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Annaly Capital Management, Inc. Message Board

ddbikessamsara 15 posts  |  Last Activity: Jan 22, 2015 1:07 PM Member since: Oct 5, 2004
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  • Reply to

    Link to Rockov's involuntary sale

    by ease98a Jan 22, 2015 11:57 AM
    ddbikessamsara ddbikessamsara Jan 22, 2015 1:07 PM Flag

    Directly from the form 4 : "Units sold involuntarily. These units were held as collateral for a loan and were sold as a result of a decline in the Issuer's unit price."

    Sentiment: Hold

  • ddbikessamsara ddbikessamsara Jan 22, 2015 1:04 PM Flag

    Absolutely absurd statement. Directly from the form 4 : "Units sold involuntarily. These units were held as collateral for a loan and were sold as a result of a decline in the Issuer's unit price."

    He obviously had put the units up as collateral for a loan. When the unit price declined as a result of market forces the lender forced the sale to protect their own interests. Nothing whatsoever to do with Rockov's own view of either his company's prospects or his outlook for oil prices.

    It just drives me crazy when people who know nothing start throwing out ignorant statements.

    Sentiment: Buy

  • ddbikessamsara by ddbikessamsara Dec 30, 2014 7:35 PM Flag

    I'm looking at the Q3 summary BBEP filed on 11/5/2014. Here's a rough, very simplified projection - EXCLUDING QRE since not enough data yet for that;

    For Q3 2014 they sold 1.904 million barrels of oil, or 21,155 bpd. Looking down further at the hedges in place for 2015 I see they have a total hedged oil volume of 18,433 bpd at $93.61. Just for a simple picture I am saying that $93.61 is the total average price they would have received this year. Now assume the same level of production for 2015 as the Q3 average - 21,155 bpd.

    21,155-18,433 bpd hedged at $93.61 leaves 2,722 bpd unhedged and sold at market prices. Since nobody really knows I'm just throwing out $50 as the market price per barrel for 2015. So they would have a revenue reduction in 2015 of $43.61 ($93.61 avg '14 price less $50 '15 market price) per barrel x 2,722 unhedged bpd or $118,706 per day. For the year that is $43.4 million less in oil revenues. Oil is about 82% of the revenue base.

    For the 9 months YTD Q3 total revenues were $659 million. Again rough and dirty annualize that to get approximately $879 million in total revenues for 2014. 82% of that or $720 million would be oil sales. $43.4 million less oil sales from above on that $720 million = 6.03% decline. Assume even a higher decline for the other components of NGL and gas and say even a 10% overall revenue decline from the 2014 annualized estimate of $879 million. That's a revenue drop of $88 million. While not pleasant by any means it is hardly a catastrophic development. I don't think it will be that bad because gas is also well-hedged and I have a hard time believing oil will stay at these levels more than a few months at the longest.

    While admittedly a very rough estimate that leaves out the QRE impact it gives me a sense that even with $50 oil for the full year they are not going into the disaster zone.

    Sentiment: Strong Buy

  • ddbikessamsara by ddbikessamsara Dec 29, 2014 6:48 PM Flag

    BBEP had a $146 million gain on derivatives in Q3. That's when oil was still over $90. That same level of hedging PLUS QRE's - which was stronger than BBEP - should have been in effect during Q4 as well. With oil prices cratering like they did in Q4 these guys could conceivably double the Q3 gain - maybe $300 million. I admit I am not a specialist on hedging but common sense tells me the Q4 gain HAS to be pretty big. Derivative gains are a component of EBITDA, thus one of the big determinants both of distibutable income and debt covenants. They are also nicely hedged for 2015 as pointed out in another post.

    It would appear to me that just for EBITDA purposes the hedges are going to cover the distribution as well as debt covenant concerns. Again I am no specialist in the area but unless this oil price stays around for well over a year there does not appear to me to be any major problem. Anyone more knowledgeable than me feel free to chime in. The distribution will run them a little over $100 million cash per quarter. If they notch a $300 million gain on derivatives for Q4 does anyone know how much of that converts to cash? I assume there is a counterparty somewhere that has to pay off - it can't all just be accounting entries.

    Anyway, just opening a topic that maybe some people more knowledgeable about the hedging story may be able to build on. I know Harold Hamm and Continental Resources cashed out their hedges at a massive gain and intend to ride out the downturn at current prices.

    Sentiment: Strong Buy

  • Reply to

    short position

    by pba69 Dec 26, 2014 3:58 PM
    ddbikessamsara ddbikessamsara Dec 26, 2014 7:40 PM Flag

    Thanks. So much the better. I like your numbers even more. Less than 3% short interest is tiny. It could get bigger of course but surprisingly small considering the 50% price drop in the last month.

    Sentiment: Strong Buy

  • Reply to

    short position

    by pba69 Dec 26, 2014 3:58 PM
    ddbikessamsara ddbikessamsara Dec 26, 2014 7:22 PM Flag

    Yahoo shows 137 million shares os.

