SharperDingaan

"I almost have to believe that Resolute has gone off the reservation with the direction of the takeover following the lockup. It's possible that FFH is regretting that lockup and doesn't like how this is being done." We would suggest that a large part of the ill-will is because it is highly likely that there will be senior level terminations at ABH once its over. No board (& related significant shareholders) appreciates being ridiculed as inept, especially when they had such overwhelming advantage going into this thing. The story line must also be galling; FBK management was inept, about to make a stupid acquisition, & the ABH bid was to 'save' everybody. The results to date suggest that ABH actually has the inept management. They might even be better off with FBK's senior management ;)

GK THE best thing you can do for yourself - is set up a game plan - AND a hedge if it doesn't work out. For most people, that means 5 years apprenticing as a senior financial analyst working for one of the major industrials in your sector of interest. DO NOT WORK FOR A BANK. In your apprenticeship; - Work only for #1, 2, or 3 in the sector that you've chosen. You know squat, they are the experts at what they do, & you are there to learn. Youth, humility, & emotional maturity are your biggest assets. - Use the time to do your CFA exams, & expect to fail at least twice. Your aim is to pass the exams before life happens (spouse, kids, etc), &/or you return to school - NOT get the designation itself. - Invest your savings in the sector, & stay away from the industry analysts. Talk to the company lifers (they have a track record of having successfully exploited the changes in the industry since you were in daipers), develop your own opinions. Experiment, & don't be shy. Your hedge is your growing circle of competency, & the small $ that you are playing with. Return to school; - Business plan. How you're going to do value investing. - MBA. The narrow view is a school in the geographic area that you would like to work - working summers for the investment firms in that area (building contacts & pursuing the experience required for your actual CFA designation). The broad view is a school in a different country where you would like to work - language, culture, contacts, experience all being built during your summers. Lessons learnt. When starting out try to work for a working Bronfman, Irving, Desmarais, etc (long list). There is nothing like having to explain DIRECTLY to the guy whose $ you've just wasted - & in time you want to BE that guy. If not an owner then the GE's of the world - but always the best. The real money is in building things, not trading. Acquire, develop, build companies then IPO/sell when you've taken them as far as you can go. You want to be a Gates, Zuckerberg, etc - not the valet financial advisor that you slip a tip to. Most securities analysts have a short life - that roughly follows a 20% declining balance amortization. Make a lot in a short term, then get fired - & essentially become unemployable. If you originally came from industry, you go back to it - & with enough cash to buy a real stake in the business. We wish you the best of luck in your endeavors, but don't let the bright lights blind you. SD

The legal BS effectively extends the Mercer bid indefinitely. The bid remains at $1.30 until there is a Supreme Court decision, or 3 days after ABH lets its bid lapse - i.e: it could be months. The lock-up has a time-limit, & to extend – all parties have to agree to it. Uncompetitive at $1.00, multiple vote failures, & an instant 30% gain if the parties walk on expiry - dance space on the pin-head is rapidly running out, & getting expensive. Fiduciary duty is a bitch - & all the lock-up parties are liable to prosecution if they don’t get paid the 30c (18M) bid difference on their shares - upfront. (18M= 130M shares x .30 x 46%) ABH can divert attention to the legal, but it is still the Marx brothers - laughing stock. The problem though, is that the lock-up group has been drinking the cool-aid. The PPA was applied for 9 weeks ago. By now there will firm indications as to whether the application was successful. Release the details a few days before the lock up expires, & this thing will resolve itself pretty quickly.

VAL9000: Be cautious when a coy doesn't tell you its day-rate. You may want to look a little closer at where they are drilling (field is mostly dry gas?), how many rigs, what needs to happen for them to go further, etc. A dividend paying O&G with limited connections & institutional ownership is a flag. Assuming it is sutainable, were PHX not paying their increased dividend they would not be a todays price. Then if a junior is doing this, what would happen if a major - in the same sector & with better prospects - partially reinstated a previously rescinded dividend? Out of sync market. Rogermunihound: Fluidized coal feeds produce more fly-ash. The rest of the emissions are a function of temperature - the hotter the burn the less emission. Coal can easily reach the temps required but operations are optimized if the higher temp is used to burn garbage instead.

We would put it to you that by end-of-week the minimum price will be $1.30, 50.01%, & you choose whichever you like best. To break it, a party is going to have to bid on the outstanding PPA, based on whatever updated details FBK releases in the next week or so. About as fair as it can possibly be. There is nothing wrong with spoon feeding, the same as there is nothing wrong with a lock-up agreement.

New power stations are designed to switch between fuels. The more modern are designed to run on primarily fluidized & pulverized coal fed by specialized conveyor - with 5-15% garbage. When gas is cheap they switch to gas. Changing to gas alters the business model from steady base load to intermittent peak load at spot rates. To shut down the conveyors, the gas has to very cheap, large quantities have to locked in for a long time, & you have to be reasonably certain of seeing peak loads for extended periods. Much higher margins while you're selling, but the down time introduces a lot of additional operational risk for a utility - as the break-even now also has to include the depreciation & carry cost on idled equipment & coal inventory. Pulverizing & fluidizing allows the Utility to use poorer quality & cheaper coal, or run at higher temps when using anthracite or coking coal. Higher temps allows the inceneration of more medical waste & the use of more plastic as fuel - the hospital/minicipality pays the Utility for disposal, & the revenue offsets the cost of the better quality coal. No one is going to be in a hurry to convert, & where it occurrs it will be on a case by case basis.

To truly appreciate just how out of sync the market currently is with the O&G servicing market, you need to do your own DD. We would suggest you start with PD's Q4 2011 MD&A + outlook, google rig activity, O&G Week, etc. You would swear that you're looking at another planet. PBN et al can't get service because they trying for PD rigs & they're all going on LT contract into oil &/or wet gas. Where they can get a rig its spot rate & cash up front - and that well only gets drilled because its a forced lease hold farm-in by a bigger operator, & PD is doing them a favour. It's an old boys club, & ya dance with the one that brung ya. If you cant drill you buy, & a shut-in well is worth squat. The further you are from a collection point, the dryer your gas, & the more constrained the pipeline capacity - the less you get. Very bad news for a junior unless you have a big friend. Obviously there are other drillers, & pluses, but we are not going to disclose them.

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.