Author Topic: Future strategy to survive discovering 1 out of every 20 bbls of oil we now use.  (Read 222539 times)

SafetyinNumbers

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Another oil bull letter laying out the investment thesis:

https://www.islainvest.com/wp-content/uploads/2019/04/LTI_Q1_2019_Final.pdf

He does have a slightly negative view on WCS based off of IMO 2020 but Iím not sure how that ties in with all of the VZ barrels that are offline.

Also, Iím curious if anyone has looked at Arrow Exploration (AXL.V)? I imagine it wonít participate in the rally initially as there still seem to be some large holders who received the spin off from CNE.TO last year and havenít quite sold it all. The stock is down over 70% from when it was spun in November and where insiders bought stock.

It looks very cheap on every valuation metric traditionally used like EV/BOE (~7k/boe) and EV/DACF (~1x) but has shareholders who canít own it which has presented this opportunity. I also discovered that TD Waterhouse had it flagged from the spin so potential retail buyers have to call in to make an order and I can see a lot of people giving up if they have to wait on hold for 30 minutes to place an order on a microcap.

They expect to report Q4 results by April 30 (the deadline) and we should hear about the bank line then or soon after along with an operational update which could act as catalysts.
Top 5 positions: ELF IAM GCM.NT/GCM PIF EFR.DB


tombgrt

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Thanks for the post, SafetyinNumbers! No insights on AXL.V however.

Also seems like ATU.V didn't receive the memo yet. Still stuck at 0.46. Incredible!

SafetyinNumbers

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Thanks for the post, SafetyinNumbers! No insights on AXL.V however.

Also seems like ATU.V didn't receive the memo yet. Still stuck at 0.46. Incredible!

Looking at GMPís latest comp sheet, they have ATU.V at 2x EV/EBITDA based on yesterdayís strip pricing. Tough to be a small cap these days.

The aforementioned AXL.V just announced it sold 5% of its production for about 40% of its market cap (75 boe/d for US$5m) and net debt is negligible.
Top 5 positions: ELF IAM GCM.NT/GCM PIF EFR.DB


SharperDingaan

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Interesting implied timeframes.
SAGD if you're long-term (after pipelines are built), service providers if you're medium term.

Seldom spoken of, is just how valuable that shut-in WCS actually is.
In todays evironment of excessive light oil, to raise margins the integrated majors need to raise their heavy/light oil mix. With VZ, Mexico, Brazil, and Iran out (or declining); there just isn't much to go round, almost all the spare capacity is in risky places (Kuwait, Iraq, SA, Russia, etc), and lots of folks are playing with matches. WCS isn't just new supply, it also materially diversifies the geo-political risk. And with a WCS basin second only to SA in size ......

Shut ins do not last forever.

SD

Joe689

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Four ships damaged by some sabotage attack in the ME.  Oil starts up 3%, ends down 1% for 4% move today.   US/CHINA trade risk > ME shipping risk.

SharperDingaan

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This isn't likely to last very long
https://globalnews.ca/news/5274129/saudi-arabia-drones-oil-infrastructure-attack/

Drones are the poor mans Tomahawk.
They can carry missiles/mines, are cheap, are hard to detect, do not have to come back, and can be launched from anywhere.
Simple matter to swarm a ship loading facilty, and wreck everyones day.

SD

sculpin

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From the commodity-cycle lows reached back in both 1970 and 2000, natural resource equities outperformed the broad stock market by five-fold over the following decade. Today, both commodity prices and natural resource-related equities have never been more depressed relative to the broad market.

http://blog.gorozen.com/blog/commodity-and-natural-resource-equities-undervalued-versus-broad-market