yadayada

very large equipment is half their assets and is selling at a small discount. Smaller equipment is selling at 40-60% discounts. Earlier this year they said on the conference call that large pieces were selling close to book in the market. Also the mother of all commodity collapses happened this year with just about every commodity coming down hard, and they took about a 40% discount? Not that terrible. And they are not selling their best assets. And my point still stands, in H1 they sold equipment without having to discount them further. You were arguing writser, that apparently all their equipment would now be discounted by 55% or whatever it was after that Indonesia shutdown, which did not happen in H1. So even in a pretty much worse case armageddon scenario it did not happen. The discount was only 42%.. So if the CEO would have been smarter (stupid of me to assume), he would have sold more equipment when he could in H1 (at a 20-40% discount) to get as much cash, to refinance those bonds as quickly as possible, instead o f inserting them into unprofitable segments. And actually try to do more of those 14m 2016 planned cost cuts in financial year 2015 already. Even if you were right, it is really irritating to follow and remind people of their mistakes in this passive aggressive belittling 'told you so!' tone. And if you feel the need to do it, actually adding something interesting to the discussion usually helps too.

In various write ups and in Cheniere's investor presentation it states that about 2.6-2.8bcf/day will come online in 2016 and 2017. And between now and 2020, you can possibly expect 10+bcf/day in Canada and the US. Hoping for a demand shock with a sharp price increase on the short term. Even if average prices are 4.5$ for a year, you will do very well.

They sold equipment at book value in H2. And if you would read up on the market a little bit (or read some transcripts of quarterly call), part of their equipment would sell for about 30-50% discounts, and other equipment would sell at book value. The thesis would still work if management would sell at a discount of 30-40%. It would greatly reduce interest costs. Net debt is about 330m$ right now subtracting derivatives and net cash and net working capital. SO if they sold 150m$ of equipment at 40% loss (instead of trying to rent out as much as possible at shitty rates), net debt could be reduced to 150-200m$ within a few years, with much lower interest costs. Then you got a business that generates 20-30m$ of FCF. Also to add, I seriously doubt the last CEO knew wtf he was doing. With that acquisition proposal, polluting shareholders, and not even getting a very good deal. He didnt really seem like a guy who had shareholders interest at heart. You really sound in a lot of posts like you got something stuck up your ass or something. I mean that post is just dripping with anger and passive aggressiveness. I think it is a lot more productive if we just discuss these things without getting all hostile.

Yeah i sold out at 12c. I should have sold earlier. The thesis was a slow liquidation, not renting out most of your equipment at low rates. If they sold like 30% of their equipment at 20-40% discounts, and used that to pay off debt and refinance, it could have worked out nicely. But asset disposals are way too slow. I guess inside ownership is too low, they just want to gamble and keep getting a paycheck.

thanks Wilson, does that 3bcf/day include LNG exports? Currently at least 10bcf/d is under construction that is suposed to come online in the next 6 years. Add 3bcf/d in demand growth from industrial and coal plant shut downs, that is an extra 28bcf/day needed in 2021. Then factor in supply reductions and I easily see how another 30bcf/d need to be added by Utica and Marcellus. They would need to almost tripple in production. About 17bcf of pipeline capacity is planned over the next 3-4 years. With a lot of debt heavy balance sheets, I dont see how taht is sustainable below 4$?

Oil is irrelevant here. And currency moves account for about 20% in costs. But most of US gas is consumed by US. And the supply/demand gap will simply be way too big. That is the thing that really matters here. The fact that the only fields that can provide production growth, stopped growing, the moment gas went below 4$. So you need almost 7bcf/d in extra production in 2 years time vs 91bcf/day now, but actual growth in the US will be closer to zero if prices stay here. So that means there is an extremely large chance prices will correct by a large % within 1-2 years. Because at some point production will have to increase, and that only happens at higher prices. So that means betting on the more levered gas plays that have fallen a lot becomes a less risky proposition. Also Canada produced a total of 15.5 bcf per day in 2014. Exports were 7.7bcf/day. Consumption was 10bcf/day. So in order to fill this 7bcf/day gap in the US they would need to increase production by almost 50% within 2 years. And then double their export output. Highly unlikely that will happen. edit: Also 25-50 GW of coal will come offline. it takes 10 cf of gas to provide 1 KWH of energy in a gas plant. so you would need another 10 * 24 * 25 million . That is 6-12bcf/day in demand growth alone. http://www.eia.gov/tools/faqs/faq.cfm?id=667&t=2

What gas names are you in currently packer? You just bought the low cost Marcellus players?

