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  1. Today
  2. Some new news from EXCO Resources. 2 new additions to the board. Sale coming? Or is EXCO looking to perhaps be a buyer? EXCO is largely a natural gas producer. If nat gas prices spike further this fall (as Russia puts the screws to Europe) nat gas producers will continue to make windfall profits. Could be a great time for Fairfax to unload an asset like EXCO (i think Fairfax owns 44%). ————- August 10, 2022 DALLAS, TEXAS – EXCO Resources, Inc. (“EXCO” or the “Company”) announced that the Board of Directors has increased in size to seven members. Paul Aronzon and Harold L. Hickey have been appointed to the Company’s Board of Directors. Mr. Aronzon has over 40 years of experience, as lead advisor, in mergers and corporate reorganizations, including extensive experience advising companies, boards and board committees, independent directors, sponsors, debtors, creditors, parties acquiring debt, assets or companies and other parties in corporate transactions. From 2008 to 2019, Mr. Aronzon was the co-managing partner of the Los Angeles office of Milbank LLP, an international law firm, and co-leader of Milbank’s Global Financial Restructuring Group. Mr. Aronzon was also the Executive Vice President and Managing Director of Imperial Capital from 2006 to 2008. Mr. Aronzon has advised companies, boards, board committees, independent directors, sponsors, parties acquiring assets, debt or companies and others in transactions across a wide array of industries. Mr. Hickey is Chief Executive Officer and President of the Company and has more than 40 years of experience in the oil and gas industry. Mr. Hickey has been the Chief Executive Officer and President of the Company since 2015. Since he joined the Company in 2001, Mr. Hickey has served in various senior management roles, including President of North Coast Energy, and Chief Operating Officer, President and Chief Executive Officer of EXCO. Before joining the Company, Mr. Hickey worked at Mobil Oil Corporation, in various technical, commercial and managerial roles from 1979 to 2000. Mr. Hickey has extensive knowledge of the Company and the oil and gas industry as well as significant operations, engineering, and executive leadership experience, including senior management roles in multiple acquisitions and divestitures and complex energy joint ventures. About EXCO Resources, Inc. EXCO Resources, Inc. is an oil and natural gas exploration, exploitation, acquisition, development and production company headquartered in Dallas, Texas with principal operations in Texas, North Louisiana and the Appalachia region. EXCO’s headquarters are located at 12377 Merit Drive, Suite 1700, Dallas, TX 75251. - http://www.excoresources.com/exco-resources-inc-announces-appointment-of-paul-aronzon-and-harold-l-hickey-to-board-of-directors/
  3. A bit of GOOGL and a tad of CPNG over the week to reduce basis. Some MSGE, thanks to posters with knowledge in msg threads for extensive discussion
  4. Has gotten too political? The "S" in ESG stands for social, it has always been entirely political.
  5. Got JOE put on me. In at 50 (-the put premium).
  6. Bought some XLE. Keeping it simple LOL
  7. I'm confused by this statement. In 2021, the US consumed 18.7 million boe/day. Latest data has US oil production at 12.2 million boe/day. Am I missing something? I believe it is much worse if you look at "green" energy. Solar panels, lithium, cobalt, copper, rare earth magnets. All are extremely reliant on non-US mining and production. For example, just doing a quick search it looks like roughly 70% of worldwide solar panel construction is in China and about 3% in the US. I think the considerations as to whether and to what extent the US should have an SPR go beyond whether the US is energy self-sufficient, but I don't understand where the premise that the US is "energy self sufficient" comes from.
  8. Why didn't OXY buyback the public warrants, or equities faster so as to prevent the coming dilution from all the warrants (public+berkshire)? Is it likely the stock will go in circles around 60 as mr market gets moody about the risk of recession versus the risk of inflation?
  9. To further expound, BRK will probably be a ready buyer of ATCO for $10+ billion in a few years.
  10. Not sure if this interview July 25 with Digit CEO has been posted. Good update. There is so much going on with Fairfax today it is easy to forget about Digit. This company is shaping up to be a real game changer for Fairfax shareholders. - https://www.moneycontrol.com/news/business/startup/will-assess-timing-of-ipo-based-on-market-conditions-digit-insurance-chairman-kamesh-goyal-8881791.html ——- In FY22, Kamesh Goyal’s startup Go Digit General Insurance became the fastest general insurer to cross Rs 5,000 crore in annual gross written premiums. The next pit stop for the company, backed by Canadian billionaire investor Prem Watsa’s Fairfax Holdings, is to go public soon after the company completes five years in business this October. Per Insurance Regulatory and Development Authority of India (IRDAI) norms, promoters cannot sell a stake before five years. However, the insurance industry veteran has larger plans to build an insurance conglomerate. Digit has applied to the IRDAI seeking licences to set up a life insurance and a reinsurance entity. Valued at $3.5 billion, the company raised a total of $284 million in 2021. Besides Fairfax Holdings, the company counts Sequoia Capital India, A91 Partners, Faering Capital, TVS Capital and cricketer Virat Kohli as its investors. In an interview with Moneycontrol, Goyal said that the company will assess the timing of its IPO at the end of the five-year tenure, based on market conditions. Meanwhile, he believes that the tough macro environment owing to rising interest rates and inflation will slow down the pace of growth for the general insurance industry. Goyal worked in both life and general insurance before founding Digit in 2017 and has 32 years of experience in the space. Digit is an insurance manufacturer and provides motor, health, travel, fire and other small-ticket insurance. The company has an overall market share of 2.4 percent and a share of 4.7 percent in the motor insurance space.
