petec

I have a simpler answer: Ensign! Mainly because I am a sucker for free cash yield, but I also like the inside ownership (>50% is in the hands of management and Fairfax) and economics well below the incentive price for new supply.

I think the fact they're paying dividends tells you they're not capital constrained - the people involved are too rational and long term to make any other decision, but I could be wrong. I agree they're super smart, but I do think they got caught with their pants down somewhat when rates rose and I wonder why they didn't fix more of their liabilities, especially given that their contracts are not inflation-linked which I have always thought was a huge weakness of their model/the industry. I see it as a kind of levered option, but I like your point that FFH overall benefits more if rates rise than fall - I hadn't really considered this aspect of their Atlas investment.

It's a while since I looked closely at Atlas, but I used to own it and followed it closely, and the sense I had was that they always optimised for IRR and meeting customer needs rather than type of ownership. So it may well be that they just got a good IRR from this deal. I was always slightly sceptical about this because IRR is only relevant if you can immediately redeploy the capital.

I also have this. I ran a Latam fund for a decade so have some comfort with the region, ant they explained the opportunity well in their 2023 investor day (might have been 2022 actually).

Important to note that the first two of these are not mutually exclusive. If they retain earnings to grow insurance, they can ALSO invest those retained earnings in stocks and bonds. What they can't do is buy back shares and still retain the capital to grow insurance.

That makes sense. But the video's argument is that future drilling needs to be more tightly regulated, with implications for costs. That's really what I am interested in.

Sure, but if seismicity is rising, the increase may (may) be directly attributable to man's activities.

The increase in water cut is not the issue. If that video is right, the issues are: Storage capacity (in porous rocks) is finite, and they're mostly full in that area. The increase in pressure is causing increased seismicity. In other words it is a stock problem, not a flow problem. If so, I would think the only long term solution is piping the water elsewhere. Good luck getting that permitted. It means literally exporting the environmental problem, and in huge volume - the Permian produces 4x as much water as oil, according to the video.

I don't think that works. First, if the water is able to spread due to the porosity of the rock or fractures, then drilling more wells won't help spread the water out. Second, any given rock has a finite (and calculable) capacity, and I believe the video mentions that Texas is close to max. I have no idea whether the video is true though. There may be simple counterarguments, as you say.

I found this video really interesting and (although I have no specific knowledge on the issue) it feels well-researched and coherent. What do people think? Is there a clear counterargument? If true it would seem only a matter of time before the RRC has to regulate more, and I would think this is Bad for Permian producers. Bad for land drillers & servicecos Good for pretty much all other oil producers and offshore drillers/service. Good for gas producers and US thermal coal (due to reduced associated gas). Thoughts? Thanks Pete

Have they actually said this?

Exactly this. It is Aercap without the rational OEM suppliers. If you want a simple sector comparison then it is a specialist investment bank. It captures the spread between the capital it can raise and the capital it can lease out. Being a great operator and having a good platform matters but really, as in investment and insurance, the only real differentiator in the long term is management. It is definitely not a utility, since these tend to be characterised by local monopolies and regulated returns.

Why does it increase durability? I would have thought it was a straight financial decision (between buybacks vs buying back minorities) based on price and expected returns.

I should know this, but is the $4bn number the current combined dividend capacity of the subs or is it your own estimate? And what's the $2.5bn cover? Allied, Brit, Odyssey? It's a pity we don't know enough about the terms of each of these deals to assess whether buying in the subs is better than buying back shares.

I'm never sure what to think of East 72. They seem to do deep work, but taking this report as an example The first idea, Belron, looks super risky to me. Margins have tripled in a few short years and leverage has ballooned against this profitability. This happened after PE got involved. I don't see any real argument for pricing power so there's a distinct possibility that the business can't bear the debt long term. The second idea, FIH and specifically BIAL, looks fairly valued vs. most comps on 10-12x 2026 ebitda, which may be a near term peak. The only argument for undervaluation on the data E72 have provided is that a private buyer might pay 24x ebitda. I own FIH but didn't find this report particularly well-argued. The third idea is more obviously cheap, but looks very like an ego project to me, with sub-par capital allocation. I'm just not convinced by their thinking.