Carl is going to control the producer and the biggest LNG processing plant in the U.S.
I'm sure CHK will be shipping 75-90% of the gas through the Cheniere plant to the ships.
Wonder why Carl does not spend another $1 billion
of his $25 billion net worth to acquire another 25% of CHK at the current market cap of $4 billion.
Actually I think the U.S. and Canadian oil and gas companies over produced energy and kept drilling more and more without thinking about the other producers like Russia and Saudi Arabia. We need Congress to pass a law that U.S. companies should produce all they can and the price is set by the U.S. government. They will never do that because they think we have free markets, called capitalism. Saudi Arabia sets the price of Energy and they are out to destroy their competition and keep their market so they are setting the price at $40 a barrel.
It is not about Obama it is Congress that has never developed a national energy policy based upon what is best for the U.S. Why do you think we are producing Ethanol to add to our gasoline? Because many senators from farm states in the midwest grow corn.
Lousy legislation actually comes out and is passed by Congress and many of the members are own farms and collect subsidies.
I read an article this month in Fortune magazine. The author ran the first and largest fund to move into Russia. He has a book coming out at the end of the year about operating in Russia and Russia companies. Basically in the article he said do not invest in Russian companies as the government and the companies are run by thieves.
My concern is that 3 of the 5 ships, 60% of the fleet is leased to Gazprom, a Russian company. In addition it looks like the next ship from the ship yards is going to Gazprom, that would be 4 of 6 ships with one company. A company with constantly declining metrics and a lack of financing and technology due to being based inside Russia which is in a ideological war with Washington and Europe over the Ukraine war.
I do not understand why this company does not believe in diversification and does not heed the advice provided in the Fortune magazine article that basically says do not invest in Russian companies, you will only be hurt.
Seems to me investing here is risky and there are other LNG shipping options that are not in bed with one Russian company but have most of their contracts with European companies.
One more thing:
KMI 2014 2013
Cap Ex. $3.6B $3.4B
Dividends $3.8B $3.3B
Cash Flow $4.5B $4.1B
The same story exists for 2015. For the three years KMI has about $7 billion going out for distributions and capital expenditures. The cash flow: Net Income and Depreciation added back is about $4 billion per year. In my opinion when you spend $7 billion each year on projects and dividends to investors and the cash coming in from operations (cash flow) is $4 billion, you have a $3 billion short fall that has to come from somewhere. That somewhere is adding more debt and more shares each year. This is the exact opposite of Berkshire Hathaway and Warren Buffet that acquires one or two new companies every year for $10-20-30 billion all for cash..
company name, share price high 2015 and present price:
Chesapeake Energy, $27, $7
Encana, $23, $6
Sandridge Energy, $5, 50 cents
Penn West Petroleum, $8, $1
Oasis Petroleum, $10, 50 cents
Whiting Petroleum, $93, $17
Swift Energy, $12, $1
Denbury Resources, $17, $3
The largest of the group is the number two natural gas
producer in the country and look at their last quarterly
cash flow and income statement on Yahoo.
Their cost of production, marketing and transportation
(KMI, etc.) is $2.00 per mcf and they realized less than
that on all natural gas sales. Forget the daily spot price
or the futures, they received less than that. Gluts are
I am not talking about multinational E&Ps that also own
retail gas stations and refining and chemical plants and
do you really see the E&P companies that KMI serves as making any money during 2015 or 2016? Companies that are barely profitable at $50 oil and $3 gas are not the best companies to do business with. Prices are closing in 10-20% lower than the last quarterly reports and KMI will be effected. Do you not think this is going to impact future projects. Oil and gas can go lower if weather stays mild and summer ends in a month and the world surplus of energy stays at around 3 million barrels. Iran needs cash to rebuild its country and it can only sell one thing: energy. So the U.S. producers drop production and Iran replaces it, good recipe for an over supplied industry.
I will go out on a limb here and say that all the coal companies in the U.S. go into bankruptcy in 2016, reduce debt and other liabilities and come back able to offer even lower coal production prices and this will impact energy pricing. No matter what Obama says the coal industry is still producing as much energy in the U.S. as the oil or the gas producers and that will be the situation for another generation or two. They are not going away and they will have the cheapest costs after reorganizing in bankruptcy court.
