SharperDingaan

Look at the Q4-2011 for PD. - Running flat out. Signing all kinds of new multi-year contracts for oil &/or wet gas drilling - Clean BS. 200M write-off taken in Q4, & STILL showing rapid & ACCELERATING growth - THE Cdn land based directional driller.Tech, staff, networks to match - Day rates & rig volumes increasing - spot & long term - New super rigs going to ME Pretty tight with the old Cdn Fracmaster, & were fracking ME fields long before 'shale' gas technology became 'mainstream'. Formula-1 rigs going back to wells that were drilled with the equivalent of a VW - and going where flag neutrality is a consideration. Re disclosure. We hold a long position at a very low cost base.

With a 5yr+ holding period, NA gas is a great complement to NA real-estate. But to make it really work, you need many more Asian purchases in NA O&G fields - plus extensive pipeline & west coast LNG facilities. 5yrs just to get the ports upgraded. With a shorter holding period look to the oilfield service companies. They are running flat out, & that additional activity has begun to spread to the ME O&G fields as well.

Been there 12 years. Slime by association. Scalping muppets is what you do - so why not scalp THE muppet - GS. Make a name, side with the angels, get the industry 'trust busted', & come back as a CFO/Senior Partner in a 'new' I-Bank, under 'new' rules. Short GS down to peanuts, & let your bank balance do the talking. GS partners loathe you because you took away the golden goose, but so what - f** 'em - they're just more muppets. Begging you for a 'partnerhip' in your new firm if you're successfull. GS only exists because the partners have no way of reliably making more $ elsewhere. Their ability to grow the business further, & their profit maximization, has gone about as far as it can go. The big $ are now from imploding it & shorting all the way down ..... & with maybe a little assistance from global regulators, & the I-Bank lobby cutting off a limb to save the body. SD

FBKQ4 and 2011 Financial Results: On October 26, 2011, the Québec Government adopted a regulation which allows Hydro-Québec to purchase electric power produced by cogeneration facilities from residual forest biomass from a renewable energy source producer. The program was approved by the Régie de l'énergie on December 15, 2011 and formally launched by Hydro-Québec on December 20, 2011. Fibrek believes that its Saint-Félicien Mill qualifies as a renewable energy source producer under this program. On January 27, 2012, the Company submitted its proposal to be awarded the equivalent of the existing installed green energy capacity of 33MW under the 150 MW available for allocation in this cogeneration program. No one wants to hear it, but at some point this potential PPA is going to become a reality; & the further out the bids get extended the more likely it is to occur. As at March 09, it has been 6 weeks since submission date. Agreed that MERC is the better of the two current offers, but if the PPA shows up, at least one of the bid prices goes up. SD

You might want to recognize: Looser & cheaper mortgages. HELOC financing permits interest only monthly payment. The extended period of historic low rates allows a given $ of monthly payment to support a lot more mortgage. CMHC removed the default risk on the big mortgages with minimal DP, making questionable credit extension safe for the lender. Availability of longer than 'normal' financing terms. Net impact is more $ to spend on the same supply of housing. Therefore price must increase - Economics 101 Help with DP. Every $ of help mom/dad extend son/daughter is another $ to spend on the same supply of housing. Also a multiplyer as without the DP help, son/daughter may not have been able to enter the housing market period. Again, more $ at the lower end of the market. Price can only increase. Global investment. Vast majority of Canada lives in the major cities, & many of them are attractive investment homes to foreign investors. Family going to school (Vancouver, Toronto), NA alternative (Montreal, Quebec City, Victoria), just like the place. Again, more $ at the higher end of the market. Price can only increase. Exclude all Canada's major urban centers from the stats, & prices have moved by roughly the inflation + regional growth rate. About what you would expect.

margin equivilancy: The share price at which the $4.00 investment in the warrant could alternatively be used to buy the stock itself with the maximum possible 70% margin financing. max margin financing: The maximum amount a broker will permit an investor to borrow, using the stock itself as the loan collateral. warrant 1/2 life: Proxy for your intended holding period. Market convention is to average; hence divide remaining time to expiry by 2. You might also want to review the value of a warrant at expiry, & the practical margin elibibilty of a warrant.