  • Reply to

    short position

    by pba69 Dec 26, 2014 3:58 PM
    ddbikessamsara ddbikessamsara Dec 26, 2014 6:42 PM Flag

    I would say that at only 5% of shares outstanding that number is actually pretty encouraging. If there was serious doubt about BBEP's coming through this ok the short interest would be much higher than it is. Smart money usually smells blood and the sharks circle accordingly. 5% is no more than any average stock short interest. Not saying your point is not valid but again, this level of short interest is mostly encouraging - assuming one is long of course. Already trading at a 5-year low, less than half of book value with strong hedges and the possibility at any time of a geopolitical event spiking oil up again is not an overly tempting short target.

    Speaking of geopolitical events - the "market" forces moving the price of oil down seem to be blissfully unaware how much of the world's oil supply is subject to such unforeseen events - which occur on a pretty routine basis over the course of any year. The Middle East is not what you call a hotbed of stability. Just the rumor of a Libyan problem last evening drove Brent up over $1. If something real happens to a serious producer a $ 5 to $ 10 spike could happen from this level before you could blink. Shorting at these levels is a precarious situation.

    Sentiment: Strong Buy

  • ddbikessamsara by ddbikessamsara Dec 26, 2014 12:09 PM Flag

    These guys are well-hedged with 71% of oil at $93.51 and 71% of gas at $4.98 for 2015. Even better than that for Q4 2014. 2016 tapers down to 60% of oil at $89.01 and 56% of gas at $4.25. I look for a monster hedging gain in Q4 and 2015 is looking very solid as well. My bet is they scale back the dividend some, adjust capex, and pay down as much debt as possible. I don't see a complete suspension of the dividend this early - the hedges are strong and debt redermination is not until April so I bet Q1 dividend will be paid in full with a scaling back after redetermination - IF oil prices stay here or lower.

    I read an article where Harold Hamm - one of the smartest operators around who started Continental Resources and really got the shale boom going - actually cashed out of ALL hedges for a monster gain because they see these prices as unsustainable and they want to fully participate in the inevitable price rise. T. Boone Pickens sees oil back over $80 by the end of the year. The Saudis see oil back over $80. There is a miniscule supply/demand imbalance with global production at 93.8 mbpd and demand at 93.3 mbpd. That's a mere .5 mbpd difference which can be corrected pretty quickly - lots of domestic producers are already scaling back and many shale wells deplete rapidly so the supply side will balance in the near future.

    Regardless what the media is blaring demand is still at the highest level EVER - look at any chart and nothing but a solid uptrend line with a tiny hiccup down in 2008-09 when the whole world was in panic. Oil and gas will be primary fuels for decades - renewables are less than 2% of global energy supply today even after decades of installations.

    In short, this oil price plunge is ridiculous given the overall demand picture and in my opinion mainly orchestrated by hedge funds and traders - NOT driven by economic fundamentals. The bounce back to $80 or better is inevitable - the only question is how long it may take.

    Sentiment: Strong Buy

  • From the Q3 CC : "First, LINN's production mix in the third quarter was 48% natural gas, 36% oil, and 16% NGLs. Pro forma, for all announced transactions, accept the final divestiture of remaining Midland Basin properties, a very preliminary estimate of our production mix shows approximately 55% natural gas, 35% oil, and 10% NGLs."

    So they are MUCH less exposed to oil prices per se than this crazy market is assuming.

    Add to that the strong hedges : "Second, we are hedged approximately 90% to 100% on expected natural gas production in 2015 and 2016. On the oil side, we are hedged approximately 60% to 70% in 2015 and between 50% and 60% in 2016 on expected production."

    Basically the "bad" exposure is the 35% oil production that is unhedged. So in 2015 that would be the UNHEDGED 40% portion of 35% oil, or a net 14% of 2015 oil production unhedged. Hardly a catastrophic situation.

    The current "market" price of oil is also virtually ignoring what to me is a very real chance of a significant geopolitical disruption caused by the Saudis intractable stance. Commando raid on the Ghawar field and oil is back over $100 overnight. You think Putin and Iran aren't already thinking along those lines?

    It seems unlikely to me the Saudis can hold this line with no consequences for a really protracted period. Even if the price of oil does stay low for a few quarters, based on the numbers laid out above things are nowhere near as dire as the panic selling is suggesting.

    All my opinion but I bought LNCO today based on it.

    Sentiment: Strong Buy

  • Reply to

    Baird's New Price Target

    by nosweat82 Dec 17, 2014 1:55 PM
    ddbikessamsara ddbikessamsara Dec 17, 2014 2:39 PM Flag

    So that puts them at the low end of the spectrum vs. $25 at the high end of the spectrum. 15 analyst opinions ranging from $25 to $7 price targets. In other words none of them have a real clue but are throwing out a wide range of guesses. It is all mostly dependent on the price of oil, secondarily dependent on how well BBEP manages the business through this period. They are overall well-hedged and have managed through other cycles very effectively - that track record is what made me choose them as my "oil crash" investment. Also one of the cheapest at .5 book value. Nearest comparison is LINE and they trade at .9 book so BBEP seems to me to more undervalued with greater rebound potential.