You have further hit the nail on the head. Take a look at the debt of companies like Shell or Exxon or Chevron or the pharmaceuticals (which have the ability to charge $100k for a drug for one person or increase prices on a pill by 10%-100%).
KMI keeps taking on debt to grow. The greatest wealth builder in the U.S. or the world for that matter is what Warren Buffet has done for a company named Berkshire Hathaway. He just purchased a company for $30 billion dollars +. Did he issue more stock to do it? Did he take on more debt to do it?
KMI issues more debt, issues more shares. As I said China is a house of cards: the most polluted place on earth, I was amazed last year that I could never see the color of the sky anywhere and often could not see one block in front of me. I went from one end of the country to the other in 6 weeks.
Nothing goes up forever, but China has built its country from no infrastructure in 1975 to one the equal of the U.S. In fact their train stations, airports and roads are in better condition than ours because our infrastructure is crumbling at age 75-100.
China will eventually have a recession like the bad ones the U.S. has had. This will impact the world as I think we are beginning to see with China lowering the value of its currency for the first time in a decade and its stock market is in the process of crashing even though the government is trying to prop it up.
The value of KMI compared to its cash flow and trying to support the dividend and growing the company using a formula that is 100% opposite from the Warren Buffet approach is problematic especially during a decade that will see higher interest rates and lower energy prices. E&P producers will demand lower prices on new contracts and there will be give and take. What does that mean?
Click on the link.
Go to the last 4 quarters and look at the cash flow from operations.
Then look at the capex for each quarter. These are two very interesting lines/amounts.
They are spending a great deal of money every 90 days and the dividends
are not covered by cash flow after the capex spend.
I think the combined enterprise is pricey and as commodities weaken
these shares will continue to be impacted. Remember China is in
trouble that is why their stock market has been crashing and same
with their currency. Look at the amount of debt they are taking on to
fund loans on construction of cities and infrastructure.
China is the engine of world energy and commodities and their growth
numbers have the same integrity as in other areas such as patent
protection, copyright protection, respect for laws, etc.
One of my close friends has a daughter that has been in Beijing with
a major U.S. law firm for the last 7 years and she says China has a
real problem enforcing laws as bribery and corruption is everywhere.
The world stock markets have been inflated by the U.S. and other
central banks keeping interest rates low in recent years. The direction
of interest rates is going to go up. China is financing its economy with
debt, sound familiar, but more so than any other country.
What happens to Kinder Morgan and its billions in debt.
It looks expensive to me and carries more debt than many of the companies
I look at that have market cap of $100-200-300 billion and up. I am talking double or
triple the debt. Of course this excludes the tech giants that have very low debt.
I would suggest that Apple, Face Book and others in the tech, pharmaceutical area
prices of drugs and generics are inflating at crazy numbers, nursing homes and
assisted living operators offer less risk and better return than Kinder will over the
next 12-24 months. I see the shares dropping. Better choices out there.
The fund industry (mutual, ETFs, etc.) have income funds as their offerings and these buy only bonds and preferred issues. When a company is in trouble its bonds and notes sell at a large discount as these institutions have to unload unless their governing prospectus permits the purchase of distressed securities.
This company would not have fixed rate securities trading in the $95-100 range if it was in financial trouble as the money managers and investment boards that govern these funds will have to dump securities that are at risk.
I hold CHK at much higher prices.
Today Richard Zeits in his article pointed out that CHK started the year with $4 billion in cash.
Most of that came from the sale of 7% of land/production last year. The cash position has
dropped in half after two quarters.
As Zeits pointed out CHK received around $1 for its natural gas this year and cost to
produce, process and transport is $2.
CHK has indicated that the quarter ending in 45 days will be more of the same. So
we should expect cash to drop another billion. I suspect that the final 90 days in the year
will exhaust another billion of the cash.
So CHK which sold basically 7% of its wells/production/land last year and received $5 billion
has nothing to show for that.
I suspect China's contraction or lack of growth is going to depress their economy further
as the debt the government keeps taking on to spur growth in the past is tapering. This is not
going to be good for commodities in 2016 as the overproduction of energy in 2015 was not good
I suspect that CHK is going to sell more assets as they are running out of cash and the $12 billion in debt has not been reduced significantly. Not during $100 per barrel energy and it becomes harder now with every energy company in North America looking to unload assets at $40 oil and $2.75 gas.
