Both KCG and HRG investments are fairly small...although both look wise. I am a long time LUK holder and have follwed LUK into its investments on numerouse occassions including JEF and Inmet. I have often found this strategy to be profitable.
HRG shares are up 30%+ from the $8.50/share price acquired. While I still see some value in HRG its up quite a bit from the acquisition and near all time highs...I've decided to hold off here, but will continue to follow.
KCG - this one fell off my radar after the rescue, I simply stopped following. After today's announcement I took a look and it appears to be a solid turnaround story in the early innings. I'm sure a bull market is providing tailwinds but the company is reducing costs and debt rapidly and is producing some solid cash flow. It is at all time highs, but trades below book value. Sold some puts and will continue to follow. Beleive LUK/JEF will be in this a while and may look to increase their investment.
Just curious doogle...what do you see as the catalyst to boost NG prices in 2nd half 2014?
Its hard to see this happening because even though dry gas rigs continue to fall - as rigs target oil and liquids a ton of NG comes with it so its just hard to see a large dent in supply. As far as demand, I don't see anything happening within the next 12 months to significantly change that. A cold winter would help, but won't be enough.
Agreed management did not do a good job of representing KKR - frankly management doesn't do a good job in general of showing confindence that they are in control and grasp the details of their deals and operations in general.
One other thing is the KKR really hinders a potential buyout of XCO by another E&P company like a DVN. It doesn't hinder a bid to take private, but I think an acquisition or merger is out of the question here unfort.
There is value in the Eagle Ford - I think folks are really undervaluing XCO's Eagle Ford purchase from CHK. I think the KKR deal has clouded the picture. The bottom line is we got a good asset which 1) has production, 2) adds to reserves, and 3) allows us to develop wells without spending lots of cash. Hopefully the Dec 10 call will help give the market some insight into the KKR deal.
I think there is value here and XCO has quite a bit of hedges in place - especially for their nat gas production.
Yes - and besides some transition pains I don't see whats so different from the picture at mid-summer. It may take some patience, but I think there is some value here.
Good counter argument - and some very good points. I just think at these prices there is a bigger margin of safety that help me get comfortable with the short comings here.
Good luck to you as well
Have been an investor in EXCO for some time now and sold a bunch of Jan and March Puts at $6 and $5.
This company has some great assets - the concern is 1) debt levels are extremely elevated due to CHK acquisitions (this is mitigated partialy by the TGGT sell and by current hedgin policy which covers almost all production; 2) management - Miller has consistently underdelivered (this cannot be mitigated - market and investors have a lack of confidence and he does nothing to disprove this on calls).
My comfort lies in the following: 1) Natural Gas Assets - Haynesville and Marcellus holdings are top notch assets and could become much more valuable IF nat gas prices rise. 2) KKR JV - my take is that KKR is smart and they are not going to screw up their portion of the investment so that means I trust in the land (Eagle Ford), trust in XCO's operating expertise, and trust in the 1st year production. I will admit the long term acquisition piece is a little more dicey BUT XCO seems committed to hedging and as long as XCO doesn't total screw up the decline curve these should be decent LT investments. 3) I like the investors: Ross; and Partners: KKR, Harbinger - these are individuals / entities I respect, have good track records, and maybe most importantly have deep pockets. In my mind they serve as a partical back stop for XCO is some form or fashion. 4) NO Equity Dillution (so far) - the only correct thing Miller said on the conf call was that they made a $1B acquisition without dilluting shareholders and thats true - granted leverage is up, BUT if this KKR venture works out it will add a lot of value to XCO shares.
One last observation - I don't want to hear Miller talk about any acquisitions going forward - that shouldn't even be on the radar. Lets get the Eagle Ford well under our belt and get the overall EBITDA increaing for sometime before we go there.
I have owned XCO in the past but sold most of it for a loss around $9. I am getting interested again and have dipped my toe in $6 Jan puts at $0.30. I like the CHK acquisition even though it does stretch the balance sheet a bit.
up 20% so far - $33MM in profit. I am sure there are sell restrictions, but overall looks like a decent collection of companies especially the XCO partnership and SPB. Both should appear able to create future value. Who knows on the insurance/financial assets? Interesting transaction and wouldn't be suprised if we hold this investment for a while as I think it fits with LUKs past strategy (which assume will be similar going forward).