    T. Boone Pickens predicts oil back to $90-$100 in 12-18 months. I respect his opinion a lot more than any 2-bit analyst throwing darts. I can throw darts as well as them and to me both the decline in oil prices AND the decline in oil company stocks is greatly overdone and the odds are in your favor that there is much more upside than downside in both.

    I'm holding through this cycle with the expectation that BBEP will manage through it ok and looking for oil to return to $90.

  • ddbikessamsara ddbikessamsara Dec 16, 2014 11:24 AM Flag

    Wow, Baird is clairvoyant indeed making calls for 2Q '16. That's a year and a half out and there is no way they can legitimately predict oil prices 6 months out let alone a year and a half. This whole mess is due to the Saudis trying to force everyone else's hand, and the ensuing panic selling - NOT true market forces. There is no way Baird can possibly predict the price of oil, BBEP's asset mix, debt mix etc. that far ahead. This is a breathtakingly stupid report, even from the analyst community who make stupid calls on a regular basis. Where was Baird before the disastrous last 90 days when some accurate analysis could have saved a lot of people a lot of money?

    Sentiment: Strong Buy

  • ddbikessamsara by ddbikessamsara Dec 15, 2014 6:20 PM Flag

    Somebody or some group of bodies is manipulating the oil market. Just like a few hedge funds managed to move oil up to $140 the same effect is ocurring in reverse. There is a small amount of oversupply : from the IEA report:

    "IEA expects that global liquid fuels supply will continue to outpace consumption, resulting in an average stock build of 0.4 million bbl/d in 2015. Stock builds are expected to be concentrated in the first half of the year, averaging 0.7 million bbl/d during this period. EIA forecasts global liquid fuels supply to average 92.8 million bbl/d in 2015, 0.2 million bbl/d lower than in last month's STEO. The 2015 global demand forecast was also revised downward by 0.2 million bbl/d to an average of 92.3 million bbl/d, based on weaker global economic growth prospects for next year"

    So the supply is 92.8 million bbl/d and demand is 92.3 million bbl/d. Thus demand is 99.46% of supply. That is almost a statistical non-event, virtually equilibrium. Yes, prices should have come down to some small degree but a 50% washout is an impossibility just on the underlying base economics. This is unbridled manipulation. There is simply no way this sort of horror show could unfold otherwise.

    As to BEPP itself, they have ridden out similar storms in the past. They have a ton of high-dollar hedges and a lot of discretion on capex spending so they will be able to manage cash flow pretty well. Listen to the December 9th Wells Fargo presentation on the website if you want a degree of reassurance.

    This stock price is beyond insane, no logic whatsoever. I'm hanging in - 5-year low due to a manipulated downdraft in oil prices is not a reason to sell but a compelling reason to buy.

    Sentiment: Strong Buy

  • Reply to

    Functional RESET Theory

    by fireballmoney Dec 11, 2014 1:49 PM
    ddbikessamsara ddbikessamsara Dec 11, 2014 2:32 PM Flag

    I agree, The oil cycle has repeated itself many times and there is no reason to expect anything different this time. I'll bet the Saudis cut production in the near future - there is only so much pain they will be willing to endure. We may not see $100 oil for a while but this move down has been so dramatic and swift it has been overdone IMO. Strong hedges will offset a large part of the price decline for LNCO and when the price of oil stabilizes and recovers it's back to normal. Oil will be king for at least another decade, probably much longer since there simply are not enough renewables to even make a small dent in global energy requirements.

    Sentiment: Strong Buy

  • Reply to

    PSEC may not stay low for too long

    by thewisejman Dec 9, 2014 2:25 PM
    ddbikessamsara ddbikessamsara Dec 9, 2014 3:36 PM Flag

    I sold my PSEC this morning at a loss since I no longer trust the management. I immediately reinvested those funds into FSC. Same monthly payout BUT with my loss on PSEC I will be able to offset $3000 per year capital loss carryforward against the FSC dividend. Tax savings on that offset levers up my FSC yield to around 13%. If PSEC stays in this price range I may buy it back after the 30-day wash rule but for now I am out and regard FSC as an equivalent investment for the most part but with a better yield with the tax loss from PSEC offsetting it.

    Sentiment: Sell

  • Reply to

    Better Than Expected Earning Coming!

    by hotracer2012 Oct 29, 2014 6:15 AM
    ddbikessamsara ddbikessamsara Oct 31, 2014 12:22 PM Flag

    Nice call. Hopefully it will do a repeat of last year where the same thing happened - a "hiccup" quarter where it nosedived for a while then it turned around and ran back over $15

    Sentiment: Buy

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