Yes there are going to be exports in 2016 that did not exist in 2015 but the ramp up is going to be slow.
I see another bad year in 2016 if someone does not buy CHK. The question will be what does a company with a stock price of $5-6-7 bring in the market place. Any rich person can buy 20% of the company at current prices, buying 5 million shares a day for the rest of the year in shell companies and continue buying in 2016 as long as prices are depressed. Before you know it they own 1/3 of the company for $2 billion and no one can stop them.
I have never heard of a company that declines 95% of its value in less than a year surviving.
The stock market says there is still equity but let's be real, shares are closing in on dimes.
Linn management bought Berry oil at the top of the market, so they overpaid, then they had to negotiate a higher buy price and in addition they assumed billions in Berry debt. That acquisition hurt the company. The goal of the management was to grow and grow no matter what they paid for the growth. Then the Saudi's decided to destroy the companies flooding the market with additional production and the U.S. government continues to protect Saudi Arabia with its military and arms and the American taxpayer pays the cost of doing that through the defense budget.
Your the joke. CHKs revenues from liquids are priced to oil even though they are natural gas wells.
CHK share price reflects the great prices they are getting from the natural gas they are selling. The price of natural gas is selling for half the price of 1-2-3 years ago. Now Wallpack is telling us that most producers are not able to compete against CHK. Tell that to EOG, Devon, Southwest, etc.
CHK is getting killed because the prior CEO and Board took on too much debt and entered contracts during the high in energy prices.
CHK will get out of this when they sell acreage or taken over, not because natural gas prices rise 10% as Wallpack presumes will happen during the next six months. That does not stop the bleeding that is taking place at $1 billion each quarter.
Natural gas and oil prices are low. It does not look like that is going to change much in the next 6 months because the world is producing about 2.5 million barrels of oil a day that is surplus.
Second, CHK has long term contracts with pipeline companies and they pay fixed prices that were negotiated at $100 oil and $4.50 natural gas. CHK is earning half as much in price of energy but the fixed price contracts on moving the production are killing them. The pipelines also pay out most of their earnings to investors and they are not going to take a 25-50% cut in contract rates which is what CHK needs during these low prices.
Most of the producers that have spoken out on prices do not see much of a change in prices during the next 6-12 months and most are predicting low prices for years. Even if they are wrong, CHK looks like it is going to take a beating for another year. Yes, they can do a joint venture but that is not going to change the price of energy of the price of the mid-stream contracts.
I think the only hope is a buy-out or selling part of the company for cash to pay off half of the debt and wipe out half of their interest expense.
How do you figure that. World energy production is between 2-3 million barrels a day exceeding demand at this time. Most producers are not making money at these prices if they do not also have downstream and midstream operations. Shell and others have refineries and other operations such as chemicals that are making them most of the money. CHK and others like Brazil and Russia are hurting big time.
The dividends paid over the last three years exceeds the cash flow from
operations. This is not good for shareholders if you want to see any growth
in the equity.
Who is making out best here? Management.
Management already said they were going to do joint ventures. Since these are being negotiated the Board and Management are not permitted to trade when they have inside information. Certainly the insiders have money to buy shares and would look at $7-8 as a good price. Then I ask myself why management did not buy any shares to retire which would benefit all shareholders. There was a corporate Board authorization which was released to the press more than six months ago so they certainly could have purchased shares everyday for the last three months. Is this an opportunity they squandered?
so, the only winners in this company are management as they receive salaries and options while the shell game continues, what happens with the next impairment charge? another drop of $1-2 dollars? what good is the distribution?
land based oil and gas drilling is cheaper than drilling in the oceans by a factor of 10-100 times.
With land production increasing and more supply and increasing lowering of production costs
there is going to be continued pressure on deep sea rigs and prices. As the driller continue
to store rigs and pay for servicing them and they continue to scrap old rigs the story is not going
to be any better in 2016. I see the ocean drilling companies going lower still for the next year or
Why has no management been able to get the company share price up to its
book value. The discount to book value implies a discount in the share price.
What percentage of companies in the world sell below book value? My guess
is that 99% of all equities sell for the value of the book value on the balance
sheet or above book value. In fact most of the equities I own sell for 2x book
value or more.
If this was a bargain fund managers would gobble this us and so would investors,
which would drive up the price of the shares compared to book value.