BrotherMaynard
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Latest Comments33 Comments
Oil Sector Flush with Cash, Expect M&A - Canaccord Analyst
The EIA is required to make guesses. They're obviously no better than the next guy as they were about 50% off the mark this time around. It's irrational to believe that the EIA or anyone else for that matter can divine what the price of oil will be in the future.
For instance:
"As a result of the sputtering economy and lower petroleum demand, the price for the U.S. benchmark West Texas Intermediate oil will average $63.50 a barrel next year, the EIA said."
www.reuters.com/articl...
On Nov 27 10:26 AM jayjayjay1212 wrote:
> HAHAHA 30$ oil... What an irrational investor, I'm guessing he was
> the first one to call oil at 250$ when it was trading at 140$ + ...
>
>
> By the way, the integrated companies know the long term equilibrium
> price should be more towards 100-120$ in real dollars, just as the
> International Energy Agency mentioned in their study. BrotherMaynard,
> if you know more than the IEA, please tell us how you got this good
> and why you are not CEO or on the board of any of the big energy
> companies!
>
> As Warren Buffett says, better to buy a great company at a good price
> than an average company at a great price. The great names in Oil
> Sands (Suncor, Canadian Natural Resources and Encana) would fit in
> the former category, so the big guys in Energy are likely shopping
> around as we speak in order to boost their growth prospects.
>
> As for your ''Time to move on'' statement, most of us are actually
> WORKING in this sector, so this is our job, we are not ''moving on''
> to the next ''hot sector'' as I'm sure you already have done. We
> actually study the fundamentals, not what Roubini or Cramer are saying.
>
>
> Disclaimer: I own Suncor shares
>
Oil Sector Flush with Cash, Expect M&A - Canaccord Analyst
It was a bubble folks...time to move on.
Chesapeake Energy Continues to Shore Up Its Balance Sheet
Chesapeake Energy Continues to Shore Up Its Balance Sheet
www.platts.com/Natural...
Chesapeake Energy Continues to Shore Up Its Balance Sheet
The fact that CHK is levered 1.5x, and runs a perpetually diminished cash balance, should be viewed as totally unacceptable by any prudent investor...esp. those investors that give two bits about management. Its the hubris of management that will kill this company, as they fail to care or believe that Nat gas sunk to as low as 2.50 during the last recession (and that was not a consumer led recession). Lord knows demand isn't going to pick up in this environment save for a ridiculously cold winter (4 months out of the year), but even then, industrial capacity is being laid idle writ large....yet supply is at levels net seen in a long time (b/c of finds like CHK's). We can't export the stuff (need LNG capacity for that...and its as big an eyesore as refiners, apparently), so we have to deal with what we pump. As a result, Raymond James made this prediction:
"With the exception of a brief winter spike, US natural gas prices will
have to tank in 2009 to rebalance a glutted market...[RJ's] model, which is based on 30-year average weather, shows the US reaching a theoretical 4.25 Tcf of gas in storage at the end of 2009's injection season based on gains in US production and a slackening of demand in a weak US economy... "This cannot physically happen (due to storage constraints)," Adkins said, noting that there is only about 3.75 Tcf of US gas storage available. "This means that gas prices must fall sufficiently to whack the gas rig count and force some producers to shut in gas production over the next year. For that to happen, the gas market will need to take prices even lower than our current forecast to rebalance the system."
Meanwhile, addressing the covenants that mmarrk is complaining about, we will cite a Johnson and Rice piece from 10/13/08:
"The key covenant is the debt-to-EBITDA ratio which is maxed out in the covenants at 3.75x. As of September 30, 2008, this stood at roughly 2.05:1...to push CHK into violation of this covenant, we estimate that all hedging positions must be lost (failure of counter parties?), not just the knock-out provisions, and NYMEX gas and oil prices would have to fall to $4/mcf and $60/bbl for a prolonged period, basically a doomsday scenario."
So there you have it. $4 is more real than anyone wants to admit given the RJ comments and where nat gas went last recession. $60 oil has been breached.
You have been warned.
Chesapeake Energy Unlikely To Remain this Cheap
I'm not sure where you derived that probability from...but how soon everyone forgets...the 2001-2002 recession saw sub $2.50
gas. CHK likely doesn't exist (assuming this capital structure) at $2.50
tfc-charts.w2d.com/his... (pull use the pull down menu to view year by year)
Time to Fill Up on the Strategic Petroleum Reserve
Chesapeake Energy Unlikely To Remain this Cheap
Go to page 3.
Look at NAV with a $5 nat gas scenario...$29 pershare (a lot higher than today, obviously). However, notice the difference between NAV at $6 and NAV at $5 (or the second derivative of change)...its a 37% drop. The drop is the same from $7 to $6. Yet from $8 to $7 it was only a 25% change...so the lower the prices go, the faster the NAV falls. If nat gas hits $4 will NAV be worth maybe, 50% less? Who knows...they, for whatever reason, won't show us.
Chesapeake Energy Unlikely To Remain this Cheap
I sure haven't found one...maybe if they illustrated what happens to their model at $4, more people would be buyers.
there are ebitda covenents on their debt and ebitda is directly tied to nat gas prices...therefore, if nat gas drops below $5, they are really going to have problems with the liability side. this is what the XOM's and CVX's are waiting for...picking through the wreckage of independant E&P's that extrapolated the most fleeting of overly optimistic trends at the very top.
Gold Miners: Biggest Drag on My Portfolio, Yet the Biggest Opportunity
Gold Miners: Biggest Drag on My Portfolio, Yet the Biggest Opportunity
Why I Sold National Oilwell Varco and Bought WMS Industries
Chesapeake Energy Unlikely To Remain this Cheap
Getting Clobbered: Why I Changed My Investment Rules
following insiders never helps you to see the bullet that actually kills the company...e.g. Aubrey McClendon was recently blown out of his ownership stake in CHK. I'm not saying insider buying is bad, just make sure you know management well enough to make sure that they're not trying to be icarus (Al Lord from SLM corp was another headline grabber last year when the SLM buyout deal tanked...he then proceeded to drop f-bombs on the ensuing conference cal)l.
Getting Clobbered: Why I Changed My Investment Rules