Catch, I agree on missing Peter's comments, a bright guy who always had a provocative take on investing, which helped me think about things like Black Swans and the level of debt. I didn't agree with him all of the time, but appreciated his perspective. I never could get to his Rinehart and Rogoff influenced economic position. Not sure why he deserted us. Wonder what he would say about our current state.
If you look at a stock chart over a long enough period, the temporary setbacks aren't even noticeable. My ideal stock is one I will never sell. There was an article I saw yesterday, on Elliot Roosevelt and his CO2 EOR investment in the Permian, didn't know he was involved, but think it points out that the EOR business will be with us for a long time to come, good for DNR. OXY said in their last pres that the EOR business provides their best returns. Seems DNR is undervalued at $90 oil.
Don, I listened to that discussion, and thought, why do we even bother listening to them. The Schwab strategist mentioned that most of their clients are still waiting for a pullback, with lots of skepticism, that is what I have heard also from people. My rep there thinks I should hedge or do something to protect against another down draft, but he said the same thing three years ago at the beginning of '10. I still think people should just find companies that will probably grow their earnings over a long period of time, a la Buffet, and buy when things go on sale, which is hard to do for most people. I really think CNBC does a disservice to most investors, focusing on things that are not forecastable and usually irrelevant for the long term. They had one reporter still in Cyprus, who cares. The fear of inflation is a real one, but one of the guys this a m said that inflation is good for stocks. And we may not have a reaction to the whats happening today for several years. I just think there is too much fear being peddled, and it usually serves some purpose, the financial guys make us think we can't do it on our own, in fact, I think most people would be better off just relying on their on research and instincts. Same for the govt, we don't need to our leaders making all of our decisions. I am optimistic about the future. One of the commentators said it is more "intellectual" to be on the bear side, most "pundits" are there, but you listen to Buffet and his premise is that the US is a good place to do business and will continue to grow, doesn't take a bunch of graphs or statistics. I do believe that the energy revolution we are experiencing will look like a big deal when we look back on it a couple of decades from now. It's not a bubble, it's real, it could be a bubble but we're a ways off. I think that the bears will continue to be silenced, and then people will start buying into the blue sky arguments, and those pundits will be wrong also. So it goes.
ATLS touched $46 today, must be the KWK sale of Barnett assets. ARP up also. KWK got more than I thought they would for the Barnett from Japan buyer. Values the total Barnett at around $2 billion, they have around $2 billion debt, so you have $500 million of equity for Horn River, Canada coal seam assets, Sand Wash Basin acreage and Permian acreage, neither of which are developed. Not sure the Horn River is worth much for years, until LNG export. Seems they have avoided bankruptcy but don't think their is much upside. GMXR announced bankruptcy today. ATLS at $50 seems maybe fully valued this year. Another ARP acquisition would drive it up.
Don, talked to my father's cousin, farmer in MO, said they are increasingly using no till farming. Past year, the acreage yielded 180 bushels corn/acre, even at $6, that's seems a fairly healthy return. The no till approach saves erosion, water, energy.
If you assume the rest of the Barnett is worth the same as the part sold, might not be the case, that value cancels the $2 billion of debt. So the $500 million of equity is for the Horn River, Can coal seam, Permian and Sand Wash acreage. Not much value in Can gas at the moment, and the other two plays are just acreage at the moment, although Shell as a partner is probably a good thing. They have probably escaped bk, but doesn't seem there is much value beyond the current price. I thought $2 was the equity value number before, maybe $3 now. The only thing that would bail them, it seems, would be a spike in nat gas, not sure we won't see ~$4 for a few years.
CS initiated Williams WMB at $49 per share, that's probably the highest I've seen, looking beyond the NGL weakness. Also, their top e and p pick continues to be Birdog's favorite, Coastal, $34 target.
An article in Barron's, said that strategists forecast near $30 of S and P 500 earnings in the 4th quarter, 16.7x avg PE over past 15 years x $120, 2000 S and P index by year end, a 30% increase. And if interest rates stay in the current range, 2% for the 10 yr T note, 2000 on the S and P could be conservative. Seems it's going to take some significant negative shocks to change the market trajectory.
Just read the article, interesting. Also looked at OXY's recent pres. They have 2 million acres in CA and have 1.8 million net acres, almost 5mm gross acres in the Permian, largest in both cases. They say that 60% of their Permian prod is CO2, their most profitable production. Not sure how you play the Mont shale, but looks like OXY might as good an oil play. 60% of prod is US, seems they could separate the two cos, intl and US. They might have one of the best oil positions in the sector. Happy Easter.
Bison, not sure that the two correlate well, CA munis and the shale play. If you want CA oil, along with the best position in the Permian, buy OXY. Yield now is 3.3%. CS has a $110 target on the stock, $78 now. They are lowering spending, should be debt free in a couple of years. CS projects $9 eps next year, they mentioned 15% increase in dividend. Seems they could raise the div for several years if oil stays in the $90 range. I owned Venoco once for the Mont Shale, made a little on it, never took off, believe the CEO took it private. OXY looks like a good bet if you are bullish on oil. OXY is probably comparable to a DNR bet, except you have the yield. Also, OXY is a $60 billion co, wouldn't be out of the range for a major to buy.
Don, this is from the March dist release. Went back to mid 12 and prices were in the mid $80s. I think this is the case of Permian being discounted because of transportation capacity limits, same as what has been going on in the Bakken. The trusts are complicated because they deduct cap ex also, which is controlled by the operator. That's the neg in my mind, the operator could decide to no spend any capital on the properties, so you are at their mercy. As I said before, I couldn't find the capex for this year, seems it should be out by now. The differential to WTI shouldn't be too much as new pipe is built out.
