bmichaud

http://www.forbes.com/sites/ericjackson/2012/12/26/the-anti-barrons-round-table-crowd-sourced-twitter-2013-stock-and-market-picks/ The poll is sorted from most pessimistic to most optimistic (on the general market). I'm not surprised at the results - the vast majority have the market ending over 1500 if not 1600. This type of optimism is showing up across a whole range of sentiment indicators such as sentiment polls and put-to-call ratios. Now contrast with last year's poll where there were 800 and 900 price targets and many sub 1300 projections.... http://www.forbes.com/sites/ericjackson/2012/01/05/crowd-sourcing-the-top-2012-twitter-stock-and-market-picks/ We shall see how long this ebullience lasts for....

I was agreeing with you! I was mocking the ludicrousness of believing BRK's buyback will somehow act as a put in a large market decline. Sorry for the confusion - sarcasm sometimes doesn't come across on a message board.

the buyback is no put. it's not a guarantee that it stays at his buyback price. I don't know why people keep calling it that. if we had a market event next week that took s n p down 20% brk would go down 15%. Come on Burke, it's the easiest trade in the world! ;D I don't understand it. not the first time. cheers! Of course you don't...... http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-mother-of-all-trades/10/

the buyback is no put. it's not a guarantee that it stays at his buyback price. I don't know why people keep calling it that. if we had a market event next week that took s n p down 20% brk would go down 15%. Come on Burke, it's the easiest trade in the world! ;D

I liked it. hahaha hahahah he was hilarious!! loved his jabs about them talking and not listening...

This was nauseating. I get it - we all admire and seek to invest like Buffett....but does he really need to virtually clone the principles of Buffett's letters? Preference for buying whole businesses, look-through earnings, separating the business into investments and operating earnings, writing to his "partners"....

Informational website created by TPG: http://www.shareholdersforsandridge.com/home/

FCX's acquisition of PXP provides an interesting comp for SD (MMR is messier, so I stuck with PXP for now)... Deal Details: Equity $6,900MM BP GOM purchase price 6,100 Net Debt @ 3Q12 4,563 Long-term debt + current liabilities - current assets - BP GOM deposit Deal EV $17,563 2013E EBITDA $3,349 Capital IQ consensus estimates Reserves Analysis Proved Reserves 537 MMBOE Pg. 3 of October 2012 Company presentation Unproved Reserves 2,364 MMBOE Total resource potential of 2,901 on pg. 18 of October 2012 Company presentation - proved reserves FYE 2011 PV10 $/BOE $12.54 Capital IQ Pro Forma PV10 $6,735 $12.54 x 537 UPR FV @ $1.50/BOE $3,546 Deal Multiples Implied UPR $/BOE $4.58 (Deal EV - pro forma PV10) / UPR Implied PV10 multiple 2.1X (Deal EV - UPR FV) / pro forma PV10 Implied EBITDA multiple 4.2X (Deal EV - UPR FV) / 2013E EBITDA SD Data FYE 2011 PV10 $/BOE $10.90 Capital IQ Proved Reserves 533 MMBOE Pg. 3 of November 13, 2012 Company presentation Pro Forma PV10 $5,811 UPR 3,867 Pg. 3 of November 13, 2012 Company presentation UPR FV @ $1.50/BOE $5,801 2013E EBITDA $1,323 Capital IQ consensus estimates Net Liabilities $5,957 Total liabilities + minority interest - current assets FD Shares Out 600MM Implied SD FVPS Based on PXP Metrics UPR $/BOE $29.28 ((Implied UPR $/BOE x UPR) + PV10 - Net Liabilities) / FD Shares Out PV10 Multiple $19.90 ((Implied PV10 multiple x PV10) + UPR FV - Net Liabilities) / FD Shares Out EBITDA Multiple $8.97 ((Implied EBITDA multiple x 2013E EBITDA) + UPR FV - Net Liabilities) / FD Shares Out