Assume 5 yr warrant, strike of $11.00 Share price today is $10.50. Max margin of 70% Warrant price today of $4.00 P(margin equivalency achieved < warrant ½ life): 60% Margin equivalency: Today’s $4.00 warrant price could be pledged as long & margin equity. ie: if the share price was $13.33 & you used 70% margin to buy it, you would need to make a $4.00 equity investment 13.33x(1-.7)=4.00 At margin equivalency, the warrant will be $2.33 in the money. 13.33-11.00=2.33 Assuming no other change, the warrant price will be $6.33 (4.00+2.33) Assume a warrant 1/2 life of 2.5 yrs (5yr life/2) PV=4.00, FV=6.33, N=2.5, PMT=0, IRR=20.15% Risk adjusted IRR = 12.09% (20.15x0.6) Reject if you want a return > 12.09% Quick & simple, & one of many methods. Because of the risk most would not consider it unless there was current low share volatility, & the risk adjusted return was > 25-30%

Real Estate was the traditional investment vehicle for the masses, before the advent of the mutual fund industry selling stocks/bonds as the replacement. If you didn't understand/trust the market you bought bricks/mortar, often in your own town, & because in the worst case - you/familiy could always live in it if you had to. Market reversals are driving mean reversion. Board interest in this string is anecdotal evidence. Sons/daughters need family help to buy a McMansion. Mom/Dad become grandparents sooner, & get to see their grandkids more often, if they put up the funds. Mom/Dad also get to cash out of THEIR McMansion because there is now a buyer. No different to liquidating a position by creating liquidity & selling 5 units for every 4 bought.

Beerbaron: CRA is silent. Both transactions are directly with the market. It is also no different from todays process of swapping securities between the accounts - both accounts have to sell/buy from the market. Execution is via a series of transactions over a period of time. Shlom: Determine at what price long/margin takes over (warrant price[PV]/max margin). Subtract from todays price to determine the max remaining warrant increase. Add to warrant price [FV]. Use remaining time to expiry & calculate YTM. Multiply by prob that WFC may never get that high by expiry date. What remains is maximum risk adjusted return. Walk if it is not good enough.

Couple of other practical add ons: 1) The Greeks are usefull but not the way they are taught. Treat volatilty as a proxy for RSI. Write at the high end, cover at the low end. 2) Liquidate as soon as premium approaches 30% of share cost, where the long/margin alternate takes over. Or suddenly see your market go no-bid. 3) Favour convertibles for their debt/equity arbitrage ability. Either you or someone else. Seldom mentioned, & often more valuable, is the tax application. Sell a long dated low volatility at the money call from a tax deferred RRSP, & buy in a tax exempt TFSA account. Unwind on a high volatility event. The RRSP loss becomes the TFSA gain, & wealth transfers from the RRSP with no witholding tax. RRSP -> Market loss & Market ->TFSA gain structure nixes challenges.

EROEI is the wrong measure. Oil sands production burns large quantities of gas to produce the oil. You get more energy out (EROEI >1) but it is as less utilitarian oil vs more utilitarian gas. Gas prices are low, only because the market is flooded with shale gas that is no longer economical to drill.

http://www.nea.is/oil-and-gas-exploration/ "Exploration for oil and gas on the Icelandic Continental Shelf is in an early phase" With Canada's Hibernia, Beufort, & other northern offshore fields, it is not hard to see why there is interim interest in the $C. The Dreki field alone will turn them into a petro currency, Gammur is bonus.

We have european family who are Quantity Surveyors. Iceland is an indicator canary, & this one has been having serious discussions around adopting the $C as its currency. Additionally, were an investment made it would be done at todays lows & not the historic highs. An investment today would exploit the capital controls on purchase, rely on them for interim appreciation, & use Krona conversion to cash out - over the short term. Notable are the rejected currency choices of Euro & $US, & why. Aberdeen, Inverness, & St John's mansion prices before the development of off-shore o&g. 4 hours flying time from Toronto.

And what happens < 3yrs of the crash ... http://www.icenews.is/index.php/2012/02/29/iceland-property-prices-increased-fastest-in-europe-last-year/ Property prices in Iceland increased faster last year than in any other European country surveyed. The increase in par value of houses was higher even than in Norway, where a property boom is in progress

Change the game. ie: Buy a house/condo in city X, sell a long lease (25-40yr) on the land inclusive of property tax. Lessee lives in the shelter (house) on top of the land, pays the utilities, & maintains the property if desired. Lessor hands over the shelter keys, pays the annual property tax, walks away, & re-leases or levels/re-develops the property at the end of the lease. The lease is a bond, valuing at the PV of the remaining CF. Maximum value is at initiation & in a low risk environment. Lease value declines every year & terminates at zero. Shelter cost between yr X & Y is the difference in lease value, identical to depreciation in a vehicle purchase. Shorter the lease, the lower the price, & the less/no need for mortgage financing.

"So what do we short, guys" You don't. Park your $ in Canada's. If/when a particular property falls far enough for you - buy it.

You cannot prevent people from hurting themselves, it is their choice.

