Author Topic: JEF - Jefferies Group  (Read 599198 times)

Grenville

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Re: JEF - Jefferies Group
« Reply #830 on: July 08, 2014, 10:11:37 AM »
A Jefferies quarterly letter by "Rich and Brian".  This is exactly the type of tone an investment bank should keep.

http://www.jefferies.com/cmsfiles/jefferies.com/files/insights/tickr/jefferiesinsights_july2014.pdf

Thanks for posting. Good read.


james22

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Re: JEF - Jefferies Group
« Reply #831 on: July 30, 2014, 11:10:05 PM »
I think the misunderstandings surrounding LUK can give us a rare opportunity to invest in a quality company with proven history at this attractive price point.

http://seekingalpha.com/article/2351905-leucadia-national-corp-where-value-investors-can-still-find-good-opportunity-in-this-inflated-market
BRK, BAM l SV, EM l Fannie Mae, Freddie Mac l Stable Value, Cash Value

ajc

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Re: JEF - Jefferies Group
« Reply #832 on: August 01, 2014, 07:34:01 AM »

Oregon LNG wins natural gas export license


- The Department of Energy approves Oregon LNG, controlled by Leucadia National Corp. (LUK -1.2%), to export up to 1.25B cf/day of liquefied natural gas for 20 years.

- The project still must clear a lengthy and expensive review process at the FERC, which can span at least 18 months.

- The DOE's review of the Warrenton, Ore., project was initiated before the Obama administration shook up its LNG review process in May; under the revamp, the DOE will no longer issue conditional approvals of LNG projects.


http://seekingalpha.com/news/1889345-oregon-lng-wins-natural-gas-export-license



rranjan

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Re: JEF - Jefferies Group
« Reply #833 on: August 01, 2014, 08:04:59 AM »

Oregon LNG wins natural gas export license


- The Department of Energy approves Oregon LNG, controlled by Leucadia National Corp. (LUK -1.2%), to export up to 1.25B cf/day of liquefied natural gas for 20 years.

- The project still must clear a lengthy and expensive review process at the FERC, which can span at least 18 months.

- The DOE's review of the Warrenton, Ore., project was initiated before the Obama administration shook up its LNG review process in May; under the revamp, the DOE will no longer issue conditional approvals of LNG projects.


How much flowing to the bottom line we are talking here? Any reasonable estimates?

ajc

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Re: JEF - Jefferies Group
« Reply #834 on: August 01, 2014, 10:13:04 AM »


Oregon LNG wins natural gas export license


- The Department of Energy approves Oregon LNG, controlled by Leucadia National Corp. (LUK -1.2%), to export up to 1.25B cf/day of liquefied natural gas for 20 years.

- The project still must clear a lengthy and expensive review process at the FERC, which can span at least 18 months.

- The DOE's review of the Warrenton, Ore., project was initiated before the Obama administration shook up its LNG review process in May; under the revamp, the DOE will no longer issue conditional approvals of LNG projects.


How much flowing to the bottom line we are talking here? Any reasonable estimates?


From the article that james22 posted above, the author writes that "the potential revenue for this project could be billions, but there are still many obstacles to overcome."
Obviously though, that's vague.
Arnold Van Den Berg (go to about 2 minutes in - https://www.youtube.com/watch?v=fc_5-iqalQ8) talks about current US capacity allowing for production at $4.00 to $4.50 per 1000 cubic feet with shipping costs being roughly the same price.
He goes on to say that Japan pays as high as $16.00 per 1000 cf.

Say production and shipping cost $9.50 and Japan and others pay $13.50 (I'm not sure if that's conservative enough), then the entire drilling to delivery process yields $4.00 profit per 1000 cf.
How much does Oregon LNG get from that $4.00? I don't know.
At a guess, they're a key component in the delivery process so they get more. Producers, pipelines (less so) and ships are somewhat abundant, LNG export terminals are complex and there aren't many of them.
Say they get 30% or 35% of that $4.00, so $1.25 or so.

If the terminal operates at full capacity (1.25B cf/day), 6 days per week then Oregon LNG gets $488 million a year for the service they provide. If that $9.50 can turn into $8.50 for production and sellers get $14.50 from Asia then that number goes up to $788 million per year for Oregon LNG.
Minus the annual cost of running a LNG terminal and you have your answer. What that cost is though, I really have no idea.
Maybe there are some operational Middle Eastern LNG terminals that would make useful comparisons.

There are some economic studies (http://www.oregonlng.com/learn-about-lng/economic-studies/) on their website, by the way.
A few of the market analyses look like they'll also shed more light on the issue of production costs and what prices Asia might pay over the next few decades.

PS. I might be double-counting, but I'm assuming that export terminals weren't included in Van Den Berg calculations.

PPS. Some other things I don't know the answer to:

 - Could that 1.25B cf per day number be increased after Oregon LNG operates smoothly for a number of years?

 - And, would it be legal for Leucadia to buy from producers themselves, hire shippers and then use some of Oregon's capacity to capture a greater share of that $4.00 per 1000 cf?

« Last Edit: August 01, 2014, 11:03:16 AM by ajc »

scorpioncapital

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Re: JEF - Jefferies Group
« Reply #835 on: August 01, 2014, 11:58:01 AM »
They do plan to buy the natGas from Canada. Perhaps there is a speculation on foreign exchange implicit here as well.

ajc

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Re: JEF - Jefferies Group
« Reply #836 on: August 01, 2014, 02:16:51 PM »

They do plan to buy the natGas from Canada. Perhaps there is a speculation on foreign exchange implicit here as well.

