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moustachio

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  1. Wow, only two choices in the poll. The best option is third party. How does a ticket with two former governors on it whom no one seems to hate sound? Well, compared to the two clown options in this poll it sounds great to me. The Libertarian party has two former Republicans on the ticket this year. I think they are objectively better choices than Hillary Clinton or Donald Trump. You know, Gary Johnson seems like a genuinely nice guy, which is a stark contrast to our current choices. Unfortunately, I don't think they will have the backing, infrastructure, or time to pull off a serious challenge to the major joke candidates everyone is going to vote for.
  2. You might want to take a look at what PGN looks like in 2016 and 2017... they have some very high priced contracts rolling off and their rigs are more likely to be scrapped than re-contracted over the investment horizon before this company goes BK I hear ya, it really does come down to what happens when these contracts expire and if the management team can find away to limit the haircuts to the rates. Speculative indeed! I did some more work on PGN, Company is a dog, definitely not a multibagger, I'm guessing they start tripping their covenants in 2Q 2016 Isn't the revolving credit facility the only debt with coverage and leverage requirements? Won't they be able to pay that off in full before 2016?
  3. Yeah, its only one data point now, but I expect we'll see further drops going forward. Some officials from the ND government (http://www.reuters.com/article/2015/01/12/north-dakota-oilprices-idUSL1N0UQ0P020150112 ) along with plenty of people from the industry have said that they expect production to remain steady or grow for some time even with low oil prices. It sounded like wishful thinking to me and I expect slight declines in production most of this year, but I didn't want to dare question the competence of government officials or O&G executives that want to pretend that their production isn't going to go down. Obviously there is only the potential for such rapid declines in production in tight oil plays, so I find the following link informative. It has rig counts for the tight oil plays and production numbers from those plays: http://www.artberman.com/oil-prices-dont-change-because-of-rig-count/ An interesting dynamic in the Bakken is the potential of wells being drilled, but not completed. I don't know how many companies are doing that, but a company I've followed a little is doing just that: http://thebakken.com/articles/1017/triangle-petroleum-unveils-2015-well-completion-schedule
  4. I was more wondering if they will be able to survive the year without an asset sale. They have over 5x D/CF with oil at 65$ according to a December press release: http://finance.yahoo.com/news/lightstream-announces-2015-capital-program-223521477.html With oil likely to be much lower for at least the first half of the year, they are looking at much lower cash flow flows and further declining production. I wonder if they'll be able to come up with any cash flow at all for drilling. "Lightstream Appears On Track To Nearly Wipe Out Its Shareholders" http://seekingalpha.com/article/2985546-lightstream-appears-on-track-to-nearly-wipe-out-its-shareholders
  5. Scott, could you tell us more about this job and how you got it? I've always been interested in the newsletter industry.
  6. I was more wondering if they will be able to survive the year without an asset sale. They have over 5x D/CF with oil at 65$ according to a December press release: http://finance.yahoo.com/news/lightstream-announces-2015-capital-program-223521477.html With oil likely to be much lower for at least the first half of the year, they are looking at much lower cash flow flows and further declining production. I wonder if they'll be able to come up with any cash flow at all for drilling.