So gas E&P stocks have dropped by a huge amount. Thought I would provide some analysis with actual numbers why it is exciting to invest there now, what the market looks like. To start off, since 2010, gas production has increased by about 500 billion CF a month. http://www.eia.gov/dnav/ng/hist/n9050us2m.htm And the Marcellus field has added in that period about 420 billion CF a month. This is all average production per day. And they are now levelling off. So Marcellus is a huge % in this. Some other traditional fields have been in decline. See following link to verify this: http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf I googled for a bit on the Marcellus field a bit and found the following articles: https://oilandgas-investments.com/2015/natural-gas/the-marcellus-is-close-to-peak-production-and-why-this-is-so-important/ http://www.naturalgasintel.com/articles/99892-as-marcellus-shale-costs-fall-and-volumes-rise-operators-want-more So Cabot oil has some of the highest quality assets in Marcellus, and they are break even full cycle at about 1.4$ realized prices (currently closer to 1$): http://www.naturalgasintel.com/data/data_products/weekly?location_id=NEATENN4MAR&region_id=northeast http://phx.corporate-ir.net/phoenix.zhtml?c=116492&p=irol-calendar (presentation of Cabot oil). What would other gas producers look like? Note that operating costs have not fallen by much, and they are 2/3 of production costs. So for the lowest cost player in this field to make money you need at least gas prices of about 3-3.5$ elsewhere (. My guess is , a lot of marginal players need at least 4$ gas to make a full cycle profit. You can see this in the total collapse in rigs as soon as gas prices dropped in a lot of regions. So if the field that basically provided all the growth in NA gas levelled off the moment gas reached 3$ end 2014, and Utica also levelled off the moment gas prices fell (with rig count falling from 30 to 5 very quickly), then it is clear to me that with other fields declining or even, total production will decline. You can actually see this so far in 2015 (you can google that link for yourself). If you check the above link, you will see that the other fields have declined by about 2 Bcf/ day in 2015. With demand to grow and Cheniere having export capacity of 4 Bcf/d, of which 2.8 Bcf/d coming online in 2016 and 2017 (that is over 17% of marcellus field). So production is down in the US, up 1bcf/day in Canada I think (judging by exports) and possibly another bcf/d will fall off at these prices if declines continue, and 2.8bcf/day will be added in export demand. Then there is a steady rise in gas consumption in north america that increased 2.5% in 2014 (or about 2 Bcf/day total, so not 2bcf added each day). So if consumption rises another 4bcf/day in next 2 years, exports increase 2.8bcf/d, that is 6.8bcf/d. And so far production is actually falling. So at 16 bCF/day right now (possibly lower already), the Marcellus field has provided almost all the growth in US gas. They stopped growing right away when gas hit 3$. And to keep up with demand you will need 6.8 million CF/day coming online in the next 2 years. That is half of the Marcellus field! And the only two fields that were growing rapidly, and have provided almost all of US gas production growth levelled off right away when gas started falling (unlike oil for example). If you add in some additional LNG terminals down the line here, I think the future for gas producers look very bright. FWIW total north american consumption of gas was about 91 bcf/d in 2014. This includes mexico. And Canada production has been flat in the past 7 years, while their reserves are dwindling (US reserves growing). So together will LNG exports from Cheniere and regular growth, that is a 7.4% increase in demand in the next 2 years alone. And it doesnt really look like production is catching up with that right now. http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2015/bp-statistical-review-of-world-energy-2015-full-report.pdf Page 22 and 23. Note that you ahve to convert to cubic feet, the unit I used. So multiply by 35, and divided by 365 to get BCF/day. So with that in mind, if you bet on cheap gas producers that make a small profit at around 3$ gas you will do very well. Especially since some of those are priced like they will never make money again. And the F&D costs are actually pretty low right now, they don't have that much room to fall % wise vs total full cycle development costs. Finally time to drill has been cut by 60-75% in the past 6-7 years. But rig count has actually fallen from 1400 to 200 now! With gas consumption up quite a bit. Even if they are more efficient, that is just too few rigs. A few names I had in mind are Bellatrix, perpetual, Tourmaline, Chesapeake, Trilogy. All of these have fallen a lot, will likely survive the next 2 years, and are very very cheap if gas goes to 4$+ . Thoughts? edit: here some more on Cheniere: http://marketrealist.com/2014/10/must-know-overview-cheniere-energy/ So potentially more then 5bcf. Add in 4bcf production growth in next 2 years, and that is 9bcf in demand growth. Which would be huge.

