PWE - Penn West Petroleum

[goldfinger]

Who was lamenting a few weeks ago about how it was difficult to accumulate a meaningful position in PWT without moving the price up a lot...... :-)

Well, I think whoever wants to take a big chunk of PWT, can get all they want right now.

 

 

lol.  Someone else was lamenting that you would never get it at a low price again... well its there now.

 

For a strange comparable Suncor just paid approximately 46,000 Cdn (ithink it was Cdn.) per flowing barrel for COS.  Cos has similar production stats to PWT, and similar debt levels.  It differs in that COS has essentially unlimited reserves, but a lower grade of oil, and higher costs of production.  The comparative to me puts Pwt at a value of 9.20 per share (accounting for the debt we well).

How did you come up with 9.2 cad/share at 45k per flowing net of debt? My numbers are closer to 2 to 3 cad putting most non core assets at 0 of course?

[Uccmal]

Who was lamenting a few weeks ago about how it was difficult to accumulate a meaningful position in PWT without moving the price up a lot...... :-)

Well, I think whoever wants to take a big chunk of PWT, can get all they want right now.

 

 

lol.  Someone else was lamenting that you would never get it at a low price again... well its there now.

 

For a strange comparable Suncor just paid approximately 46,000 Cdn (ithink it was Cdn.) per flowing barrel for COS.  Cos has similar production stats to PWT, and similar debt levels.  It differs in that COS has essentially unlimited reserves, but a lower grade of oil, and higher costs of production.  The comparative to me puts Pwt at a value of 9.20 per share (accounting for the debt we well).

How did you come up with 9.2 cad/share at 45k per flowing net of debt? My numbers are closer to 2 to 3 cad putting most non core assets at 0 of course?

 

You know, its not that precise.  I didn't account for non-core, core or anything else - the situation is likely similar with either company.  Su probably got alot of non-producing acreage with Cos, that you might call non-core, a lot of licenses they may sell off, and stuff that is useless. 

 

Suncor is paying ~ 6.6 B for Cos including debt.  So 4.4 B for the assets of COs. 

 

Cos produces the same amount of boe/day roughly as pwt, after the recent divestitures by pwt.  Cos is hard to pin down exactly because production has been erratic due to fires, etc.  But its in that range.  I used 4.4 b/500m pwt shares = 9.20.  Maybe its 7.50 or 8:50 or 9:50 - doesn't matter - its a hell of alot more than 80 cents. 

 

In my mind the two transactions would be similar but different.  Each of pwt and cos has valuable assets and not so useful assets, a similar amount of debt, a similar ability to service the debt, different problems but perhaps similar in a financial sense. 

 

Thats it, nothing more.  Its Munger's or Buffett's fat person entering the room. 

 

I dont know where you get 2-3 $ from. 

[goldfinger]

Who was lamenting a few weeks ago about how it was difficult to accumulate a meaningful position in PWT without moving the price up a lot...... :-)

Well, I think whoever wants to take a big chunk of PWT, can get all they want right now.

 

 

lol.  Someone else was lamenting that you would never get it at a low price again... well its there now.

 

For a strange comparable Suncor just paid approximately 46,000 Cdn (ithink it was Cdn.) per flowing barrel for COS.  Cos has similar production stats to PWT, and similar debt levels.  It differs in that COS has essentially unlimited reserves, but a lower grade of oil, and higher costs of production.  The comparative to me puts Pwt at a value of 9.20 per share (accounting for the debt we well).

How did you come up with 9.2 cad/share at 45k per flowing net of debt? My numbers are closer to 2 to 3 cad putting most non core assets at 0 of course?

 

You know, its not that precise.  I didn't account for non-core, core or anything else - the situation is likely similar with either company.  Su probably got alot of non-producing acreage with Cos, that you might call non-core, a lot of licenses they may sell off, and stuff that is useless. 

 

Suncor is paying ~ 6.6 B for Cos including debt.  So 4.4 B for the assets of COs. 

 

Cos produces the same amount of boe/day roughly as pwt, after the recent divestitures by pwt.  Cos is hard to pin down exactly because production has been erratic due to fires, etc.  But its in that range.  I used 4.4 b/500m pwt shares = 9.20.  Maybe its 7.50 or 8:50 or 9:50 - doesn't matter - its a hell of alot more than 80 cents. 

 

In my mind the two transactions would be similar but different.  Each of pwt and cos has valuable assets and not so useful assets, a similar amount of debt, a similar ability to service the debt, different problems but perhaps similar in a financial sense. 