  7. I thought about this for a while, and this is what I am thinking right now. Oil services are basically a bet on the overall health of the parts of the oil industry that they cater to, along with oil prices rising enough for there to be enough activity for service revenues. A bet on an O&G company is a bet on that specific company and oil prices rising enough for it to do well. In the current oil supply/demand situation, SA(Saudi Arabia, and their close allies in OPEC) had two choices: cut or don't cut. Cutting would just make high cost production sustainable, production would increase, and in 6-12 months they would be faced with the same problem of excess supply. They would have to continually cede market share, and in the end there would be a lot of extra wells drilled because of it. There would be a lot of shale wells with their initial decline already done, so there would be a lot of sustaining extra production. So instead, they decide to not cut. They say that high cost producers need to cut, that OPEC doesn't need to cut because they are low cost. Now who are the high cost producers? Basically deep sea, shale, and oil sands. Oil sands are big operations with tons of capital sunk in, and from my limited understanding probably won't go away. That leaves deep sea and shale, and it appears to me that both of those service stocks are providing services to those parts of the oil industry. The oil crash in 2008/2009 was cut relatively short because OPEC cut production, but this time is different. If SA wants to break the back of high cost producers, they may very well increase production to tighten the screws at some point. If you look at either of those companies, neither did very well in 2009 with a relatively short lived decline in oil prices. So, right now I think you are investing in industries that serve the very parts of the oil industry that OPEC is targeting. I assume MCR has significant exposure to shale, but that is somewhat of an assumption, correct me if I'm wrong. I've followed the MCR thread somewhat, but I haven't done deep research on it. MCR only seemed to start to perform well when the shale boom started picking up. Look at a chart, and I think services companies probably lagged O&G companies after oil prices started going up. This recovery might be even slower. A lot of shale companies are over-leveraged, and when oil prices stay below break-even, if they stop drilling production will drop rapidly due to high production declines. That leaves these companies with low oil prices, lowered production and lower credit lines due to readjusted credit facilities due to lower oil prices. Between bankruptcies, lower cash flow, and lower credit, there will probably be a lot less activity for a while. It could be a buyer's market for services for years, while it has been a seller's market with the boom. HOS is also very dependent on drilling activity. If you look at their investor presentation there are a number of slides on increased drilling, so it is pretty obvious much of their business is dependent on drilling activity. Look at the 10K from the 2009 end year and they had a rough year. If oil prices stay lower for longer, they will be in even worse shape with contracts potentially ended early and day rates plummeting. They are investing in more vessels at the same time as activity is going to drop a lot. Now don't get me wrong, I think both of those are healthy companies, they will survive, and they both show value at these prices, but not as much value as you seem to think. I just think that both will have a very rough year, and they probably won't bounce back super quickly. Look at 2009 charts and financials, and then imagine low oil prices for twice as long. IMO these won't be quick multibaggers, and they will probably have cheaper entry points some time this year(along with a lot of oil companies). A couple of quotes from HOS 10-K:
  8. The oil majors are barely down from their 52 week highs, but there are leveraged small caps that are now a fraction of their 52 week highs. WRES and LEG.TO are good examples of oil/gas stocks that are a fraction of their formerly high price and potentially offer high upside(along with risk). Even some stocks with no leverage have suffered some high losses. TAO.TO is an example of such a stock. It has no debt, relatively high netbacks, and a high cash position, yet trades for less than 1/2 it's 52 week high. There are plenty of other examples of oil companies that have declined a lot further, but are probably value traps IMO. LTS.TO might go bankrupt at some point in the not so distant future, and SD will probably survive in the short term, but has a business model that might make it a walking dead company if oil prices don't double from here. Both of those companies have a ton of multibagger potential, but you are highly speculating on a fairly quick return to much higher oil prices. Why are service firms so attractive? At lower oil prices a very large percentage of wells will be below break even. How much business will these service companies have when drilling activity drops by 50%, 75%? At a certain oil price buying them is as much of a bet on rising oil prices as buying oil companies With that said, if you could find a service firm whose sales are mostly for maintaining producing wells and not related to new drilling activity and that also trades at a substantial discount, then you would probably have a very nice investment. I don't know if such a thing exists and haven't looked for it. I think a substantial opportunity exists in oil and gas producers right now, but you have to pick the right ones. *this last paragraph added during editing before reading yadayada's next post, but after he posted.
  9. How is Lightstream looking to people now? 2015 is going to be rough...
  10. An interesting article on past oil down cycles: http://seekingalpha.com/article/2757505-how-long-does-a-typical-oil-downcycle-last I thought the chart on past declines was pretty interesting, partly because it basically mirrors what I figured oil prices will likely do before I saw the chart.
