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Denbury Resources Inc. Message Board

  • bigriverdago bigriverdago Apr 1, 2008 10:18 PM Flag

    Energy innovation

    For a look into just how truly innovative the energy R&D is that's taking place, check out this site:

    newenergynews.com

    IMO, this shows why the Pollyannish predictions of $200 oil before long are likely to be exaggerations.

    At some point other sources become competitive. Because of all the incentive for research and innovation stemming from high oil prices, the point at which other sources become competitive will likely decrease over time.

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    • Titusville,Oil City,and Franklin had some fine old Victorian homes.The Episcopal Church in Franklin has Tiffany windows.

    • Harehau,

      Further on LINE, here's an article from the NYTimes:

      http://www.nytimes.com/2008/04/08/business/08gas.html?_r=1&ex=1365393600&en=991cb88614b707c9&ei=5088&partner=rssnyt&emc=rss&oref=slogin

      Not a thing specific, but they do own 100,000 acres held by production right on top of the Marcellus shale. They own nearly as much on top of the Fayetteville shale in Oklahoma but not in the sweetspot of the Arkoma Basin.

      Incidentally, it is nice to see some of those folks in West Virginia and Pennsylvania having their day in the sun again. In the 19th and early 20th century places from Morgantown through Johnstown and up to Williamsport were some of the most prosperous parts of the country but they fell on very hard times.

      Regards,

      Peter

    • You are right, they won't do another deal because they can't unless someone with deep pockets contributes the equity. But I remember in the past when an oilman was asked why he would do a deal at such a low return, he said, it's all I know how to do. Same could be said for bankers. Still feel like you have a good investment unless they overextend.

    • Harehau,

      True enough. They are acquirors like the Canroys typically have been. But I'll bet you lunch that they won't do another acquisition this year (modified below). You may even have oyster po' boys in your part of the world. That would be tasty. I say this for two reasons: (1) a cc ago, they said that they would not do one this year unless it was both small and highly accretive and (2) the financing and IPO market probably won't allow another deal this year. I'm certain that the environment for them for '08 is going to be min 9.25% finance and 10% to equity. For them to stay ahead of the game, they'd have to have someone sell them assets at a 7 multiple to cash flow. And for them to actually take the unit price higher in the next year they'd have to get a 5 or 6 multiple deal.

      If you're willing to grant me an exemption for anything less than $60 mm--bupkiss in the scheme of things--then you're on.

      Regards,

      Peter

    • Peter, I decided that if I bought more energy, it would be CHK but I know the COO of Linn from a previous life and he is a solid e and p exec. Barring a commodity crash, they should be able to make it work but I get the impression that they will buy any time they can find the properties and get the financing.

    • Harehau,

      I don't mind the fact that Mr. Cooperman knows how to talk his own book since I own plenty of LINE. Omega, Mr. Cooperman's firm owns about 3% of Linn Energy. He bought it right about where it is now, I think. He thinks thirty but that would represent a yield of 8.4% on current distributions. I think that the market for the production energy income stream market is a bit higher than that--say 9.25% so you'd only get to $30 on a distribution raise. I hope that that does not occur this year. Management, two conference calls ago, made a commitment to raising the distribution coverage. I'd like to see them get to 1.25, up from the squeeky 1.05 they had last year. It also wouldn't hurt to have some cash around to add to the capex program or to at least make a show of paying down debt a tad. They believe in the 2:1 formula, e:d, but it wouldn't hurt if they made a show of being disciplined.

      You can always borrow it back.

      My other hope for Linn is that they actually didn't have to put some of their oil and natural gas Q1. The NG puts are around $8 for 15% of production and oil were around $70 I think for an inferior California grade for 25% of oil production. If they could simply say "The hedging plan works fine and we got to keep x-millions of upside." then the market would stop thinking of them as a fixed coupon.

      Regards,

      Peter

    • I again took some chips off the Table on my energy stocks.

      I hear the talk of world suppy not meeting world demand but:

      I still feel some of the energy stocks overcooked.

      For example APA at 130 ?

      I may be wrong as I am many Times,But I can live with the cash

    • For whatever it's worth, Leon Cooperman in interview thinks the market will be positive for the year. When asked for favorites, he mentioned energy and MLPs, Conoco, Linn, sounds like he met with management recently, Williams, Atlas and Enterprise Products. Same story, global growth over shadowing our domestic problems. He says he is embarrassed with the recent excesses in the financial firms.

    • Thanks for the post. We are at the mercy of demand and oil acts like it is price inelastic, at least on a global basis. Today, I'm holding all my energy positions and just bought a (very small position) bank. Hoping both do well. Cheers.

    • From Platts:

      Though the Organization of the Petroleum Exporting Countries (OPEC) tries mightily to suggest a disconnect exists between the current price and supply of oil -- pegging crude's strength mostly to geopolitics, US refinery woes and speculators while insisting the market is adequately supplied -- the numbers, as it is said, do not lie.

      And those numbers show that while world oil demand is on the rise, production from across the globe, be it from OPEC, Organisation for Economic Co-operation and Development (OECD) states, or non-OECD sources, was lower in 2007 than it was the previous year.



      The International Energy Agency (IEA), in its December 2007 monthly report, forecast oil production from the OECD states at 19.8 million barrels per day (b/d) in 2007, down from 20 million b/d in 2006. OECD output in 2008 is expected to decline further, to 19.5 million b/d, said IEA.

      Non-OECD production was pegged by the IEA at 27.9 million b/d in 2007, down 900,000 b/d from 2006, before rebounding to 29 million b/d in 2008. The IEA last fall cautioned that project delays and cost overruns "remain a key downside risk" to its supply forecast, noting some 735,000 b/d of future output was affected by those factors as of the fall of 2007.


      "It tells you that the new capacity being brought on has already been canceled out by declines in the existing production base," Staniford said, citing the North Sea and its maturing fields in particular. "There just aren't enough new projects being brought on to offset the depletion."

      Moves made a year ago by OPEC to trim supply contributed to the tightness; the cartel slashed a combined 1.7 million b/d of production in November 2006 and February 2007 in a bid to thin what it believed were ample stocks in consuming nations.

      But even OPEC, despite the invariable calls from the West to "open the spigots," can be of limited help, at least in the short term. Data published in March by the US Energy Information Administration put OPEC's spare production capacity in February at 1.4 million b/d, every barrel of it held by Saudi Arabia.

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