Please help me understand the basis for the valuation of their unproved resources of more than$9.00/SH. Are these solid or are these mostly leases that have to be drilled in five years or less? If so, could not the owners repossess the rights and lease those rights to someone else? So the acreage is as follows: Developed: 375,090 - the "Continuing Ops" valuation of $4 billion works out to be $10,669 per developed acre Undeveloped: 1,672,328 - the "Excess Reserves" valuation of $7.056 billion works out to be $1,288 per undeveloped acre Likely, a buyer with scale would pay more than $1,300 per acre, as demonstrated by JV transactions over the past several years between $5 and $15K an acrea. Your question regarding HPB is a good one though - this is how the Company breaks down its undeveloped acreage expiry: 12/31/2012: 208,368 12/31/2013: 603,372 12/31/2014: 635,004 12/31/2015 or later: 153,685 Other: 71,899 So about 87% of its undeveloped acreage expires by FYE 2014. All the more reason for a sale, or to put in place a credible development plan.

Zorro - a sale at $10 then putting the proceeds into BAC at $10 may yield just as good if not higher results than holding SD til $25 in four years 8)

Please help me understand the basis for the valuation of their unproved resources of more than$9.00/SH. Are these solid or are these mostly leases that have to be drilled in five years or less? If so, could not the owners repossess the rights and lease those rights to someone else? Likely some portion is HPB - regardless, SD would likely receive something around that per BOE in the event of a sale. It is messy for sure, but roughly tracks most NAV estimates for SD - most Street analysts break out each property and risk them....this way just aggregates it all and applies a rough estimate of per BOE value. If in fact HPB requirements are a problem, this is all the more reason for a sale....

Record date for the proposed consent solicitation set: http://www.sacbee.com/2012/12/03/5026814/sandridge-energy-inc-sets-record.html I don't have time to delve into consent solicitations at the moment, but will later today - preliminarily, the attached doc somewhat explains what purpose a consent soliciation serves. Curious what others thoughts are on them.... Consent_Solicitation_Doc.pdf

Ok so in fairness to TW and SD, I believe TPG is being unfair looking at SD's G&A relative to its market cap versus other peers. To rectify this, I looked at SD relative to the TPG-derived peer group (excluding Shell) of Apache, Chesapeake, Devon, EnCana and Range Resources using TPG-derived G&A (Friday closing market cap x TPG letter G&A % of mkt cap) versus total assets (Capital IQ data): Company Total Assets G&A G&A % of TA SD 9,844 224 2.3% APA 58,810 694 1.2% CHK 45,671 577 1.3% DVN 43,548 649 1.5% ECA 18,909 417 2.2% RRC 6,658 187 2.8% This appears to be a much more reasonable comp set. Interesting, looks like Range has an even larger G&A problem. Giving TPG the benefit of the doubt though, let's say SD should be at CHK's level.... 1.3% x 9,844 = $128MM of pro forma G&A, or a $98MM reduction from current levels. Taxed at 35% and divided by 600MM shares equals $.10 of additional EPS. SUM-OF-THE-PARTS Sources: Company Presentations, Company Filings and Capital IQ, unless otherwise noted Shares out: 600MM (assumes preferreds fully converted) FVPS = Fair Value Per Share Continuing Ops: 2013E production 39.2 MMBOE 2013E EBITDA $1,323 million Maintenance CAPEX $588 (I assume maintenance F&D costs are $15/BOE to maintain production of 39.2 MMBOE) EBIT $735 Net Income $478 (Tax rate = 35%) EPS $.80 Continuing Ops FVPS $6.67 (Cost of equity = 12%) Excess Reserves: Proved Undeveloped 251 MMBOE (47% of proved reserves are undeveloped, according to page 3 of SD's 11/13 presentation) Valuation $/BOE $5.00 (FYE 2011 PV10 was ~$11/BOE....as such, $5/BOE appears reasonable for PUD reserves) PUD FVPS $2.09 Unproved Resources 3,867 MMBOE Valuation $/BOE $1 to $2 UPR FVPS $9.67 Excess Reserves FVPS $11.76 Net Liabilities: Total Liabilities $5,639 +Minority Interest $1,547 -Current Assets $1,229 Net Liab. Per Share $9.93 TOTAL FVPS $8.50 (Continuing Ops + Excess Reserves - Net Liabilities) If SD can cut G&A by $.10 per share after tax, that's an additional $.83 of value per share ($.10 / 12% cost of equity). The way I look at it, likely at worst net liabilities are fully covered by excess reserves, which leaves investors with EPS of $.80 before G&A reductions. In a perfect world, SD would sell off non-core reserves and pay down all net liabilities, cut G&A per TPG's suggestion, and leave investors with clean EPS of $.90 per share and no net liabilities. Under this scenario, likely the market would pay 10X earnings, valuing SD at $9 per share. Obviously we're not in a perfect world....but the MOS appears robust and a catalyst is finally in place.

