muscleman

Why not Google "oil and gas reserve estimation" and come to your own conclusions? Or try this Wikipedia page for a start: https://en.wikipedia.org/wiki/Oil_reserves Management teams can: 1- Hire only engineers that are extremely optimistic. 2- Pressure the engineers to deliver a high number. I don't think that they pay them off to inflate reserves. It's not bribery but the effect is the same. It's because reserve estimation is inherently uncertain. You might get a lot more or a lot less oil/gas than you initially expected. It's really hard (or impossible) to differentiate between honest mistakes and dishonest estimations. A side effect of this is that it is almost impossible to prove fraud. This means that there will be few repercussions for inflating reserves. If this is so difficult to do, why do we still see super investors buying E&P names? Do they have any special edge in it?

So even for super investors like Carl Icahn, he could not take a look at the detailed data room in CHK before he decides to attack McClendon?

Thank you! So the primary issue is how to get an accurate PV-10 value then?

There are some popular E&P stocks in our investment ideas section, but I am not sure what the best way it is to do valuation on these names? Do we just look at the PV-10, or the NAV?

If we only stick with cheap companies with strong balance sheet and strong buybacks, is it going to be worriesome? If the market collapse, these companies could buyback shares, and our intrinsic value per share will be much greater. Recently Buffet said the stock market is still pretty fairly valued. Maybe we have 1-2 more years before the next collapse?

If Prem is bearish on commodity prices only based on that parabolic price chart, I doubt if it is a good reason. If we change the chart to logarithmic scale, it doesn't look that parabolic, and I think long term commodity charts should be viewed in logarithmic scale instead of numeric scale. The reason is because, let's say inflation supports the price and the price increases 4% a year, then if we view a 100 year chart in numeric scale, it looks to be quite a parabolic move. But if we look at it in logarithmic scale, it is just a straight line.

Why Cheers? Shouldn't we be cautious when market is so high?

Baupost holds 35% of cash. I am wondering if we should do the same too? ::) http://www.valuewalk.com/2013/01/baupost-groups-seth-klarman-sees-50-shades-of-value-in-the-market/ It is just four months old. :) " prides himself on maintaining a handsome cash balance (33 percent on average)" Even if it is only one day old, it could still change, right? I am wondering what I could do right now. Undervalued stocks are harder to find. Perhaps I should just be patient and hold a lot of cash.

nat gas can support US for the next 100+ years. Why worry about oil?

Hasn't Cohen already settled with the regulator?

Baupost holds 35% of cash. I am wondering if we should do the same too? ::) http://www.valuewalk.com/2013/01/baupost-groups-seth-klarman-sees-50-shades-of-value-in-the-market/ It is just four months old. :) " prides himself on maintaining a handsome cash balance (33 percent on average)"

Baupost holds 35% of cash. I am wondering if we should do the same too? ::)

How likely is this to happen? It is not similar to the us housing bubble, in which lots of people bought homes with 2-3 year interest only loans. Also right now all central banks have the attitude of printing money out of the trouble, so I think a soft landing is more likely than a hard landing.

Looks like you are Prasad's babysitter. ;D

I think you are right. The gas companies took their rigs to drill oil wells, so the total land rig count is flat. In the longer term however, I think the trend is very bullish. When gas price goes up to $7 again, there will be lots of tight gas well drilled.

Any of his articles, writings, bio etc?

Well today Repsol came up at the top of my screen. Statistical investing does not work that well with megacaps (the markets are more efficient for them) so I will not probably buy it. But in the last few months I've bought and still hold Adveo, Prim and Duro Felguera, bought and sold Vueling for a nice short term profit and also some Portuguese stocks: Corticeira Amorim and Sonaecom. No Banco Santader?

Horizontal hydraulic frac for oil and gas industry just started getting hot only recently. This will unlock a ton of new reserves that were uneconomic to drill. It is hard to say when is the top of the cycle, but it is hard to believe that the cycle will end so soon. I will look more into this interesting question. I hope other people who have a better perspective into the industry could help me understand it.

Thank you for this idea. I sold my MBI position and got a 10% position in NOV this morning. I like the idea of selling pants and shovels to gold diggers instead of buying the gold diggers themselves.

How about the Chinese hybrids that trade at 0.1 PE? :)

These guys are not futures traders. Their incentive is to help the gas producers. By saying that the gas price will stay low, they can convince the government more easily to approve LNG export, which will benefit gas producers. Export or not, I think gas price will unlikely stay this low. There are only a few producers with all in cost around $4. Most producer's all in costs are around $6. A proof is that even the gas price has increased to over $4 now, the dig counts are still dropping.

Are you looking for shorting Chinese stocks? Or do you just wait for the crash and buy bargains? I think if China crashes, the US equity index might drop a bit too, and creates a chance to buy bargains in the US. However, I think the bubble in China could be different than the housing bubble in the US. The reason is because the borrowers are local governments, and Chinese central government likes to intervene a lot. For the us housing bubble, the government did not bailout individual borrowers who couldn't pay the debt, so they had to get foreclosed. The Chinese government will try everything possible to bailout the local governments, perhaps by printing as much as possible. In the end, there will be severe inflation for sure.

Ok. So Greece sounds like a better time to get in then?

Is SD your only exposure to natural gas?

What are the best ways to play this major trend? We can buy gas producers with the lowest cost, like XCO and UPL. We can also buy oil producers with a lot of gas in production, like SD. What other options do we have? Pipeline construction companies? Auto companies that will launch nat gas trucks? Thanks! WEB plays the oil boom via rail shipments. I recall reading many years ago that the people who got rich during the gold rush were those selling shovels....we need to find our "shovel" ;D cheers Zorro Either find shovels, or find existing undervalued gold mines. But never buy junior companies that has nothing except a promise to find gold mines. I think the pipeline companies could be interesting. Also LNG exporters.