 

Thats it, nothing more.  Its Munger's or Buffett's fat person entering the room. 

 

I dont know where you get 2-3 $ from.

I get 2.5 to 3B for Viking and Cardium at 50 to 60K per flowing.

~100 M for the royalty

300 to 400M for Swan hills, Slave point and other non core assets - best ones at 25/35K per flowing, others at almost 0

200M tax assets.

2+B debt

[Uccmal]

Uccmal,

 

Hate to break your bubble but, COS can produce indefinitely at the same cost by simply continuing to send trucks and shovels to their mine. PWT on the other hand has to continue drilling or spend capex to maintain production which is not factored in into their netbacks. And SU will likely get a fair bit of cost cutting by combining their operations and using best practices.

 

Under a different environment PWT is worth multiples of today's prices but, it has to change and relatively fast I might add.

 

Cardboard

 

They are not directly comparable.  On that I will agree.  However, the notion that there is no elevated cost beyond sending trucks into a mine indefinitely is incorrect.  This fall they lost a huge amount of production to an upgrader fire.  These fires and explosions are not one offs, and I suspect are not insurable, leaving the refinery repair costs and business interruption costs to the producers.  They also require inputs in the form of nat. gas, some of which comes from other Alberta producers.  And then there is the low price for the product relative to the light oil of Pwt.  Then there is land reclamation costs which are fractional for a Pwt relative to Cos.  Then there is water treatment costs.  I figure it nets out. 

 

Even if Pwt doesn't fetch as much as Cos, it is still worth multiples of its stock price.  On that we can agree.  No bubble to burst.  I am under no illusions.

 

There are numerous benefits COS gets being owned by Suncor. For one, they are right next door to Suncor's mines, and to improve reliability they can send production right on over to the upgrader to maintain high efficiencies. They wouldn't do this at a 11% ownership.

 

Syncrude is upgraded, not discounted too much compared to WTI. Further, even if it was discounted to WTI, cheaper feedstock to refineries, of which both Imperial and Suncor's take advantage of. Syncrude also is a huge asset, that with operational improvements, will create huge benefits for its owners given its scale of operations.

 

In this commodity landscape, scale is of utmost importance. Super mines are continually wiping out smaller, less efficient mines, from Iron Ore to Zinc.

 

To Re: Goldfinger. It depends on the refinery. Right? If you're not integrated, you can't get above market prices. Heavy oil gets discounted, but that's great for refineries built to handle heavy crude. If you're a light oil producer, with no midstream or integrated assets, you're at the mercy of the market price. Downside risk is only rewarded during tough times, which is why Suncor was able to buy COS fairly cheap.

 

The going forward rate of per barrel flowing oil Suncor paid for COS is much lower than 46,000. COS had several production issues in 2015 lowering overall output. So comparing PWT with COS may not be the best way to evaluate the company, imo.

Uccmal,

 

Hate to break your bubble but, COS can produce indefinitely at the same cost by simply continuing to send trucks and shovels to their mine. PWT on the other hand has to continue drilling or spend capex to maintain production which is not factored in into their netbacks. And SU will likely get a fair bit of cost cutting by combining their operations and using best practices.

 

Under a different environment PWT is worth multiples of today's prices but, it has to change and relatively fast I might add.

 

Cardboard

 

They are not directly comparable.  On that I will agree.  However, the notion that there is no elevated cost beyond sending trucks into a mine indefinitely is incorrect.  This fall they lost a huge amount of production to an upgrader fire.  These fires and explosions are not one offs, and I suspect are not insurable, leaving the refinery repair costs and business interruption costs to the producers.  They also require inputs in the form of nat. gas, some of which comes from other Alberta producers.  And then there is the low price for the product relative to the light oil of Pwt.  Then there is land reclamation costs which are fractional for a Pwt relative to Cos.  Then there is water treatment costs.  I figure it nets out. 

 

Even if Pwt doesn't fetch as much as Cos, it is still worth multiples of its stock price.  On that we can agree.  No bubble to burst.  I am under no illusions.

 

There are numerous benefits COS gets being owned by Suncor. For one, they are right next door to Suncor's mines, and to improve reliability they can send production right on over to the upgrader to maintain high efficiencies. They wouldn't do this at a 11% ownership.