Prem's comment here in a recent interview.... .....is interesting given Fairfax dramatically reduced its position above $10. In other words, Fairfax has no basis for rejecting a sale above $10. And again, assuming TPG is not lying, there does not appear to be much evidence supporting the claim TW is one of the best operators in the business.

Phenomenal piece.

I personally found Grantham's recent letter relatively absurd - I don't believe commodities are permanently elevated, as they are likely moving through a very standard secular bull market running alongside the equity secular bear, and I don't see why once the developed world is appropriately deleveraged we cannot continue our historical rates of growth. Laurence Siegel outlines the anti-Grantham case pretty well here: http://www.advisorperspectives.com/newsletters12/48-critique4.php (h/t pragcap).... Even more interesting, however, is that the oober-bearish John Hussman disagrees with Grantham's long-run growth projection ASSUMING we can appropriately get through the mess we are currently in....see here: http://hussmanfunds.com/wmc/wmc121126.htm

"Cant' wait to hear some ranting from the delusional Ann Randists steeped in self serving bias (even though they lost the election)." Yes, yes, it's quite self serving to complain how somehow it's "fair" that 10% of America pays over 50% of total taxes... Liberals live in an effing DREAM WORLD believing the rich should pay more bc the current system somehow isn't "fair." Nobody seeking to enter the middle class is held back from pursuing whatever their dream is bc Buffett pays 15% on his investment income - the only thing holding back those who believe the current system is unfair is their own outlandish selfishness. They need to get the eff over themselves, get of their asses and get to work.

That sounds right. And then they expect to fully implement "NewBAC I" by end of Q3, giving them $2b of savings over Q4'13 and Q1'14. That gets them to $14.2b. Then I'm throwing in another billion for savings from LAS rundown, although I figure it will be more than just 1 billion. The Fed wording suggests they are allowed to return based on their forward looking capital generation, not their present level. So say they have roughly $13.4B to save from LAS non-core operating and litigation then another roughly $4B remaining under New BAC, or $17.4B in total....let's assume they have zero realization in 2013 (for simplicity), then 1/3 of the 17.4 is realized in 2014 and 2/3 in 2015 before the full 17.4 in 2016. That's $17.4B in pre-tax realization over the next 3 years. If adjusted EBT is $12.4B, that's $37.2B cumulative over three years, bringing total pre-tax cash flow to $54.6B before excess R&W losses ($17.4 + $37.2). I come up with $10.6B of possible R&W losses over and above current reserves based on prior settlement rates, etc., which leaves $44B of pre-tax cash flow.... At an effective tax rate of 17.5% (half of the statutory 35% rate to be conservative), that's ~$36B of after-tax excess cash flow over the next three years. My $.35 annual dividend adds up to $11.9B total dividends over three years, leaving $24.1B for buybacks. Perhaps we will be unlucky enough to have the stock rise above tangible book, but assuming a $24.1B buyback at an average price of TBVPS, or ~$12.40, BAC could retire 17% of shares outstanding over the next three years. If those earnings are instead taxed at 0%, versus 17.5%, shares retired rises to 23% of fully diluted shares outstanding...if BAC only has $6B of excess R&W versus $10.6B, untaxed, that's another 3% of shares out. All that to say, the scenarios can get pretty exciting.

