Does the PV 10 analysis use NYMEX nat gas prices or the actual prices that CHKR sells its gas at? As everyone should know by now, CHKR doesn't get anything close to the NYMEX price and in fact disclosed that their differentials will grow over time.
Actually the tax can be at ordinary tax rates since this isn't a qualified dividend. Your K-1 will show an amount in the interest box because part of the income on part of the wells is treated like a receipt of bond interest. There is depletion however which offsets part of that income.
The larger point is that the share price declines after the ex-date, so while your income statement shows the distribution (net of taxes), your capital account shows a decrease (from the pre-ex-date value), and you still have capital at risk. The better strategy is to book whatever profit you have from the divy run-up and exit the trade to re-load at the much lower level that surely will come in about 2-3 weeks.
Rogere, I think you are making a very similar mistake that overtakes many an investor. You make a mistake and then don't want to make a second mistake by taking action. The old adage is to cut your losses and let your winners run. In my opinion, investors have a tough time cutting losses because that action produces 2 more actions to take: 1) when to sell and 2) what to buy to replace the investment. Thus, there are 2 more chances to make a mistake (and be second-guessed), whereas sticking with the same loser stock is considered just one mistake. Investors also don't consider a "tax loss" as an asset that offsets taxable gains (if the loss is taken in a taxable account).
With these trusts, investors also let the illusory 20% yield confuse their strategy because they think they won't be able to find a replacement investment that yields as much, when in reality CHKR is not really yielding 20% when you consider that part of that so-called yield is coming out of your principal and won't be sustained after the subordinated period ends. The total return will probably be 0.. The fact is that the chance of recovering your cost basis is probably slim. At today's price, you have $12.50 plus the value of your tax loss. If you hold, you will probably only receive $12.50 paid out over several years.
There are no guarantees in investing, but I'm sure you can find plenty of companies that are increasing their dividends (as opposed to the cuts that CHKR will have). You may even pick a company that succeeds and increases in price. The chances of that have to be greater than the chance of CHKR recovering back to your cost basis.
rogere, it is difficult to try to explain the short-term technical movements in any stock. However, we have seen these types of movements in CHKR and they produce a pattern. If you pull up a longer term chart, you can clearly see the downward channel. CHKR rallies up to the downtrend line which approximates the 200 day moving average and then after the ex-date moves sharply down to the bottom of the channel.
I think some of the selloff in PER is because those who bought the bottom and rode that increase are now selling before the ex-date. They don't need to hold until the last minute if they bought in at the recent low of $11.75. They already earned more than the dividend. You will note that the increase in PER is stalling out right around the 50 dma. These technical levels are self-fulfilling in that many technical programs put their stop orders right there.
I believe the rally in CHKR will stall around the $12.77 level and then reverse sharply. The 50 dma at $10.97 will be the first support level, but if that breaks, and it could take a few tests, then the stock goes lower again.
Finally, Dan Moore usually writes an analysis of these trusts with a fair value estimate based on the recent results. Last quarter, despite his neutral view on the Sandridge trusts, they continued to fall through his range. The same could happen to CHKR.
rogere, you are correct that CHKR has not hedged their gas. Most who follow these trusts know the difference in that PER is mostly oil. Not sure if the numbers bear this out, but the perception has been that the price of oil has been more steady than the price of nat gas so that an oil trust like PER does not require as high a yield as CHKR or the other gas trusts. To your point, it may be that the gas trusts require a higher yield because of the declines in production they suffer and I was merely trying to point out that by comparing the overall MBOE numbers.
On the sale price issue, CHK remarked on their latest presentation (for the Company, not for CHKR) that their differentials will increase some 20-30 cents so this seems to be an overall issue for CHK.
For about the last year I have studied the charts of CHKR and the Sandridge trusts to try to detect the patterns leading up to the ex-dates. As I mentioned, I have had 3 quarters of successful put trades with CHKR. I have bought both in-the-money and out-of the money puts and have varied the transaction dates, sometimes buying a few days before the ex-date and sometime 1 day before. Sometimes I have had to average down on my puts and wait for the stock price to decline. Last quarter it took until mid Dec before CHKR really started to slide so that pattern could repeat itself again.
These trusts got very oversold at the end of the year, probably as a result of tax-loss selling and have had great bounces. I still believe that post ex-date, the selling will start again and trap longs. CHKR could rally a little further before it hits resistance. It's RSI is 67 (70 is oversold). Each time it has gone over RSI 70 in the past, a large selloff follows.
A couple of comments. Perhaps one thing to look at is the CHANGE from the previous quarter. PER's total MBOE went from 404 to 398 or a decline of about 1.5%, but CHKR's MBOE went from 849 to 809 or a decline of 5%. This is during the time that they are added wells, so one can imagine what is going to happen when they are done adding wells.
Second, CHKR disclosed at the very beginning of this trust that there would be a wide and growing difference between their sales price and the NYMX price. While they never disclosed all of the reasons for this difference, one can assume that it is due to the particularities of the supply and demand in the location where CHKR produces its gas. In other words, it's not just a matter of CHK doing a poor job -- it is what it is and they told you that upfront.
Finally, as to the hedges, they can work two ways -- producing a loss if they don't deliver enough gas to meet the amount that they hedged.
