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Wellmont, I enjoyed reading your thoughts on what is (or is not) 'priced in'. I still have a bad habit of assuming that just because something is pretty obvious to me that it is also obvious to everyone else (and therefore must be already reflected in the stock price). as a result, things tend to play out much more slowly than what I expect. As a result I am often early to the party and early to leave. Not a bad thing. I am trying to be a little more patient when I buy and sell an investment.

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You have a point.  Okay, What about a list of "quality" small caps.

 

 

Most of the quality small caps won't be E&P, they'll be energy-related products and services. I haven't done any work on most of these but here are a few Canadian small caps from gurus I follow:

 

CEU

DEE

POU

RRX

SES

SCL

TOT

HNL

HWO

 

 

 

 

 

 

 

KC, Will have a look.  thanks.

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I have started a watch list.  These all have Debt to Cash Flows of 2.0 x or less based on recent earnings.  Obviously The cash flow side of the equation will drop.  The d/cf numbers have come from screens and may be variable. 

 

Arc Energy - ARX

BNE

CPG

ERF

TOG

VET - noted earlier

WCP - also noted earlier

 

I am only looking right now but had to get a narrowed list. 

 

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How do you calculate nav ex goodwill?  Never heard of it before.

 

 

As everything gets cheap I certainly would appreciate the ability to diversify, and maybe move up the quality curve, if thats how things unfold.  My PWt position is as large as I want it.  On the other hand it is trading at less than 30% nav - ex. goodwill.

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How do you calculate nav ex goodwill?  Never heard of it before.

 

 

As everything gets cheap I certainly would appreciate the ability to diversify, and maybe move up the quality curve, if thats how things unfold.  My PWt position is as large as I want it.  On the other hand it is trading at less than 30% nav - ex. goodwill.

 

Wouldn't this just be a standard NAV calculation, assigning zero value to any goodwill on the balance sheet?

 

The more pressing question to me is:  How do you calculate NAV in the first place?    Do you look through the reserve reports and adjust for a lower price of oil?  Or are you talking about a NAV number as presented by management?

 

NAV for E&P companies always seems like a moving target to me. 

 

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Wellmont, I enjoyed reading your thoughts on what is (or is not) 'priced in'. I still have a bad habit of assuming that just because something is pretty obvious to me that it is also obvious to everyone else (and therefore must be already reflected in the stock price). as a result, things tend to play out much more slowly than what I expect. As a result I am often early to the party and early to leave. Not a bad thing. I am trying to be a little more patient when I buy and sell an investment.

 

I have yet to see a dividend cut that is fully "priced in" --- it seems there's always a spike down when the cut is announced, even if is patently obvious that either the cut is coming.  But I've seen many instances where a brief spike down on the divi-cut is followed by a very fast correction to the pre-cut price (or even higher).  Maybe that's a better definition of "priced in":  Will a cut have any more than a very short-term affect on the price?

 

I don't think this is true with PWT in this environment.  A cut will be just another reason to drive the price down, and it seems likely it will keep going down until either crude goes up or they manage to sell some assets for non-firesale prices.

 

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How do you calculate nav ex goodwill?  Never heard of it before.

 

 

As everything gets cheap I certainly would appreciate the ability to diversify, and maybe move up the quality curve, if thats how things unfold.  My PWt position is as large as I want it.  On the other hand it is trading at less than 30% nav - ex. goodwill.

 

Wouldn't this just be a standard NAV calculation, assigning zero value to any goodwill on the balance sheet?

 

The more pressing question to me is:  How do you calculate NAV in the first place?    Do you look through the reserve reports and adjust for a lower price of oil?  Or are you talking about a NAV number as presented by management?

 

NAV for E&P companies always seems like a moving target to me. 

 

 

All I have done is take NAV which Pwt has reported as 15.xx - taken away goodwill; and taken it down another couple of dollars to account for oil price decrease to get about $10.  As far as I am concerned that is the best you could ever get to a reasonable estimate of what someone else might offer for the property, operation, and equipment. 

 

 

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Wellmont, I enjoyed reading your thoughts on what is (or is not) 'priced in'. I still have a bad habit of assuming that just because something is pretty obvious to me that it is also obvious to everyone else (and therefore must be already reflected in the stock price). as a result, things tend to play out much more slowly than what I expect. As a result I am often early to the party and early to leave. Not a bad thing. I am trying to be a little more patient when I buy and sell an investment.