The 24 yr old with the massive mortgage goes bankrupt, moves back in with mom/dad, & CHMC covers the bank against loss. Highly visible, but there are not many of these, & the CMHC/Bank/BoC have more than enough capital to hold houses off the market, en masse, if needs be. Financing for mortgages this big is usually by LOC. Rates increase, the house(s) get sold at a deep discount, & the new buyer finances via conventional mortgage (or the bank/BoC doesn't give the mortgage. Prices drop, but they don't melt down 30%+, en-masse. Financing goes from unstable to stable, with monthly amortization continuously lowering the risk going forward. Victoria McMansions may lose 40% of their value, but they dont drag down the nation overall.

Going forward we'll very likely take the same approach, despite having done very investing alongside them. Silence on what we like & why, but where we touch FFH it will be for seasonal trading purposes only. Unfortunately, the canadian investment pool is really too small to allow any other approach. SD

There is 'read' & there is 'scan'. We read the Globe and Mail, & Oil & Gas Week. We periodically scan www.straitstimes.com, www.thestandard.com/hk, www.telegraph.com.uk/, www.icenews.is, www.theportugalnews.com, & www.aljazeera.com. We scan primarily for tone, the hot business topics, & assume each publication is overtly biased. SD

As at 7:25 EST, 02/27, 20 of 27 voters see the ABH bid as an abuse of minority shareholder rights. We were deliberately provocative - to demonstrate how a voter could arrive at a conclusion of abuse, using publicly released information. Those who insist on drunk driving, or beating their wives, do not see their actions as abusive either. Most would conclude that given these statements, the longer the lock-up now continues the greater the likelihood that the conclusions are true. The solution is simple – drop the lock-up, or match the Merc bid. In the interest of fairness our rebuttals are as follows; 1. You have no idea whatsoever what the "value enhancement" from the acquisition would have been. The deal had to have a material & significant NPV or it would never have been proposed (Corporate Finance 101). The NPV also had to have been > the BV loss of the new shares that would have been issued (Corporate Finance 101). It was a bad deal for FFH because it would have diluted the size of the lock-up stake being negotiated. 2. This is pure speculation! Agreed we do not know what was considered. We do know that FBK was under pressure to demonstrate value, & that share consolidation &/or major shareholder dilution are mechanisms that would have increased FBK’s value (Corporate Finance 101). 3. Again, explain to me how minority shareholders were deprived from realizing the full value of their shares. They could have sold millions last week at well above the $1.30 offer price. superior bid. Selling last week was to assume no further improvements in what is a hostile takeover. < 10% probability that the PPA will be realized. 0% probability that the Merc private placement will go ahead. Mr Markets price today, NOT the Merc or ABH final offer. 4. Rubbish! This is actually libel...that you are accusing ABH and Steelhead of a coordinated fraud. We do not make this statement. We simply point out that the ABH bid has gained more support. Those votes could be because the group has bought more shares, or a new party (other affiliate) has bought shares & chosen to align with ABH for the present. 5. It's their responsibility to take care of their shareholder's first. Agreed. If they are not tendering to Merc’s $1.30 offer it must be because they will make more from an ABH win A win that can only be achieved by abusing FBK minority shareholders. 6. Glad you can read their minds Sharper. We don’t read minds, we look to fiduciary responsibilities. SD

