I'm curious about LL&E trust.
1. Do you have an estimate of what a terminating competitive auction of LL&E should produce - if so, what is it and what is the basis?
2. Assume no termination, what's your valuation - the SEC PV10?
3. Have you been adding since the summmer - how big a percentage stake?
Have you looked at ENT at about 1/2 book? Just cleared a lender review of its collateral, i.e., reserve base, from which I infer that the book value is good.
I saw and asked that alcideholder where he got his $27 lifting number - no response. In any event, it is easy enough to adjust for oil price off of the SEC10 NPV number or off of the reported transaction price to Quantum of $67mm for the other 50% of what I now understand to be LRT's 50% in what was about 28.8% of net proceeds from the working interest. That number corresponds with a total Jay field value of $465MM and thus ties to the oil and gas investor report that I linked to in one of my posts indicating Quantum Resources invested much of its $500 in the Jay field with 40mm boe.
If we assume that no smart private equity fund would have bought without expecting that it was getting a discount to present fair value of at least about 30%, when oil was at $62, could be worth $4.5. With oil above $80 . . . well I don't want to be a pig, but that's over $5.
And yes, I have a meaningful position in every account, ranging from just over 20% in my largest account to over 50% of my trading account. Thanks for flagging this.
As for OGBY, OMG. You're welcome. I never bought because I didn't take the time to try to figure it out when it didn't become apparent to me. I don't even want to think about the foregone opportunity. However, I'm glad you got something because I think I'm getting something big from your idea.
Yes sir, $10 per bbl lifting cost is typical. But in southwest Louisiana the wells tend to be shallow, the reserve tend to be small, injection also cost money, much higher cost is probable. I saw your post at LRT board but did not check into it. Laziness and my expectation to hold till complete liquidation makes the exercise less important/urgent. Besides, the use of lower lifting cost only make the valuation more conservative when adjusting the valuation of reserve due to price increase in the past year. As I wrote earlier, $4 per unit seems possible. Hope you bought a meaningful position.
PS Did you notice that OGBY is to be taken out for $36? I sold at around 21! Still, thank you.
Sam, later tonight I'll post my valuation analysis. I have been bidding often since i started studying this, finished my study yesterday. Also there's an interesting post on the LRT board about the next new reserve valuation - I asked about it because his production cost number - seems too high relative to the M&L report and what I understand to be the world wide average production cost of $10 bbl - a number that squares with the $9.921 I find implied by the 9/30/06 M&L report in the 10k
Greetings, Mr. Iwant,
Your interpretations on UBIT make sense to me. Thanks.
I did not see the SEC inquiries, but glad to know someone with a big stick is watching out for us.
The thesis with LL&E is simple. If the assets are worth more than current price and if they can fetch a fair price in liquidation, and we have a reasonable time frame for it to happen...The wild card is oil/gas prices.
Good day, Sam
Hi Sam, just saw that. If you go to the royalty exclusion, it is only off if the "organization" meaning I take it your tax exempt org, owns the working interest. I believe neither the IRA org. nor even LRT own the working interest. Rather, LL&E Co. and LRT are partners in a partnership that takes royalties from the actual owner of the working interest, which I believe is now Quantum Resources. But, I'll pose a question on LRT's bd.
BTW, i trolled through the SEC filings for LRT. Surprised to see posted correspondence btwn SEC and LRT re: the language of its 10k. On the other hand, once you know the SEC has scrutinized you I would think you would walk an especially straight line in all future filings, rather than risk jail time.
Hi, again, Mr. Iwant,
This fellow that you "spoke" to had a few thoughtful posts on LL&E.
Good night, Sam
I saw the engineers' report. I read it to have wrapped in all costs of production including dismantling in arriving at an estimate of future net revenues. What i didn't see is their oil and gas price assumptions as of 9/30/06. Whatever they were I presume that they followed SEC PV10, meaning they assume that price is used to calculate all future net revenues. Probably conservative.
Greetings. Mr. Iwant...
I had a couple of posts on this. They are basis for my valuation.
Worse case, $50M min. value less $20M max. abandonment cost, with 19M shares out, it's worth $1.58. If anything, the valuation should be a little higher since Jay field started producing and oil/gas prices are higher. The monthly dividend, if repeated, amounts to 0.40 per year. It could well be worth more.
Quantum's purchase price on working interest was $67M, so the conservative fair value of LL&E should be less than $67M, but I don't know by how much.
My thesis about oil price is that this nation is not going to start to conserve until oil reaches $100 per bbl, a psychological barrier. The flip side of that is that oil will reach $100. One gotta dream.
LL&E was about 4-5% of my total commitment. I added a little after it dropped. I somehow feared that the trustee may sell us out and not getting a fair price in liquidation. I did it all in tax deferred accounts. They had little cushion at the time, I think.
I haven't looked at ENT.
My best, Sam
I have a small position while I study it. In a tax-deferred, isn't there a UBIT problem of the IRA or other such vehicle having to declare and pay income tax for unrelated business income after you take in $1k in distributions, or is UBIT some fraction of the distributions? Or have you held long enough to get a K-1 to find out how much is UBIT?