This month's distribution increased from the previous month due to increased production of both oil and gas allocated to the Trust and reduced capital expenditures as the 2012 budget pays out. Production for the
Trust's allocated portion of the Waddell Ranch and the Texas Royalty Properties combined for oil and gas respectively was 25,862 bbls and 26,867 Mcf. The average price for oil was $78.43 per bbl and for gas was $3.15 per Mcf. This would primarily reflect production for the month of January for oil and the month of December for gas. The worldwide market conditions continue to affect the pricing for domestic production. It is difficult to predict what effect these conditions will have on future distributions.
Don, looks like PBT might be a good play based on the hz potential. The trusts are hard to analyze because it's dependent on what the operator does, and they are net profits interests, operators in this case COP and SLB. Didn't see what the cap ex is for '13. Prices for the most recent dist were in the $70 range for oil and $3 for gas, seems those have to go up. So if you have more drilling, and oil price increases with better transportation out of the basin, plus strength in gas, seems the distribution should go up. A negative is the PV 10 value is $350 million and the trust is valued at around $600 million, but that seems to be typical of trust values. Seems biggest risk is global oil price sinks, otherwise if WTI continues to move to Brent price, the $70s price they have been getting recently has to move up. Seems it could move up to the high teens, if it gets back to paying $1.20 annual, at 7%, $18.
Don, I haven't looked at it since you mentioned it last time. Seems that with the horizontal activity in the Permian, it should benefit. I'll look at it, one that I think might work is EVEP, with their Utica position, investors are disappointed that they didn't make a deal to sell some, seems the value is still there.
Mt Kellett owns 25 mm shares, saw where their avg cost is $8+, not sure that is accurate. TPG has the largest I believe and Cooperman has almost the same number of shares as MK, at least he did. Cooperman is one that I pay attention to, he has been in ATLS since the single digits. Also, saw that MK's largest holding is EXXI, SD is number 3. If they don't bail, the PE s will do what needs to be done to get their money back. I'm not sure why they need Ward. If they sold offshore, they would be at essentially no debt, with 1.85 mm acres to develop. Seems that with $2.3 billion in proved reserves in the Mid Cont with the stock reflecting a $2.4 value for the Mid Cont, there is no value for the potential, whether it is 2000 wells, 5000 wells or 11,000 wells. SD now is the kind of investment I like, where it seems the downside is limited, even if the upside is still murky, but that is maybe why it might work, and you have the short termers maybe selling now that the Ward challenge is over. Most won't stick around.
Looked again at SD's analyst pres. Enterprise value is around $4.6 billion now. If you back out offshore value of $1.4 billion and Permian still owned, guess it's roy trust interest, of $800 million, leaves a $2.4 billion value for the Miss Lime. The PV 10 value for it was $2.3 billion for '12. They had only drilled around 600 wells in the Miss at year end. They project 11,000 wells to be drilled over the 1.85 million acres, which may not be accurate. But the new type curve shows EURs of 369k boe, 45% liquids and around 50% ROR at $100 oil and $4.25 gas. That would mean $1.5 million NAV per well, or $16.5 billion of potential value, $28 per share over the current price. It will take years to drill up the acreage, but it seems at $5 stock price that the risk is limited on the downside, unless the type curves surprise again. That's the problem of trying to project thousands of well results from a couple of hundred. At the moment, not sure most investors are giving them much credit for the play, but that's understandable given Ward's behavior. Seems the private equity investors will be in it for a while to get their money back, and seems Ward be gone this summer. Continued strength in gas, if it stays in the $4 range should help. Seems gas will stay there for a few years, but at least it's not in the $2 range.
Bought some more SD in the $5.20s, seems to me that $5 should be a floor if oil holds up, and the nat gas strength could sneak up on investors, $4 is not a great number, but it's better than the $2.50 price used to value year end reserves a couple of months ago. SDs gas is half of the Miss play is gas. Might buy some ZAZA, seems that the best e and p s are undervalued at the moment assuming $90 oil and $4 gs.
Haven't looked at the details, but this deal with EOG seems should be a big deal for ZAZA. Partnering with EOG and having part of the acreage under partnership with Range, maybe the two best operators in the industry. HK is in the play also. Seems we should hear more about the play. Also, surprised ZAZA hasn't moved more.
ZaZa Energy Corp. (Nasdaq: ZAZA) has entered into a joint exploration and development agreement with EOG Resources Inc. (NYSE: EOG) to develop certain properties in the Eaglebine trend north of Houston, a regulatory filing shows.
The two Houston-based companies will develop up to about 100,000 gross acres, or about 73,000 net acres, in Walker, Grimes, Madison, Trinity and Montgomery counties, ZaZa said in a Monday filing with the U.S. Securities and Exchange Commission.
I need to look at both again, haven't done so in a while. Both good companies, as you said, it doesn't make sense with the strength in oil. Your sense of a good market this year was a correct one. Today, I think it could run for a while. Analysts recs usually don't correlate with long term fundamentals, which I guess sets up opportunities. Someone said we are going to get another cold front.
A slow learner maybe, but I bought some more SD at $5.50, as a trade. Seems the assets are worth more than that, the low was around $5 and it's in much better shape, and now that Ward is controlled, don't have to be concerned with his antics. Also saw that another dissident group bought more shares. Ward should disappear by the summer, if not sooner.
I don't think today is the beginning of a correction yet, is coming but doesn't feel like it now. Another time to buy the market based on noise in Europe. We will probably look back on the recent past and see that they were almost sure times to buy. The guy that used to be with ISI was on the tube this a m, said investors are not asking about govt policy effects anymore, rightly or not. Seems animal spirits could push the market higher, the convention that a reckoning is a ways off, years.