Maybe that's a possibility.

Having thought about it now though, I think the key will be expanding the 1.25B cf per day limit.
My view is that this is just a starting point and that after X years of safe operation, they will get permission to increase Oregon's capacity. From the website, there looks like plenty of open space available for that.
Perhaps sooner rather than later too, because the Canadian supply is huge and the demand in Asia is big and growing rapidly.
I think there is a risk of these terminals becoming major bottlenecks if capacities aren't regularly being increased.

For example, Qatar exported around 3800 billion (est.) cubic feet of LNG in 2011 and that number was doubling every 2 years (http://persiangulffund.com/qatar-the-biggest-exporter-of-liquid-gas-in-the-world/).
In order for the west coast of North America to match Qatar's 2011 output, they would need 10 terminals like Oregon sending out 1.25 billion cubic feet per day for 6 days a week, all year round.
Given those numbers, I think it makes a lot of sense to expand existing capacity instead of building whole new terminals each year.

Just to pluck a number out of the sky, if after a few years that number got increased to 5 or 10 billion cubic feet per day for Oregon LNG then you can see for yourself that things would start to look quite different from Leucadia's point of view.



ajc

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Re: JEF - Jefferies Group
« Reply #837 on: August 02, 2014, 10:51:15 AM »

@scorpioncapital

Just some thoughts to follow-on from what you wrote.

Most of the US export plants looking to be built are on the Eastern seaboard.
Oregon LNG is the only one out west. Canada has 3 proposed western projects which together total 2.0B cf per day (http://www.sourcewatch.org/index.php?title=LNG_Terminals).
I'm having a hard time thinking that anywhere will be cheaper to ship to Asia from, but maybe I'm missing something obvious there.

As well as that, there's the US/Canada arbitrage opportunities.
In currency as you noted and also I think related to where there's been over-production and a consequential over-supply. Sometimes that will happen in the US and sometimes it'll be Canada.
Either way, Oregon users get the best access to the lowest prices.
So, from that perspective it seems to make sense for the smart money to take their business to Oregon because you'd think it'd be the most profitable terminal for them to do work through.

Does that then also mean that Oregon expands capacity more quickly than other places? I don't know, but I don't think that's a totally crazy notion.
The more companies that want to do business through your terminal, the more pressure there will likely be to increase capacity there. I mean, that'd be the sensible direction for things to take.
For the sake of some comparison, Ras Laffan Industrial City (the world's largest LNG export terminal, if I'm not mistaken) was exporting 31 million tons of LNG per year back in 2007 (http://www.cedaconferences.org/documents/dredgingconference/downloads/2/qatar2008_2008-18-05_42_saad.pdf).
Oregon will be designed to export 9 million metric tons per year, so there is still a fair amount of room for growth there.

Finally, I was wondering... since Jefferies is a full-service investment bank and Leucadia would own Oregon LNG, would Oregon LNG become a kind of full-service export terminal?
Could they offer currency hedging to all of their various clients?
The relationships would already be there, they'd trust each other and Jefferies could do that kind of thing.
How about if a producer wanted to IPO after some time. If business with Oregon LNG had been going well, would they be inclined to use Jefferies for that rather than someone else?
After all, the trust and previous business history would already be there.
Again, what if a shipping company needed to raise some capital?
The list might go on and on.

What I'm wondering is how active Oregon LNG could eventually become in financial activities that relate to the LNG business?
Or whether they could at least offer these services and then put in a call to Jefferies so that everyone involved trusts the other person they're doing business with.
I don't want to put a number on that stuff (even if I don't think it'll be zero), but right now I think most people are looking at this as if Leucadia invests and then that thing produces cash flows over time.
Clearly that's not wrong, but another side-effect might be that all of these other added business opportunities are then created for another Leucadia subsidiary and if it's handled well there could potentially be a substantial amount of business to be done there for Jefferies too.

Anyway, that's as far as I've got for now.
I guess we'll just have to wait and see how things turn out if FERC does end up giving Oregon LNG the approval they need to build this thing.


« Last Edit: August 02, 2014, 10:55:06 AM by ajc »

BG2008

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Re: JEF - Jefferies Group
« Reply #838 on: August 08, 2014, 08:00:43 AM »
Has anyone here dealt with Leucadia in a professional capacity?  Given that they are savvy investors, does that make them tough negotiators.  Any reputation on whether they are pleasant people to work with?  I find it interesting that the CEO of the Bank of Ireland said that he never wanted to go through another DD process with Fairfax again.  I get the sense that these firms are shareholder friendly, but not necessarily friendly with counterparties.  Thoughts?

Grenville

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Re: JEF - Jefferies Group
« Reply #839 on: August 08, 2014, 08:29:18 AM »
Has anyone here dealt with Leucadia in a professional capacity?  Given that they are savvy investors, does that make them tough negotiators.  Any reputation on whether they are pleasant people to work with?  I find it interesting that the CEO of the Bank of Ireland said that he never wanted to go through another DD process with Fairfax again.  I get the sense that these firms are shareholder friendly, but not necessarily friendly with counterparties.  Thoughts?

Thanks for the post. Do you have a link to those comments by the CEO of BOI? I'd be curious to hear more.