;D

Sorry, meant to post here... I estimate BAC's earning power right now, after adding back FVA, DVA adjustments, etc., but before any cost savings, is about $12.2 billion pre-tax. Assuming a 35% tax rate and 11.5B fully diluted shares out, that's about $.69 per share. I don't see why a 50% dividend payout based on this figure isn't feasible, or roughly 8 cents per quarter. At $9.50 PPS, that's about a 3.6% yield - that would vault BAC from black-box turnaround to a quasi-regulated income generator. Anything over and above that from DTAs and cost savings, net of remaining R&W, could be used to repurchase shares.

A value trap it was >:(

Watsa, I look at the entire race but also Ohio specifically as follows - Obama won in 2008 with three big tailwinds: 1) anti-bush rhetoric, 2) Obama's fraudulent promise that he was going to unite the country that made everyone feel all warm and fuzzy (despite having one of the most liberal voting records on the planet) and 3) McCain as an alternative. This three tailwinds combined to produce record democratic turnout driven by the youth vote, the minority vote and republicans voting for something different. NOW....1) you have a demoralized democratic base due to Obama's horrific performance since the first debate, and 2) the republican base is now fired up since the first debate b/c we FINALLY got to see Romney for who he is - a brilliant turnaround artist with a positive vision for the country - both of which will combine to narrow the turnout gap, IMHO. I'm not a polling expert, but when Ohio polls have Obama up 1 or 2 with D+8 and you have the above two factors driving a narrower turnout gap, I tend to believe Karl Rove when he says the following ((See attached for Rove article): Sifting_the_Numbers_for_a_Winner.pdf

The value play is based on the general polls over-polling democrats. Any model based on the general polls doesn't take this into account. Here's an interesting model with a very good record: http://www.colorado.edu/news/releases/2012/10/04/updated-election-forecasting-model-still-points-romney-win-university

Man, I guess lottery tickets are always enticing. The last few says I was thinking about a career change, and betting against the underdogs across all races… republicans and democrats are both showing too enticing odds for them. I guess people are even more emotional about politics and stocks. Betting on Romney here would be akin to the example Munger always uses to explain the pari-mutuel betting system where some make careers out of loading up on an underpriced horse........which has absolutely nothing to do with betting against all underdogs and/or emotion.....

The contrarian in me says Romney's presidential intrinsic value is far higher than what Intrade currently predicts. As anyone who has dug into the details of the various polls knows, many of the polls showing Obama up even 1 or 2 in the swing states are over-polling democrats to the tune of 5 to 10% higher than Republicans. 2008 was D+8%ish, 2010 was R+ and 2004 was roughly dead-even. With republican enthusiasm up and democratic enthusiasm down, any poll showing D+5 or more is asinine, IMO. The various markets are voting Obama today with equities, gold and Intrade all rising - and the Street has capitulated on Romney's chances, per this CNBC article: http://blogs.wsj.com/peggynoonan/2012/11/05/monday-morning/. If this isn't a contrarian sign, IDK what is. Karl Rove is predicting a narrow but potentially blow-out win for Romney: http://news.investors.com/politics-andrew-malcolm/110612-632299-election-prediction-close-race-with-romney-beating-obama-narrowly.htm, and he mentioned on Hannity the other night that his super pac American Crossroads would not be spending $2MM in PA if it was not far closer than what the media would have you believe..... And lastly, Peggy Noonan had a good note out the other day regarding Republican enthusiasm, etc....: http://blogs.wsj.com/peggynoonan/2012/11/05/monday-morning/