 

I have yet to see a dividend cut that is fully "priced in" --- it seems there's always a spike down when the cut is announced, even if is patently obvious that either the cut is coming.  But I've seen many instances where a brief spike down on the divi-cut is followed by a very fast correction to the pre-cut price (or even higher).  Maybe that's a better definition of "priced in":  Will a cut have any more than a very short-term affect on the price?

 

I don't think this is true with PWT in this environment.  A cut will be just another reason to drive the price down, and it seems likely it will keep going down until either crude goes up or they manage to sell some assets for non-firesale prices.

 

I see it this way. clearly investors expect a cut. nobody leaves 18% on the table for very long. so by not cutting it management is holding the price down. if they cut all the "wait to buy" investors would buy the stock. pwe looks like it's in distress. but it's far from it. if they cut the div to .04 a year the company would not look distressed any longer. it would have breathing room. and I think it would trade better. the excuse that investors need to be paid for their patience is nonsense to me.

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Has anyone spent a moment looking at Entrec (ENT.TO)?  They're in the heavy haul and crane business out in the Alberta oil patch.  Started up operations a couple years ago with an acquisition strategy.  As you already know (even before looking at the chart), the stock is down from the $1.20-1.40 range to $0.60-0.65, which is well below tangible book. It sold off particularly hard (10x normal volume) on the news of the Petronas delay.

 

There are lots of companies like this right now, and I'm not claiming this one is special. (It may be. I really haven't looked into it carefully but intend to at some point.) 

 

It's their debentures that caught my eye --  $25M convertible issue, 7% coupon, maturing end of October 2017.  They've tanked in just a few weeks down to 60% par. This seems irrationally pessimistic.  Yes they're levered, but senior debt consists of a asset-backed line of credit maturing in 2019, on which they owe about $140M and pay 3.5% interest.  They have enough room on the ABL to pay off the debs if they so desired. 

 

Insiders have been buying the debs recently at $80.xx. 

 

If anyone has any thoughts I'd be happy to hear them.

 

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Lightstream's press release on re-authorizing their share repurchase program was a little sketchy.

 

http://www.lightstreamresources.com/news/news-releases.cfm?newsReleaseAction=view&releaseId=167

 

QUOTE: As of November 6, 2014, no purchases have been made under Lightstream's previously announced NCIB.

 

On November 7, Lightstream bought back shares.

 

On November 10, Lightstream issued the press release.

 

Maybe insiders don't want other people to know that they are buying back a lot of shares?

 

2- In general, I think that management tries to mislead shareholders.  I don't like sketchy management teams.

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Lightstream's press release on re-authorizing their share repurchase program was a little sketchy.

 

http://www.lightstreamresources.com/news/news-releases.cfm?newsReleaseAction=view&releaseId=167

 

QUOTE: As of November 6, 2014, no purchases have been made under Lightstream's previously announced NCIB.

 

On November 7, Lightstream bought back shares.

 

On November 10, Lightstream issued the press release.

 

Maybe insiders don't want other people to know that they are buying back a lot of shares?

 

2- In general, I think that management tries to mislead shareholders.  I don't like sketchy management teams.

 

Not quite sure what you are saying here. That buying back shares now is a bad decision by management?

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I see LTS has started to buy back shares. They're buying back as Petrobakken not sure why that is.

3 mil cancelled as of Dec. 5

 

don't they buy at the same time they are issued via dividend reinvestment? does that make a lot of sense?

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I see LTS has started to buy back shares. They're buying back as Petrobakken not sure why that is.

3 mil cancelled as of Dec. 5

 

don't they buy at the same time they are issued via dividend reinvestment? does that make a lot of sense?

I don't know. Does a DRIP program ever make sense or does it only make sense under certain criteria? I'm thinking the same thought process could be applied to options. Another way to word the question is,  should companies ever have a DRIP program.

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I see LTS has started to buy back shares. They're buying back as Petrobakken not sure why that is.

3 mil cancelled as of Dec. 5

 

don't they buy at the same time they are issued via dividend reinvestment? does that make a lot of sense?

I don't know. Does a DRIP program ever make sense or does it only make sense under certain criteria? I'm thinking the same thought process could be applied to options. Another way to word the question is,  should companies ever have a DRIP program.

 

You should add a DRIP program if you are getting tight on cash and you think this might scare the market less than cutting the dividend.  And of course if misleading people in this way doesn't bother your conscience.

