulty in building pipe and the incredible moat that Enbridge has as a result. 

Ultimately, none of us here needs to be invested in this space.  We are doing it because we see the potential for outsized returns.  Once my investments in this space work out I will likely be elsewhere in another beaten down sector where I can gripe about the government not helping me out.

Yes my friend, I understand your point. Agree with you. Regarding Enbridge as well.
From my little experience and reading, commodities almost never produce good returns in the long term. However there are opportunities over the cycles, and here we have one of them.
Beaten down sectors tend to be over-beaten, as hyped sectors tend to be over-hyped. Human nature.
I do believe that there are good companies now in the Canadian oil sector selling for very low price with quite big upside and not much downside from here.

Also in general oil market, after huge underinvestment for several years, there are good opportunities in the oil-service companies: SLB, NOV, HAL, OII, FTI and some others as well. I think especially everything related to offshore driling, as this sector was the most under invested, as the money went to shale. Still reading the reports of BP, Exxon and others, it seems they have no choice but dive to the ocean again as the other sources deplete faster than they develop new sources.



LesPaul

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Yes, same here.

Sold some CRC options for a 200% return. Letting most longer dated options run for now. Looking to reinvest in neglected small caps. Already have too much in GXE so probably buying PPR, IPO or maybe ATU.

Have a look at Journey (TSX - JOY) as well. Significant insider buying & have executed a smart substantial share buyback at very accretive levels.

http://www.journeyenergy.ca/images/main-nav/PDF/Presentations/Corporate_Presentation_March_2018_Updated.pdf

Journey Energy management update, key highlights below.
 
•   Mgmt. noted that its Duvernay acquisition and share buyback were first initiated in Q1/17.
•   MIE decided to monetize its non-performing assets in late November 2017 (i.e. pledge JOY shares for financing).
•   Mgmt. highlighted a few details of the share buyback – 1) IIROC specified that the buyback had to be less than 25% of the total shares outstanding 2) JOY was required to obtain consent from 50% of disinterested shareholders.
•   The company noted that the share buyback was all about ensuring JOY has control over its business plan going forward.
•   Mgmt. is currently working on its Reserve Report – NAV should only come down slightly y/y in 2017, considering gas price degradation offset by acquisitions and share buyback.
•   Share Buyback Summary:
o   MIE elected to reduce its investment in JOY resulting in the company buying back 12.7 M shares for cancellation below PDP NAV.
o   MIE will continue to hold 3.7 M, or just under ~10% of the 38.4 M shares outstanding.
o   Cost to repurchase the shares is ~$21.3 M @$1.68/sh.
o   AIMCo agreed to increase their investment in JOY in order to fund the buy back.
o   Pro forma the buyback, JOY will have ~38.5 M shares outstanding / Mgmt. & Directors own ~12.4% (PSP and AIMCO are the largest shareholders).
o   Overall, the deal will result in a reduced capital plan over the near to medium term along with targeted asset sales in order to reduce leverage position.
•   Duvernay Land Acquisition (See Figure 1):
o   JOY has now acquired 102 net sections of Duvernay rights in the Gilby area (100% WI), which is in the general proximity to recent activity in the East Duvernay basin (Raging River, Vesta, Paramount, etc.).
o   Mgmt. noted that its Duvernay land position used to resemble a checkerboard, but has now been filled in (enabling JOY to eventually drill 2-mile wells).
o   The vast majority of JOY’s Duvernay lands are located in the oil window (condensate increases from West to East in the play).
o   JOY’s Duvernay land base has a very thick reservoir, as compared to the Eastern part of the play.
o   The area has all season access, inexpensive construction costs and lots of access to water.
o   Regarding Infrastructure, JOY is the only player in the area that owns gas plants (note - JOY’s third party revenue for 2018 will likely be in the $2-$2.5 M range and could reach ~$4 M over time). JOY has ~50 mmcf/d of open capacity at the Gilby plant.
o   Royalty rates in the play are a mix of crown & freehold (roughly 50/50 split). Mgmt. noted that JOY’s blended royalty rate would be sub 10%.
o   Well Economics – Initial Cost = $8 M with a 3 year payback / Development Cost = $6 M with  a 1.6 year payback.
 