Happy Bday Sarge.
ARR has an RSI over 70 which you should know by now means that it has topped. The mREITS will fluctuate back and forth with the rise and fall in 10 year rates. If the 10 yr is in a range between 3% and 2.6%, then one could try to trade this range. Looks like ARR has topped twice near this $4.20 level and bottomed twice around $3.50.
I may have mentioned this before. AR is a oil and gas exploration firm with big holdings in the Marcellus. They went public last year. I bought some in early Jan when it was bouncing around the 50 dma after reading a good summary. They recently reported on their reserves. They just announced the filing of an S-1 to bring their midstream operation public. They will probably maintain a majority interest.
On a separate note, I came across another item on CNQ (Canadian Resources). The article said that they were poised to sextuple their cashflow in the next few years. They recently hiked their dividend by a large % and pay a little over 2%, but that kind of cashflow growth should provide big dividend growth. I'm waiting for the market to settle down before buying.
JK, it closed strong so that should be a good sign. Earlier it looked like it was fading from the open which would have been bad. I thought they already declared the divy with the earnings report. Check it, I think it was over $1.
From a fundamental standpoint, my concern was whether they could continue to add assets if the market turned south.
You did tell us that it would put up some great numbers along with a good divy. I didn't have the courage to buy it in this type of market. I don't think the correction is over so I would be careful if you get too big of a pop today.
Gambler, there's been a very large move in Treasuries and some mentioned that they might be nearing support (or resistance depending on whether you are looking a a price or yield chart). So the bounce in mREITs may have already occurred. The economy would have to slow for rates to break further below, but it has happened previously, so I won't rule it out. I think most people were expecting rates to go to 3.5% before they would begin to slow the economy, but no one was talking about the effect that QE has had on the emerging markets. This is not like the post financial crisis time when rates were at 5% and all mREITS had to do was load up on MBS with 8 times leverage and watch the Fed bid their prices up while at the same time reducing Fed funds rates to zero.
This is total nonsense. There is no shortage of nat gas. There are some constraints on delivery especially in parts of the country where they haven't built enough pipes, like in the northeast. But there was a Bloomberg story that a new pipe into NYC was just opened this year and nat gas prices dropped there by 40%. At any rate, CHKR doesn't get the NYMEX price for its nat gas as they disclosed in their prospectus. .
Except if the production doesn't come through from the previous pressure problems that they disclosed in August, it won't matter that the price of nat gas is up. Everyone is looking at the production. Just look at SDT. They got higher selling prices but lower volumes and the stock sold off almost 10% and they haven't even hit the ex-date yet. CHKR stock followed the declines in SDT and SDR last quarter with about a two week delay.
Tom Demark was just on CNBC. Demark is a market technician who created an indicator, the Demark indicator, that attempts to predict the direction of the market. I first heard about his indicators from different columns on minyanville. He warned that the market is very vulnerable in the next 3 days and could unravel very quickly. This would happen if there was a particular sequence -- i.e. the market went up today, down the next and a lower open after that (I hope I got that right).
The host mentioned that he has been incredibly accurate.
I am not selling all of my stocks because there's always the possibility that the required set-ups don't occur upon which his call is based upon. But I am going to buy some disaster puts and inverse ETFs just in case he is correct.
There will be the usual comments about a "broken clock being right twice a day" and there have been many TV commentators calling for a crash for the last 5 years who have been wrong. But bulls never call a market top when it comes. They just become quiet or talk about sectors that are less overvalued than others. When a crash occurs, like in 1987 or 2000, the reasons become all too obvious and the permabulls are never taken to task for why they didn't call it (they just start with new calls to buy since the market has then become cheap).
Huff, BDCL seems to have fallen out of its upward channel, like so many stocks. Today is Turnaround Tuesday so it is normal to expect a bounce in the market today, but some still think the market will go lower until we hit support further down. Good profits can be made on such bounces, but for a longer term play, at least from a novice technician's approach, I think BDCL would have to recapture its 50 dma and hold it to get back into the uptrend channel.
Gambler, the financials are getting hit as interest rates have declined instead of rising like everyone seemed to be planning for. Jeff Saut from Raymond James said that there will be some rally attempts that fade and the key will be whether the rallies can hold (he doesn't expect them to, but the Dow and the Transports have not yet had a Dow Theory sell signal).
The Japanese markets are playing havoc with the rest of the world. Their central bank has been printing even more than our Fed and yet they are still in deflation mode. Years ago, we discussed on some of these message boards whether the US would follow the Japanese experience. Each time that the Fed stopped one of its QE programs, the market sold off (in 2010, 2011 and 2012). Is there any reason to believe that it will be different this time? It may pay to be more of a trader in this type of market, selling rallies or writing covered calls on long-term holdings, at least until the trend improves and gets back in line with the steady uptrend. I don't know if that will happen or if the market will be in the process of topping out and rolling over.
There's a blog post on the Dow December low indicator which says that if the Dow declines in the first quarter below its previous December low, the market usually is down for the year. 29 out of 31 times. You can read the story on yahoo finance page. I believe this is the effect that I mentioned that Jeff Saut wrote about. It will be interesting to see if he mentions it in his next post.