 

Syncrude is upgraded, not discounted too much compared to WTI. Further, even if it was discounted to WTI, cheaper feedstock to refineries, of which both Imperial and Suncor's take advantage of. Syncrude also is a huge asset, that with operational improvements, will create huge benefits for its owners given its scale of operations.

 

In this commodity landscape, scale is of utmost importance. Super mines are continually wiping out smaller, less efficient mines, from Iron Ore to Zinc.

 

To Re: Goldfinger. It depends on the refinery. Right? If you're not integrated, you can't get above market prices. Heavy oil gets discounted, but that's great for refineries built to handle heavy crude. If you're a light oil producer, with no midstream or integrated assets, you're at the mercy of the market price. Downside risk is only rewarded during tough times, which is why Suncor was able to buy COS fairly cheap.

 

The going forward rate of per barrel flowing oil Suncor paid for COS is much lower than 46,000. COS had several production issues in 2015 lowering overall output. So comparing PWT with COS may not be the best way to evaluate the company, imo.

 

Comparing pwt to cos was just an example.  Oil sands upgraders are always having issues.  Production is always in flux due to this.  Its a wonder the Alberta Ministry of Labour allows them to operate at all.  I guess as long as no one is injured. 

 

This is just an example of what folks are willing to pay for oil producing assets.  I am not reading too much into this.  Pwt could easily be picked up by someone like Wcp, which operates in the same area, or someone else, producing similar synergies and economies of scale. 

 

Im not getting overly optimistic due to this or any other deal.  People obviously dont see the similarities the way I do, which is fine. 

[Uccmal]

Who was lamenting a few weeks ago about how it was difficult to accumulate a meaningful position in PWT without moving the price up a lot...... :-)

Well, I think whoever wants to take a big chunk of PWT, can get all they want right now.

 

 

lol.  Someone else was lamenting that you would never get it at a low price again... well its there now.

 

For a strange comparable Suncor just paid approximately 46,000 Cdn (ithink it was Cdn.) per flowing barrel for COS.  Cos has similar production stats to PWT, and similar debt levels.  It differs in that COS has essentially unlimited reserves, but a lower grade of oil, and higher costs of production.  The comparative to me puts Pwt at a value of 9.20 per share (accounting for the debt we well).

How did you come up with 9.2 cad/share at 45k per flowing net of debt? My numbers are closer to 2 to 3 cad putting most non core assets at 0 of course?

 

You know, its not that precise.  I didn't account for non-core, core or anything else - the situation is likely similar with either company.  Su probably got alot of non-producing acreage with Cos, that you might call non-core, a lot of licenses they may sell off, and stuff that is useless. 

 

Suncor is paying ~ 6.6 B for Cos including debt.  So 4.4 B for the assets of COs. 

 

Cos produces the same amount of boe/day roughly as pwt, after the recent divestitures by pwt.  Cos is hard to pin down exactly because production has been erratic due to fires, etc.  But its in that range.  I used 4.4 b/500m pwt shares = 9.20.  Maybe its 7.50 or 8:50 or 9:50 - doesn't matter - its a hell of alot more than 80 cents. 

 

In my mind the two transactions would be similar but different.  Each of pwt and cos has valuable assets and not so useful assets, a similar amount of debt, a similar ability to service the debt, different problems but perhaps similar in a financial sense. 

 

Thats it, nothing more.  Its Munger's or Buffett's fat person entering the room. 

 

I dont know where you get 2-3 $ from.

I get 2.5 to 3B for Viking and Cardium at 50 to 60K per flowing.

~100 M for the royalty

300 to 400M for Swan hills, Slave point and other non core assets - best ones at 25/35K per flowing, others at almost 0

200M tax assets.

2+B debt

 

Suncor took on Cos debt.  They really paid 6.4 B or 80000 per flowing barrel.  Your using around 60000 boe/day - I was using a bit more - 75-80000 boe/day.  The way we are treating the debt is different.  If they were to make an offer for pwt of a comparable nature they would pay your 3.6'B and assume 2 B for debt - 5.6B/500 m shares = 11.20.  I know this is too high for the reasons others have outlined.  However, in both cases we are buying for future opportunities.  We cant be saying that people are buying Cos because it has huge future reserves, but not crediting Pwt for the same. 

 

If anything Pwt should be worth more than Cos because it comes with far less envirnmental baggage but thats another topic.   

 

Anyway, unless oil prices rise substantially I dont believe Pwt will see $9.00 as a standalone or in a takeover.  Maybe if they sell another non core position at a good price. 