Purchased JOY recently. TY to Sculpin for pointing this one out a while back.

Enjoyed reading this write up on it: http://nebula.wsimg.com/3fb8112303cbf0f7c3753621ee4e7e2c?AccessKeyId=986B1C17D61A5ED4B8DD&disposition=0&alloworigin=1

sculpin

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Journey Energy presentation at the Peters Energy conference today. Webcast...

https://www.petersco.com/news_prior.cfm

Journey Energy Inc.
(JOY-t: c$1.72)
August 30, 2018
BUY (from Neutral)
Target: C$3.15 (from C$2.25)
Adam Gill, CFA / (403) 232-1243
agill@viiicapital.com
Tin Duong, P.Eng / (403) 232-2191
tduong@viiicapital.com

Duvernay Farm-Out Unlocks Trapped Potential and Provides Clarity on Land Value 


Journey has stuck a farm-out deal with Pat Carlson's private Kiwetinohk Resources in the Duvernay. We believe this is an immensely important deal for Journey as it unlocks trapped value and implies ~$0.90/share of land value on their remaining position which we believe has zero value in shares today.

·         Good Deal to Unlock Trapped Value: With the deal, Kiwetinohk has committed to drill two wells with a five well option to essentially earn a 62.5% WI (plus operatorship) in 140 sections of Duvernay lands. Overall, we believe the most important parts of this deal are: 1) it shows that this western reef edge with ~30 metres of net pay is getting more attention from new players; and 2) the valuation of the farm-in helps remove uncertainty on Journey's land value (more on that below).

·         Limited 2018/19 Impact But Will See De-risking: We do believe that any production impact to Journey will be muted over 2018 and 2019, given the need for the wells to payout (which we believe will take ~18 months), so we have not made any changes to our 2018 or 2019 production or cash flow estimates at this time. That said, the seven wells will be drilled over a large spread of the land base and we expect all will be spud by the end of 2019, providing drilling result catalysts over the next 18 months.

·         Offsetting Results: Raging River [now part of Baytex (BTE-BUY; $8.50 PT, covered by P. Skolnick)] has drilled a well in similar rock about 27 miles north of Journey’s land base. We have 5 months of public production data with the well cumulating 34 MBbl of oil by the end of July as outlined in Figure 1, as this will be the best analogy for Journey’s lands at this time. Raging River completed the drilling of two more wells of the same pad ~5 miles to the SW of the 14-36 wells, showing the activity is picking up in the area.

Land Value & Target Price Increase

·         Implied Land Value is $36 MM: If Kiwetinohk completes the full seven well farm-in, we believe it will involve a capital commitment of ~$60 MM. This is $60 MM to earn a 62.5% interest in ~140 sections of land (outside of differing WI on the earn-in wells). This implies a land value of ~$685,000/section. If we apply this to Journey’s remaining net interest of 52.5 sections, we get an implied value of $36 MM. This equates to $0.93 per share for just the raw land value.

·         With a clearer picture of the value of Journey’s Duvernay land base, we have increased our price target by $0.90 to $3.15 from $2.25. This drives up the implied return to 83% (from 31%), which now stands well ahead of the oil E&P peer average of 50%. With that, we are also upgrading our rating on Journey to BUY from NEUTRAL.

·         Note, the remainder of our prior $2.25/share valuation remains the same based on a 3.0x 2019E EV/DACF target multiple (a ~3.5 point discount to oil E&P peer group) and a 50% discount to our NAVPS weighted 50/50.

sculpin

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Saudis admit they have limited spare capacity...

Lee Saks

 
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#SAUDI RUNNING LOW ON ARAB LIGHT CRUDE FOR OCTOBER ALLOCATIONS-SOURCES: DJ. #OOTT

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Lee Saks

 
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#SAUDI WORRIED ABOUT PRICES ABOVE $80/B-SOURCES: DJ. #OOTT

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Lee Saks

 
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#SAUDI ESTIMATES THEY CAN'T PUMP MUCH MORE THAN 11M B/D-SOURCES: DJ. #OOTT