lessthaniv
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Posts posted by lessthaniv
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Canadian Federal Government discussion document on on emissions caps.
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1 hour ago, Viking said:
One of the unanswered questions is when will US end SPR oil release? I think the current release is set to end Sept 30. Sounds like that may be the end of it. 1 million barrels per day will come off the market.
—————'We can't be an oil supplier': Biden's adviser says oil reserve releases must end
One of Biden’s top energy aides confirmed Friday the administration won't extend the oil releases from the Strategic Petroleum Reserve that are scheduled to end this fall.
The Strategic Petroleum Release “was really a stop-gap measure,” says Amos Hochstein, Biden’s Special Presidential Coordinator for International Energy Affairs. “We can't be an oil supplier. It's a reserve and so we have to keep that.”
…Hochstein says he has secured promises from CEOs that investments being made now in improvements like drilling profiles and platforms will pay off with an increase of about 800,000 to a 1 million barrels a day towards the end of the year. This would replace, his argument goes, the 1 million additional barrels a day on the market right now because of Biden’s April move to release the oil reserves.
…right before the midterms. -
23 hours ago, Spekulatius said:
I think you can determine that oil prices are high relative to historical prices as well as production costs. So yes, I consider them high.
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.
“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. -
On 7/16/2022 at 5:09 AM, Spekulatius said:
Some of the other investors like me don’t buy commodity stocks when the commodity is high, they have seen it all.
How do you determine when oil is high? Do you see it high at $100WTI?
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2 hours ago, Viking said:
We KNOW world oil demand is going to grow by 1 to 1.5 million barrels per day over the next 5 years (probably 10). Where is the increase in supply going to come from. Only a MODEST amount will come from Saudi Arabia…
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Another article along the same vein.
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
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41 minutes ago, Gregmal said:
What was the average Canadian house worth in 2012 or whenever Turner started his crusade?
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
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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.
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Bought into ATCO yesterday. Attractive against the backdrop of FCF that it could spin in a few years.
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Chatter of $500M IPO with valuation between $4.5B-$5B.
https://ca.finance.yahoo.com/news/exclusive-indias-digit-insurance-targets-063638559.html
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Investments overall having a nice push prior to quarter end. Stelco having a big day.
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Quote
For our stock price to match our book value’s compound rate of 18.2%, our stock price in Canadian dollars should be $1,335. And our intrinsic value exceeds book value, a principal reason being that our insurance companies generate huge amounts of float at no cost. This is the reason we continue to hold total return swaps with respect to 1.96 million subordinate voting shares of Fairfax with a total market value of $968 million at year-end
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Interesting looking Arb on FFH’s conversion of Avante Logixx debentures
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On 2/12/2022 at 5:10 AM, MMM20 said:
I wish Prem addressed the point more directly. 95% combined ratio = 5% net margin on $26B in float = $1B+ in income. Apply a 10x multiple to that and it's $10B in our intrinsic value calculation. I prefer to use more like ~2-3% normalized u/w profit in my thinking about this, but if it's ~5% then IV could easily be upwards of $1,500/share. Why not just lay that out for folks? Maybe b/c they want to do a Teledyne!
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.
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2 hours ago, StubbleJumper said:
I was puzzled by the people on the call belly-aching about the substantial issuer bid. It's not like an SIB is particularly exotic.
SJ
Me too and disclosures were there. Its not FFH’s duty to let investors know they should actually read it before responding.
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1 hour ago, valuesource said:
$660 USDs x 1.2704 (USD/CAD f/x) = $838.46 CAD
Was just a back of the napkin using the high side of its 5 yr range.
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20 minutes ago, returnonmycapital said:
I am getting closer to $700 for FMBV (using a 26% tax rate on the difference between FMV and accounting value).
$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.
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56 minutes ago, Crip1 said:
No opinion on what’s driving the recent runup, and I honestly don’t care. The factors of short term movements are more a matter of speculation and/or Mr. Market’s mood swings. Longer term, market price and book value are converging (though not in a straight line) such that, eventually, the price is going to get to or beyond BV. The questions are…what will BV be when this happens and when will it happen? It may be six months down the road and US$645, or three years down the road at $825. The fewer errors that are made (ill-advised company purchase, big investment decision gone bad, etc.) the sooner it will happen and the higher the BV once it gets there.
So, the past month or so have been nice, but it’s noise. Just want to see FFH keep executing and avoid unforced errors.
-Crip
^^^
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1 hour ago, Parsad said:
Yup! It's win-win for Prem. Either they buy back stock for cheap or they've proven that Odyssey Re's valuation is higher than on paper.
Question for those more astute on these matters, will this mean a repricing of Odyssey on the balance sheet? Based on IFRS, the new securities would reprice Odyssey's fair market value significantly higher than on the current financials, in turn increasing book value per share.
Cheers!
The SWAPS are looking good too!
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1 hour ago, Santayana said:
Shares responding nicely, without the the usual 2 day delay. I think the market had fears of bigger cat losses, really the only explanation of the big price drop in September.
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.
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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.
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Upgrades making there way into the news wires
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22 hours ago, StubbleJumper said:
Yes, I agree with this.
The investment in TRS was a decision to take a position in an undervalued security, which was effectively FFH's own shares. If the price of FFH shares should suddenly soar to 1.3x BV, the TRS would be very profitable and it might make sense to close them out, take the profit, pay the taxes and move on. But the decision to then use the proceeds to buyback and retire FFH shares is completely separate and needs to taken rationally. At a hypothetical level of 1.3x BV, I'd be disappointed if FFH actually bought back the shares because that might not be a rational price for FFH's shares.
My guess is that position in the TRS was taken under the assumption that it would take a year or two for FFH's share price to rise to 0.9x or 1.0x book, and that FFH could close out the contract and take the proceeds plus some other cash and make a rational re-purchase decision. But, in the end, the re-purchase decision is completely separate from the TRS investment decision and it must stand on its own merit.
SJ
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.
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Surprising how many people drive their cars looking in the rear view mirror.
Energy Sector
in General Discussion
Posted
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.