[goldfinger]

Who was lamenting a few weeks ago about how it was difficult to accumulate a meaningful position in PWT without moving the price up a lot...... :-)

Well, I think whoever wants to take a big chunk of PWT, can get all they want right now.

 

 

lol.  Someone else was lamenting that you would never get it at a low price again... well its there now.

 

For a strange comparable Suncor just paid approximately 46,000 Cdn (ithink it was Cdn.) per flowing barrel for COS.  Cos has similar production stats to PWT, and similar debt levels.  It differs in that COS has essentially unlimited reserves, but a lower grade of oil, and higher costs of production.  The comparative to me puts Pwt at a value of 9.20 per share (accounting for the debt we well).

How did you come up with 9.2 cad/share at 45k per flowing net of debt? My numbers are closer to 2 to 3 cad putting most non core assets at 0 of course?

 

You know, its not that precise.  I didn't account for non-core, core or anything else - the situation is likely similar with either company.  Su probably got alot of non-producing acreage with Cos, that you might call non-core, a lot of licenses they may sell off, and stuff that is useless. 

 

Suncor is paying ~ 6.6 B for Cos including debt.  So 4.4 B for the assets of COs. 

 

Cos produces the same amount of boe/day roughly as pwt, after the recent divestitures by pwt.  Cos is hard to pin down exactly because production has been erratic due to fires, etc.  But its in that range.  I used 4.4 b/500m pwt shares = 9.20.  Maybe its 7.50 or 8:50 or 9:50 - doesn't matter - its a hell of alot more than 80 cents. 

 

In my mind the two transactions would be similar but different.  Each of pwt and cos has valuable assets and not so useful assets, a similar amount of debt, a similar ability to service the debt, different problems but perhaps similar in a financial sense. 

 

Thats it, nothing more.  Its Munger's or Buffett's fat person entering the room. 

 

I dont know where you get 2-3 $ from.

I get 2.5 to 3B for Viking and Cardium at 50 to 60K per flowing.

~100 M for the royalty

300 to 400M for Swan hills, Slave point and other non core assets - best ones at 25/35K per flowing, others at almost 0

200M tax assets.

2+B debt

 

Suncor took on Cos debt.  They really paid 6.4 B or 80000 per flowing barrel.  Your using around 60000 boe/day - I was using a bit more - 75-80000 boe/day.  The way we are treating the debt is different.  If they were to make an offer for pwt of a comparable nature they would pay your 3.6'B and assume 2 B for debt - 5.6B/500 m shares = 11.20.  I know this is too high for the reasons others have outlined.  However, in both cases we are buying for future opportunities.  We cant be saying that people are buying Cos because it has huge future reserves, but not crediting Pwt for the same. 

 

If anything Pwt should be worth more than Cos because it comes with far less envirnmental baggage but thats another topic.   

 

Anyway, unless oil prices rise substantially I dont believe Pwt will see $9.00 as a standalone or in a takeover.  Maybe if they sell another non core position at a good price.

Sure I am just trying to be ultra conservative to exclude rosy assumptions, but I understand your method.

I definitely think that tight light oil assets like PWT's actually have strategic value in the future against oil sands and heavy oil and I agree about some of your assumptions.

[plato1976]

This one is not a zero? seriously

 

Who was lamenting a few weeks ago about how it was difficult to accumulate a meaningful position in PWT without moving the price up a lot...... :-)

Well, I think whoever wants to take a big chunk of PWT, can get all they want right now.

 

 

lol.  Someone else was lamenting that you would never get it at a low price again... well its there now.

 

For a strange comparable Suncor just paid approximately 46,000 Cdn (ithink it was Cdn.) per flowing barrel for COS.  Cos has similar production stats to PWT, and similar debt levels.  It differs in that COS has essentially unlimited reserves, but a lower grade of oil, and higher costs of production.  The comparative to me puts Pwt at a value of 9.20 per share (accounting for the debt we well).

How did you come up with 9.2 cad/share at 45k per flowing net of debt? My numbers are closer to 2 to 3 cad putting most non core assets at 0 of course?

 

You know, its not that precise.  I didn't account for non-core, core or anything else - the situation is likely similar with either company.  Su probably got alot of non-producing acreage with Cos, that you might call non-core, a lot of licenses they may sell off, and stuff that is useless. 

 

Suncor is paying ~ 6.6 B for Cos including debt.  So 4.4 B for the assets of COs. 