  11. Seems to be working so far. Selling into this oil spike was the right decision, imo. The US is energy self sufficient and does not need a strategic crude reserve currently. This was not the case when the strategic crude reserve was started in 1975.
  12. Dexterra reported Q2 results. Top line is growing nicely; profitability was off due to modular issues (expected) and inflation. Based on how the stock traded, results likely hit expectations. When Dexterra did the reverse takeover of Horizon North right before covid hit the management team set an annual goal of $1 billion in revenue and $100 million in EBITDA. Beginning in Q3 Dexterra could hit $250 million in revenue (for sure they will be there in Q4). And my guess is they could be close to $25 million in EBITDA in Q4. Dexterra also expects EBITDA conversion of 50% to free cash flow. Modular has been a big disappointment but should return to profitability in Q3. And inflation pressures have hit the business hard but cost increases are coming so this headwind should slow some. My guess is inflation will remain a headwind. Bottom line, despite experiencing their fair share of adversity Dexterra looks to be on track once again to growing both its top and bottom line. And as a Fairfax shareholder i am happy they will be funding their growth internally with free cash flow. - https://dexterra.com/wp-content/uploads/2022/08/Q2-2022-Analyst-Presentation-Final-Aug10-2022.pdf
  13. Fairfax are paying around 126 mil priority dividend on co-investors investment of 1584 mil = 8% dividend (vs interest on notes of 5.63% - so saving here) But then the question is what will the buyout price be?
  14. Yesterday
  15. here are some random first impression thoughts: 1.) Allied World is looking like a pretty good business: as a Fairfax shareholder, yes, it would be great to own more/all. 2.) how much is Fairfax paying for how much of Allied World? 3.) what are savings each year for Fairfax buying back Allied World? Minority shareholders were getting paid a pretty decent sum every year i think. 4.) US$750 million is not a small number. Does this push Fairfax total debt too high? 5.) Why not use proceeds from pet insurance sale to do this? Perhaps this is still being done (and both Allied minority shareholders will be bought out). 6.) Fairfax has a lot of large transactions on the go right now: - pet insurance sale ($1.4 billion) - Atlas take private (no new cash from Fairfax) - Resolute sale (will close in 1H 2023; proceeds US $600 million + $180 duty lottery ticket) - Stelco dutch auction (will Fairfax tender any shares?) - Recipe take private (@ C$475 million to take out minority shareholders) - today: buy back chunk of Allied World
  16. It just hit me what the next few chess plays might look like once Sokol is drawn even deeper into the FFH sphere after the Atco deal. First, Sokol gets a board seat at Fairfax, and it comes with some kind of rich, share-based, incentive to be more involved with operations and deal-making than just being a board member (but, it won't come with a formal operational title). Second, within 5 years we'll start seeing some sweetheart deals involving both BRK and FFH, because at that point Greg Abel will be rewarding his old buddy D. Sokol for sourcing the much-needed ideas.
  17. https://ca.finance.yahoo.com/news/fairfax-announces-pricing-senior-notes-220600581.html The offering will be used to repurchase a portion of the 21% of Allied which OMERS owns and the remainder is for general corporate purposes. We are also getting a pretty decent rate (5.625) for notes going out to 2032. —- correction: Fairfax owns 70.9% so it was to repurchase the remaining 29.1%
  18. Article from today on SPR. The last sentence in the article is priceless: “The withdrawals have pushed SPR's supply down to 464.6 million barrels, the lowest level since 1985. Turk said the department will use money from current sales to buy oil back at lower prices.” Turk is Deputy U.S. Energy Secretary. He needs to open a hedge fund… - https://finance.yahoo.com/news/nine-companies-oil-u-strategic-183803786.html
  19. Interesting… chug, chug, chug… https://www.trg.com/who-we-are/#who-we-are OUR LEADERSHIP TEAM RiverStone is a highly experienced group of professionals from various disciplines. The RiverStone Group is a group of insurance, reinsurance, and service companies specializing in the management of legacy and run-off insurance businesses and portfolios. As an industry leader in claims resolution, reinsurance recovery, and dispute resolution, we employ over 350 professionals, operating across multiple offices and affiliates spread throughout the US. RiverStone comprises a highly experienced group of international professionals from various disciplines, including finance, actuarial, litigation, claims handling, technology, and HR. Our team has worked on numerous high-profile, global run-off transactions, and our executives typically have more than 25 years of industry experience and on average have been with the company for over 15 years.