We know: FBK advised FFH management, in good faith, of their intent to execute a value enhancing acquisition. Had the acquisition proceeded ALL shareholders would have owned a smaller share of FBK that was worth more, but there would supposedly have been a diluting share issue. We know that at about the same time 1) FFH rejected a solicitation from Merc for their FBK shares at $1.00/share, & 2) ABH was negotiating for a hard lock-up with FFH/Oaktree/Pabrai. - The ABH lock-up was rushed to spike FBK’s deal & avoid dilution of the combined FFH/Oaktree/Pabrai stake in FBK. It deprived FBK shareholders of the acquisitions value enhancement, circumvented the governance we pay our senior management to do, and could not have been accomplished without the FFH explicit agreement to enter a hard lockup. The transaction was a clear minority shareholder abuse, it defrauded all shareholders except FFH/Oaktree/Pabrai, & it was abetted by FFH/Oaktree/Pabrai. - There is no reason to believe that existing shareholders would have been denied the opportunity to maintain their existing proportionate ownership, or that there would not have been a subsequent share consolidation to bring the trading value of FBK’s shares > the minimum $5/share institutional threshold. If it wished, FFH could have chosen not to participate, allowed its holding to dilute, & sold consolidated shares into a stronger & more liquid market after the fact. - Give FFH/Oaktree/Pabrai the benefit of the doubt, & assume they didn’t fully realize what “it’s just business” really meant. The lock-up abets a transfer of the IV of FBK minority shareholders to ABH shareholders at below fair value. At above 66 2/3% FBK minority shareholders will be forced to accept an offer on the ABH terms of $1.00/share at best –materially below Merc’s competing price of $1.30/share. A “just business” current defraudment of $0.30/share that is not possible without the explicit lockup consent of FFH/Oaktree/Pabrai - We know from the recent 51.5% tender that ABH/Steelhead/Other Affiliated have been buying FBK, & that the shares could only have been purchased at well > the $1.00 ABH offer price. Within the terms of the ABH bid, the purpose can only be to coerce a tender > 66 2/3% & perpetrate a defaudment on FBK minority shareholders. - We know that ABH unsuccessfully attempted to spike the Merc offer of $1.30, & that FFH/Oaktree/Pabrai publicly supported that ABH effort. FFH/Oaktree/Pabrai have a fiduciary obligation to their shareholders & investors to maximize the value of their holdings – & they cannot meet that obligation unless their opportunity gain on the ABH side of this transaction exceeds their opportunity loss on the FBK side. To take this approach, is to imply that FFH/Oaktree/Pabrai are in full agreement with the intent to defraud. “It’s just business”. - We know that if FFH/Oaktree/Pabrai were released from the lock-up tomorrow, & the ABH bid put on the same 50%+1 terms as the Merc bid, the ABH bid would fail. It would fail because it is below the $1.30 Merc bid, & FFH/Oaktree/Pabrai have each have the fiduciary duty to tender to the highest offer. As FFH/Oaktree/Pabrai have not spoken out, ABH has not released the lock-up, or matched the Merc $1.30 bid - we can only conclude that ABH intends to defraud by coercion, & that FFH/Oaktree/Pabrai have agreed to it. Should ABH prevail at the $1.00 vs $1.30 bid they will save approx 39M on the 130M o/s shares. If they can avoid paying the estimated $1.00/share PV of the PPA they will save an additional 130M. A total potential defraudment of 82M on the non-affiliated 48.5% who have not tendered to the ABH offer. Apparently fraud “is just business” ? SD

I think the point I was making is that when a company offers to buy a company for $15.00 the public shareholders get $15.00. No more, no less. As far as a PPA goes, how does it immediately affect working capital? Your statement is incorrect. Working capital is just A/R - A/P & represents the outstanding short-term receipts and liabilities that are expected to convert to cash within the next 90-120 days. To ensure that an adequate collection effort will continue immediately following the sale, the seller agrees to repay the buyer whatever agreed A/R is not collected. Without the working capital adjustment process a seller has an incentive to terminate their collection staff immediately following the sale, pay them an inflated severance, & leave the buyer with a significant A/R write-off - & the need to re-hire/hire replacement collection staff at a higher average rate. Re the PPA. Agree the PV of the PPA, Db A/R, Cr Equity. The $ amount of the A/R is the best estimate as to the PV of the power today net of all uncertainty - the same definition as for every other A/R on the books. Total A/R increases, A/P remains the same, & working capital increases. Because this specific A/R is significant, material, & unique - collection is defined as a deal signing within X days of purchase. Db long term asset, Cr A/R when the deal is signed. The buyer will argue the uncertainty makes it impossible to value the PPA. The seller will argue no sale - we wait for the uncertainty to clear, & then value the PPA. There is no sale unless there is BOTH a willing buyer AND a willing seller, and ALL institutional shareholders have a fiduciary duty to their shareholders to maximize the value of their holdings. The coercive transfer of FBK IV to ABH IV is also a criminal act. No different to a drug lord abducting the family's of all the major ABH shareholders - & then informing the head of each family that they will agree to transfer the IV of ABH to their worthless shell - or risk not seeing their family's again. These criminals just wear better suits, talk politely, & don't use guns - but otherwise, what is the difference in the process? SD

The only shareholders affected by dilution are those making a lower offer. Everybody else sees the higher price of the competing offer & are not affected – because the company will no longer exist. Remove the conditional strings on the Merc financing, reprice at the $1.30 bid, & make it effective immediately. A little less dilution, but the share count still goes up. The $ themselves are not from Merc, they are just flowing through them. Attack the lock-up. Make it fiduciary extremely difficult for ABH’s remaining shareholders to continue supporting the lock-up, by strangling their financing & Quebec business. Change the game. This entire fiasco is because FFH owns too high a % of both ABH & FFH. FFH is supposed to be a passive investor, but because of their % they are being dragged into operations decisions that they are not equipped to deal with. The solution is to merge both ABH & FBK into a 3rd & big player, & dilute their holding to a more normal <30% of the combined entity. Change the end-game. Drop the ABH bid as it has served its purpose. Support FBK management to counter the Merc bid for inclusion of a PPA A/R & improve shareholder value. Maybe even indirectly finance a portion of the PPA A/R should it occur. Demonstrate goodwill, then aim for merger. SD

Three options: - Rework the Merc deal to make it qualify - Apply to have the ABH deal diqualified - Get the PPA signed ASAP