 

Cos produces the same amount of boe/day roughly as pwt, after the recent divestitures by pwt.  Cos is hard to pin down exactly because production has been erratic due to fires, etc.  But its in that range.  I used 4.4 b/500m pwt shares = 9.20.  Maybe its 7.50 or 8:50 or 9:50 - doesn't matter - its a hell of alot more than 80 cents. 

 

In my mind the two transactions would be similar but different.  Each of pwt and cos has valuable assets and not so useful assets, a similar amount of debt, a similar ability to service the debt, different problems but perhaps similar in a financial sense. 

 

Thats it, nothing more.  Its Munger's or Buffett's fat person entering the room. 

 

I dont know where you get 2-3 $ from.

I get 2.5 to 3B for Viking and Cardium at 50 to 60K per flowing.

~100 M for the royalty

300 to 400M for Swan hills, Slave point and other non core assets - best ones at 25/35K per flowing, others at almost 0

200M tax assets.

2+B debt

 

Suncor took on Cos debt.  They really paid 6.4 B or 80000 per flowing barrel.  Your using around 60000 boe/day - I was using a bit more - 75-80000 boe/day.  The way we are treating the debt is different.  If they were to make an offer for pwt of a comparable nature they would pay your 3.6'B and assume 2 B for debt - 5.6B/500 m shares = 11.20.  I know this is too high for the reasons others have outlined.  However, in both cases we are buying for future opportunities.  We cant be saying that people are buying Cos because it has huge future reserves, but not crediting Pwt for the same. 

 

If anything Pwt should be worth more than Cos because it comes with far less envirnmental baggage but thats another topic.   

 

Anyway, unless oil prices rise substantially I dont believe Pwt will see $9.00 as a standalone or in a takeover.  Maybe if they sell another non core position at a good price.

Sure I am just trying to be ultra conservative to exclude rosy assumptions, but I understand your method.

I definitely think that tight light oil assets like PWT's actually have strategic value in the future against oil sands and heavy oil and I agree about some of your assumptions.

[goldfinger]

This one is not a zero? seriously

 

Who was lamenting a few weeks ago about how it was difficult to accumulate a meaningful position in PWT without moving the price up a lot...... :-)

Well, I think whoever wants to take a big chunk of PWT, can get all they want right now.

 

 

lol.  Someone else was lamenting that you would never get it at a low price again... well its there now.

 

For a strange comparable Suncor just paid approximately 46,000 Cdn (ithink it was Cdn.) per flowing barrel for COS.  Cos has similar production stats to PWT, and similar debt levels.  It differs in that COS has essentially unlimited reserves, but a lower grade of oil, and higher costs of production.  The comparative to me puts Pwt at a value of 9.20 per share (accounting for the debt we well).

How did you come up with 9.2 cad/share at 45k per flowing net of debt? My numbers are closer to 2 to 3 cad putting most non core assets at 0 of course?

 

You know, its not that precise.  I didn't account for non-core, core or anything else - the situation is likely similar with either company.  Su probably got alot of non-producing acreage with Cos, that you might call non-core, a lot of licenses they may sell off, and stuff that is useless. 

 

Suncor is paying ~ 6.6 B for Cos including debt.  So 4.4 B for the assets of COs. 

 

Cos produces the same amount of boe/day roughly as pwt, after the recent divestitures by pwt.  Cos is hard to pin down exactly because production has been erratic due to fires, etc.  But its in that range.  I used 4.4 b/500m pwt shares = 9.20.  Maybe its 7.50 or 8:50 or 9:50 - doesn't matter - its a hell of alot more than 80 cents. 

 

In my mind the two transactions would be similar but different.  Each of pwt and cos has valuable assets and not so useful assets, a similar amount of debt, a similar ability to service the debt, different problems but perhaps similar in a financial sense. 

 

Thats it, nothing more.  Its Munger's or Buffett's fat person entering the room. 

 

I dont know where you get 2-3 $ from.

I get 2.5 to 3B for Viking and Cardium at 50 to 60K per flowing.

~100 M for the royalty

300 to 400M for Swan hills, Slave point and other non core assets - best ones at 25/35K per flowing, others at almost 0

200M tax assets.

2+B debt

 

Suncor took on Cos debt.  They really paid 6.4 B or 80000 per flowing barrel.  Your using around 60000 boe/day - I was using a bit more - 75-80000 boe/day.  The way we are treating the debt is different.  If they were to make an offer for pwt of a comparable nature they would pay your 3.6'B and assume 2 B for debt - 5.6B/500 m shares = 11.20.  I know this is too high for the reasons others have outlined.  However, in both cases we are buying for future opportunities.  We cant be saying that people are buying Cos because it has huge future reserves, but not crediting Pwt for the same. 