  11. A good article on break even costs for shale oil: http://www.bloomberg.com/news/2014-11-20/oil-at-75-means-patches-of-texas-shale-turn-unprofitable.html
  12. This is hilarious. NOBODY predicted the drop in oil prices a year ago. Yet today, we have charts in Bloomberg saying it's an absolute fact. What changed so much in the following to provoke a 40% drop in price? Vehicle fuel efficiency New generation moving to cities Wind and solar power generation Public transport usage Baby boomers retiring It seems to me people are putting up a bunch of shit together to explain the sudden collapse. The only facts are: Shale gas has increased supply China's slowdow has reduced demand I don't see how a player that consumes 10% of oil (falling to 9% maybe) and a producer going from 10% to 12% could mark a drop of 40%. It just does not add up. Its like investing. You predict future earnings and cash flows based on past performance, trends, and analysis. When shale oil supply increases are out gaining demand for oil, something has to give. The trend will continue until the price gets low enough to reverse it. So if we have an extra million barrels of oil being pumped everyday, and can assume supply will continue to increase, you end up with a lot of oil sitting around. Even at $70 oil US oil companies were guiding for increased production. So you have extra supply, forecast for more supply, the market will go down until things balance out. $60 oil seems super cheap, but even at that price a lot of US shale oil drillers will still make production gains. I don't think many companies will shut in production at that price, and even if they do they may run at a loss for a while before they make that kind of decision. It might go down to a silly low price because companies will just keep drilling and won't cap off wells until it does. On the demand side, other than companies buying to increase inventories and companies looking to increase reserves, both at discounted prices, how quickly does demand increase when prices go down? I would think there is a pretty long lag between lower prices and increased demand. I don't suddenly start driving more just because gas is cheaper. I honestly think prices would have been lower before, but ISIS made it look like Iraq's production could go away at any time for quite a while. Now ISIS doesn't look to be a crisis, and US shale production gains march on. IEA article worth reading: http://www.bloomberg.com/news/2014-12-12/crude-oil-extends-drop-below-60-as-iea-cuts-forecast.html A few quotes: On the other side China is boosting strategic reserves: http://www.bloomberg.com/news/2014-12-01/china-winning-in-opec-price-war-as-hoarding-accelerates.html That won't last forever and doesn't take off all the current over supply, so it isn't a justification right now for prices to not go lower.
  13. http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/wres-warren-resources/
  14. I just started a thread on WRES in the investment ideas forum: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/wres-warren-resources/ It an oil and gas company that IMO is being mispriced as if it was primarily an oil company, but due to an acquisition that is no longer the case. LTM Pro forma EBITDA of 139.5 million... the current market cap is 121 million. Oil is unhedged, so oil ebitda will not be that high, but the CEO that didn't hedge is history. Last trade was 1.50 and the 52 WK high is 7.02. Unlike many of the ideas discussed in this thread, I don't think this one needs a much higher oil price for upside. I think it is undervalued even in the current crazy environment. I have another idea I'll probably write up when I have time too. EW.V, a tiny micro cap with 12M market cap and 8.3 M cash on hand with no debt. It has oil producing properties(250 boepd (net), and as they say in their presentation: "Portfolio of assets has access to approximately 1.3 million prospective exploration acres in five countries". The most interesting of those(other than the current producing ones) are potential gas properties in Romania. If drilling is done they would be fully carried for 12 wells for 15% interest. That is a lottery ticket, but it could have a lot of upside. The company is currently buying back shares.
  15. The Shiller PE includes earnings from one a period including one of the worst recessions we've ever had. I think that makes it a little less accurate for this time period than it would be otherwise. You could replace the earnings from the recession with an average of the earnings from the other ten years, but with a proper % hair cut like you would get from a "typical" recession. That should get a lower and more relevant number, unless of course you think our next recession will be like 2008-2009 all over again. Me, I don't see anything on the horizon that could cause that kind of recession to happen anytime soon.
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