https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=1005321471&source_id=em&extdocid=1005321471_1_ENG_pdf&serialid=0sD72ky5PVE69YdSxRIsei9L5gnDVssxzgAuLedlEiQ%3d Page 47 and 48. Fwiw current rig count is, 674 http://www.wtrg.com/rotaryrigs.html ANd from the article: Convential it takes about 20-40 days, unconventional it takes about 10 days (8 for the newer ones, and 14 for older ones). A lot of rigs being cut are unconventional. So let's assume about 25 days to drill a well? That is about 8-10k wells per year. Crazy that global oil rigs have fallen by 30% as well. You would think that is not sustainable. And no signs of slowing down either. What is more crazy is the fall in gas rigs: It is at 211 actually right now. It has not been that low since that entire graph! But it takes a bit longer to empty those wells for natural gas. But you would say that if this keeps up, we will see a supply crunch at some point. If even Peyto, THE low cost provider barely makes a profit at 3$ gas, my guess is we will see 4-5$ gas within the next 2 years. Another interesting graph: Production in most of these fields is declining. Interesting that the largest gas field, Marcellus, is profitable at around 4$ gas in most parts https://oilandgas-investments.com/2015/natural-gas/the-marcellus-is-close-to-peak-production-and-why-this-is-so-important/ I can see why a lot of gas company CEO's are buying stock.

Updates? At 12bn$ 4% profit margins like CHRW, that is 480m$ net profit. put a 16x multiple on that and there is well over 100% upside. Current marketcap after drop is 3.3bn$. If there is potential beyond 12bn$ revenue it looks cheap. I have a feeling it might get cheaper at some point though. A big if here is that 4% profit margin. I wonder how self driving cars affect a company like this? Anyone has any ideas on that? Since it does not seem crazy to assume that a sizable % of traffic on the road could be self driving 5-10 years from now, that seems like something to consider here. If cost of trucking goes down, you could say that is good for companies like this?

Pupil he goes into how often these forward prices are correct a few minutes in: http://www.bnn.ca/Video/player.aspx?vid=684653

FWIW i mentioned Tourmaline earlier, this is Peyto's Don Gray's comment on Mike rose: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/an-oil-patch-pitching-ace/article4327845/?page=all And Rose is actually married to the CEO of perpetual energy, Clay Riddell daughter. It seems the three safe ones to bet on are probably Gray, Rose and Riddell in that order.

His returns were ridicilous too, like something north of 60% per year? He started with a very small amount.

That was a very helpful comment :) . Nice to have some intelligent discussions going. I actually sold 80% of my stake. I guess we will have room to get in if they sign up Epic then. The patents are actually weak, they lost a case in august 2013 when they sued. There are too many unknowns surrounding this thing. The quote is from a conference call.

market cap = $100m value of 6.75m TOU = $200m value of debt = $393m this is what is going to happen to your TOU shares. Perpetual intends to retain the TOU Shares and systematically manage its debt obligations over time, including redemption of $35 million in outstanding convertible debentures (PMT.DB.E) which mature on December 31, 2015 as well as other debt obligations. The TOU Shares may also be utilized to fund the Company's development plans at East Edson as appropriate and will provide greater financial flexibility to capture and evaluate other new high impact opportunities and pursue strategic initiatives. Relative investment merits will be considered along with other leverage and risk management considerations. not a good way to own TOU. my suggestion to anyone who wants to own TOU. buy TOU. http://i.imgur.com/QgrFv.gif