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I just started a thread on WRES in the investment ideas forum: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/wres-warren-resources/

It an oil and gas company that IMO is being mispriced as if it was primarily an oil company, but due to an acquisition that is no longer the case. LTM Pro forma EBITDA of 139.5 million... the current market cap is 121 million. Oil is unhedged, so oil ebitda will not be that high, but the CEO that didn't hedge is history. Last trade was 1.50 and the 52 WK high is 7.02. Unlike many of the ideas discussed in this thread, I don't think this one needs a much higher oil price for upside. I think it is undervalued even in the current crazy environment.

 

I have another idea I'll probably write up when I have time too. EW.V, a tiny micro cap with 12M market cap and 8.3 M cash on hand with no debt. It has oil producing properties(250 boepd (net), and as they say in their presentation: "Portfolio of assets has access to approximately 1.3 million prospective exploration acres in five

countries". The most interesting of those(other than the current producing ones) are potential gas properties in Romania. If drilling is done they would be fully carried for 12 wells for 15% interest. That is a lottery ticket, but it could have a lot of upside. The company is currently buying back shares.

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I see LTS has started to buy back shares. They're buying back as Petrobakken not sure why that is.

3 mil cancelled as of Dec. 5

 

don't they buy at the same time they are issued via dividend reinvestment? does that make a lot of sense?

I don't know. Does a DRIP program ever make sense or does it only make sense under certain criteria? I'm thinking the same thought process could be applied to options. Another way to word the question is,  should companies ever have a DRIP program.

 

You should add a DRIP program if you are getting tight on cash and you think this might scare the market less than cutting the dividend.  And of course if misleading people in this way doesn't bother your conscience.

 

I wasn't necessarily talking about how LTS did it, not exactly sure when they instituted their DRIP, as the comment of buying back shares while you have a drip in place can apply to other stocks. The Canadian banks come to mind as to other shares that I have in DRIP, who also have normal course issuer bids.

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Lightstream's press release on re-authorizing their share repurchase program was a little sketchy.

 

http://www.lightstreamresources.com/news/news-releases.cfm?newsReleaseAction=view&releaseId=167

 

QUOTE: As of November 6, 2014, no purchases have been made under Lightstream's previously announced NCIB.

 

On November 7, Lightstream bought back shares.

 

On November 10, Lightstream issued the press release.

 

Maybe insiders don't want other people to know that they are buying back a lot of shares?

 

2- In general, I think that management tries to mislead shareholders.  I don't like sketchy management teams.

 

Not quite sure what you are saying here. That buying back shares now is a bad decision by management?

 

They omitted the fact that insiders and the company were buying back shares.  They would have known those things when they issued their press release.  Bad form.

 

Insiders were front running the NCIB.  That strikes me as unethical.

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Lightstream's press release on re-authorizing their share repurchase program was a little sketchy.

 

http://www.lightstreamresources.com/news/news-releases.cfm?newsReleaseAction=view&releaseId=167

 

QUOTE: As of November 6, 2014, no purchases have been made under Lightstream's previously announced NCIB.

 

On November 7, Lightstream bought back shares.

 

On November 10, Lightstream issued the press release.

 

Maybe insiders don't want other people to know that they are buying back a lot of shares?

 

2- In general, I think that management tries to mislead shareholders.  I don't like sketchy management teams.

 

Not quite sure what you are saying here. That buying back shares now is a bad decision by management?

 

They omitted the fact that insiders and the company were buying back shares.  They would have known those things when they issued their press release.  Bad form.

 

Insiders were front running the NCIB.  That strikes me as unethical.

 

Not able to comment on what they did or didn't know at the time of the press release. But my understanding is that a third party is responsible for buybacks, but have no idea what requirements would be as far as frequency of reporting buys to company.

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Lightstream's press release on re-authorizing their share repurchase program was a little sketchy.

 

http://www.lightstreamresources.com/news/news-releases.cfm?newsReleaseAction=view&releaseId=167

 

QUOTE: As of November 6, 2014, no purchases have been made under Lightstream's previously announced NCIB.

 

On November 7, Lightstream bought back shares.

 

On November 10, Lightstream issued the press release.

 

Maybe insiders don't want other people to know that they are buying back a lot of shares?

 

2- In general, I think that management tries to mislead shareholders.  I don't like sketchy management teams.

 

Not quite sure what you are saying here. That buying back shares now is a bad decision by management?

 

They omitted the fact that insiders and the company were buying back shares.  They would have known those things when they issued their press release.  Bad form.

 

Insiders were front running the NCIB.  That strikes me as unethical.

 

The Nov 10 was mainly regarding issuer repurchase plan agreement, the NCIB is there since a year ago.

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