lessthaniv

Topaz reported today. Not a name that I own, however peaking inside the financials to look at the Q2 reported commodity prices gets me excited for some of the numbers that are about to be reported by the names I do own.

Canadian Federal Government discussion document on on emissions caps. https://www.canada.ca/content/dam/eccc/documents/pdf/climate-change/oil-gas-emissions-cap/oil-gas-emissions-cap-discussion-document-july-2022-en.pdf

…right before the midterms.

By looking at a graph, it’s determinable that oil prices are high relative to historical prices and production costs, agreed. But, I think that view falls short of determining whether oil prices are in fact high relative to the current market dynamics. Things such as supply and demand; inventory levels; low capex investments; strategic reserve releases; choke points in refining and labour; change in business models … all seem to suggest something different. A good article on how big oil CEO’s are investing in shareholders not as opposed to output like in the past. Its a significant change in attitude. https://www.bloomberg.com/news/articles/2022-05-07/big-oil-spends-on-investors-not-output-prolonging-crude-crunch “All five supermajors have kept their capital expenditure budgets firmly in check and pledged that this discipline will hold in future years -- even as oil prices have closed above $100 a barrel on all but five days since Russia invaded Ukraine in February. With wells naturally declining in production every year and large projects taking half a decade or more to come online, any expansion lag happening now will push the possibility of new production even further into the future.” ”BP Chief Executive Officer Bernard Looney told analysts Tuesday. The London-based major isn’t budging on its $14 billion to $15 billion spending plans for the year, with its mid-term guidance creeping up to a maximum of $16 billion despite 10% cost inflation in some parts of its business.” ”Sinead Gorman repeated time and time again that Shell would keep within its $23 billion to $27 billion range. “Nothing has changed in terms of our capital allocation framework,” she said. ” ”“Two years in a row of large and abrupt underinvestment in oil and gas development is a recipe for higher prices and volatility later this decade,” warned Joseph McMonigle, Secretary General of the IEF.” The higher for longer arguments are hard to invert.

How do you determine when oil is high? Do you see it high at $100WTI?

Another article along the same vein. https://oilprice.com/Latest-Energy-News/World-News/Biden-Likely-To-Leave-Saudi-Arabia-With-No-Oil-Supply-News.html The oil patch is cheap. I've built positons in CNQ as a core and added SGY,VET,WCP and MEG as well. The dividends are begining to flow now and looking at the incredible FCF yields they are spinning - the current stock prices against future potential dividends look like double digit yields on many in the sector. With such low FCF multiples on $80-$100 oil, the reserves are really been given no value. Goldman stressed tested and are calling for north of $100. https://oilprice.com/Latest-Energy-News/World-News/Goldman-Sachs-Remains-Bullish-On-Oil-Prices.html

https://www.greaterfool.ca/2012/01/08/in-the-end/ This blog post of Garth's shows it was a little north of $350K and he references 2008 as the starting point

It's worthwhile to go back and re-read this thread from page 1 mining the content for investment lessons with the benefit of 10 years of hindsight.

Bought into ATCO yesterday. Attractive against the backdrop of FCF that it could spin in a few years.

Chatter of $500M IPO with valuation between $4.5B-$5B. https://ca.finance.yahoo.com/news/exclusive-indias-digit-insurance-targets-063638559.html

Investments overall having a nice push prior to quarter end. Stelco having a big day.

Interesting looking Arb on FFH’s conversion of Avante Logixx debentures

You appear to be crossing concepts here. CR speaks to underwriting profit/loss. The float is used for producing investment income. Total earnings is a combination of both. Combined Ratio = (Claim-related Losses + Expenses) / Earned Premium. So, (1 - CR) x Earned Premium will give you underwriting profit estimate. Ex: Earned Premium @ $18B and CR @ 94% .06 * $18B = ~ $1.1B from underwriting.

Me too and disclosures were there. Its not FFH’s duty to let investors know they should actually read it before responding.

Was just a back of the napkin using the high side of its 5 yr range.

$400m US digit + $346m US on associate = $746m US / 23.8m = ~ $31/share US So adjusted not including (FIH) is about $660US/sh BV or about $800Cdn/sh BV $800cdn * 1.2x = ~$960/sh Roughly piggy back National's view.

^^^

The SWAPS are looking good too!

I suspect a bit of fear around inflation and rising interest rates too. FFH looks like they are positioned well in this regard but I think they've been wrapped up in the broader markets worry. I can't wait until the earnings power of those dollar bills become evident at some point in the future when they are able to reinvest at better rates.

Holding company looks much better with $1.5b in cash and the line paid off. Terms extended to 2026 for $2b unsecured revolver. On June 29, 2021 the company amended and restated its $2.0 billion unsecured revolving credit facility with a syndicate of lenders which extended the term from December 21, 2022 to June 29, 2026. During the first nine months of 2021 the company made a net repayment of $700.0 on its revolving credit facility leaving nil borrowed at September 30, 2021 (December 31, 2020 - $700.0). The principal financial covenants of the credit facility require the company to maintain a ratio of consolidated debt to consolidated capitalization not exceeding 0.35:1 and consolidated shareholders’ equity attributable to shareholders of Fairfax of not less than $9.5 billion. At September 30, 2021 the company was in compliance with its financial covenants, with a consolidated debt to consolidated capitalization ratio of 0.261:1 and consolidated shareholders’ equity attributable to shareholders of Fairfax of $15.9 billion, both calculated as defined in the financial covenants.

Upgrades making there way into the news wires

I also agree. They took advantage of the discount in their share price that they had visibility into but at a time where there their cash was tight. I would also be disappointed to see them buy their stock in at a premium with the proceeds.

Surprising how many people drive their cars looking in the rear view mirror.