  20. https://www.insurancejournal.com/news/east/2022/08/11/679611.htm
  21. In my post i forgot to mention that the SPR release is set to end in October. So that will remove about 1 million barrels/day from global oil supplies. Where will the new supply come from? Not OPEC - as i discussed above they have no spare capacity. And despite what the White House says (see below) i am doubtful that US producers will be bringing that much new supply on to the market that fast (oil CEO’s on Q2 calls did not offer up and new barrels of supply to offset barrels lost when SPR releases stop). ————— Regarding the SPR, the next really good question is what is the plan to replace the massive draw down that has been happening over the past year? And any oil taken out is to be replaced (in case it is needed to be used for a real emergency like a war). The current use hardly qualifies as an emergency. Regardless, replacing the oil that was removed from the SPR will simply add to global demand in the coming years. And make the current supply/demand imbalance worse = higher prices. ————— The record-high release of crude oil from the U.S. Strategic Petroleum Reserve will end as scheduled this fall, the White House's Special Presidential Coordinator for International Energy Affairs Amos Hochstein told Yahoo Finance. "We can't be an oil supplier. It's a reserve and so we have to keep that," Hochstein said, adding that he did not expect this to lead to price spikes because the oil industry was already preparing to increase production once the SPR release ended. "There's a little bit of hysteria at the moment in the analysis of oil markets," Hochstein said, adding that he had had conversations with oil companies and had their word they would increase production to replace the oil that is currently coming out of the SPR. The plan, announced in April, saw a total of 180 million barrelsof crude being released from the Strategic Petroleum Reserve to counter the inexorable increase in oil prices amid a tight market, at a rate of some 1 million bpd. - https://ca.finance.yahoo.com/news/u-spr-releases-set-end-133000190.html
  22. This is only valid if you are valuing company holdings in the same fields. You need to adjust for different volumes, gas/water cuts, and egress capacity. Great production and infrastructure is worth squat if you cannot get it to market. SD
  23. I have not read the article, but according to professor Pettis, GDP slowing considerably would not be a bad sign but exactly the opposite, a very positive development for China.
  24. I think your view makes sense and explains the spread that has developed. It’s not surprising there is more supply than demand given the competition for capital. The risk adjusted return still seems worthwhile though depending on the odds of the various outcomes. Risk arb spreads in general are quite wide and there are more deals than capital available to invest in the strategy. Clearly not for everyone.
  25. Speculation is OPEC currently has minimal spare capacity. Why do investors in oil care about OPEC spare capacity? The purpose of spare capacity is act as a shock absorber for the price of oil. Oil production is very volatile. It is quite common for 1 million barrels of production to get taken off line for periods of time. Spare capacity allows OPEC to fill in where needed. Why does OPEC want smooth pricing? Smooth pricing results in a more stable environment. OPEC nations need to create and manage national budgets - health, education, military etc - and a stable oil price is very helpful. A stable price also makes investment decisions easier for producers (wickedly volatile oil prices up to $120 and then down to $90 does not encourage investment). Extreme price volatility = less investment. ————— I read OPEC historically targeted to have 5% of spare capacity. Global demand today is about 100 million barrels per day. So this suggests a target of 5 million barrels of spare capacity in a normal oil market. It sounds like only 2 OPEC producers have any spare capacity today: Saudi Arabia and UAE. And it is around 1.5 million barrels per day. So low that it WILL NOT BE TAPPED unless a true emergency arises. Why so low? Just like oil majors, OPEC members have been underinvesting in new oil production for the past 7 years. Bottom line, there are no longer any shock absorbers for the price of oil. People better pray there are no major shocks to demand…. (We have our own Game of Thrones playing out in Europe and winter is coming…). ————— So what did we learn today? Shell just shuttered 400,000 barrels/day of capacity in Gulf of Mexico (pipeline leak). A couple of days ago, Russia turned off a pipeline running through southern Europe (it has since been turned back on). It is also hurricane season - which usually results in some Gulf of Mexico production getting shuttered short term depending on the paths taken. We also know OPEC currently has minimal spare capacity. As a result, any material reductions in the supply of oil will likely quickly push prices higher. The oil market is very tight. And will likely remain tight for years. ————— Shell says oil output halted at three Gulf of Mexico platforms on pipeline outage - https://www.theglobeandmail.com/business/industry-news/energy-and-resources/article-shell-says-oil-output-halted-at-three-gulf-of-mexico-platforms-on/ Oil major Shell said it had halted production at three of its U.S. Gulf of Mexico deep-water platforms after pipelines connecting the three were shut. Shell, the leading operator in the U.S. Gulf of Mexico, said Mars, Ursa, and Olympus platforms have been shut-in. The three are designed to produce up to 410,000 barrels of oil per day combined, according to data on the company’s website. The platforms deliver Mars sour crude, a grade prized by oil refiners in the United States and Asia. Shell said it was evaluating alternative ways to move the oil to shore.
  26. Maybe we re talking different things. I interpreted your question as asking the rationale for selling. I don’t own it and have little interest but the rationale seems pretty simple. There’s better opportunities for the cash than sitting around for a couple quarters to make a few percent, especially with those uncertainties which whether likely to occur or not are things folks would consider. If the spread was 15%? Sure I’d kick the tires. But not single digits.
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