 

If anything Pwt should be worth more than Cos because it comes with far less envirnmental baggage but thats another topic.   

 

Anyway, unless oil prices rise substantially I dont believe Pwt will see $9.00 as a standalone or in a takeover.  Maybe if they sell another non core position at a good price.

Sure I am just trying to be ultra conservative to exclude rosy assumptions, but I understand your method.

I definitely think that tight light oil assets like PWT's actually have strategic value in the future against oil sands and heavy oil and I agree about some of your assumptions.

You probably know something we don't...  :o

[Uccmal]

This one is not a zero? seriously

 

Who was lamenting a few weeks ago about how it was difficult to accumulate a meaningful position in PWT without moving the price up a lot...... :-)

Well, I think whoever wants to take a big chunk of PWT, can get all they want right now.

 

 

lol.  Someone else was lamenting that you would never get it at a low price again... well its there now.

 

For a strange comparable Suncor just paid approximately 46,000 Cdn (ithink it was Cdn.) per flowing barrel for COS.  Cos has similar production stats to PWT, and similar debt levels.  It differs in that COS has essentially unlimited reserves, but a lower grade of oil, and higher costs of production.  The comparative to me puts Pwt at a value of 9.20 per share (accounting for the debt we well).

How did you come up with 9.2 cad/share at 45k per flowing net of debt? My numbers are closer to 2 to 3 cad putting most non core assets at 0 of course?

 

You know, its not that precise.  I didn't account for non-core, core or anything else - the situation is likely similar with either company.  Su probably got alot of non-producing acreage with Cos, that you might call non-core, a lot of licenses they may sell off, and stuff that is useless. 

 

Suncor is paying ~ 6.6 B for Cos including debt.  So 4.4 B for the assets of COs. 

 

Cos produces the same amount of boe/day roughly as pwt, after the recent divestitures by pwt.  Cos is hard to pin down exactly because production has been erratic due to fires, etc.  But its in that range.  I used 4.4 b/500m pwt shares = 9.20.  Maybe its 7.50 or 8:50 or 9:50 - doesn't matter - its a hell of alot more than 80 cents. 

 

In my mind the two transactions would be similar but different.  Each of pwt and cos has valuable assets and not so useful assets, a similar amount of debt, a similar ability to service the debt, different problems but perhaps similar in a financial sense. 

 

Thats it, nothing more.  Its Munger's or Buffett's fat person entering the room. 

 

I dont know where you get 2-3 $ from.

I get 2.5 to 3B for Viking and Cardium at 50 to 60K per flowing.

~100 M for the royalty

300 to 400M for Swan hills, Slave point and other non core assets - best ones at 25/35K per flowing, others at almost 0

200M tax assets.

2+B debt

 

Suncor took on Cos debt.  They really paid 6.4 B or 80000 per flowing barrel.  Your using around 60000 boe/day - I was using a bit more - 75-80000 boe/day.  The way we are treating the debt is different.  If they were to make an offer for pwt of a comparable nature they would pay your 3.6'B and assume 2 B for debt - 5.6B/500 m shares = 11.20.  I know this is too high for the reasons others have outlined.  However, in both cases we are buying for future opportunities.  We cant be saying that people are buying Cos because it has huge future reserves, but not crediting Pwt for the same. 

 

If anything Pwt should be worth more than Cos because it comes with far less envirnmental baggage but thats another topic.   

 

Anyway, unless oil prices rise substantially I dont believe Pwt will see $9.00 as a standalone or in a takeover.  Maybe if they sell another non core position at a good price.

Sure I am just trying to be ultra conservative to exclude rosy assumptions, but I understand your method.

I definitely think that tight light oil assets like PWT's actually have strategic value in the future against oil sands and heavy oil and I agree about some of your assumptions.

You probably know something we don't...  :o

 

Evidently. 

[SharperDingaan]

Has anyone else accumulated since the downturn?

 

Bought in the last of our hedges this morning.

 

SD

[Cardboard]

What kind of hedges?

 

Cardboard

[Picasso]

The make believe kind.

[investor-man]

The make believe kind.

 

Come on man. No nasty comments.

[SharperDingaan]

We sold 50% of our full long position a while back, at higher prices; with the intent of repurchasing at lower prices.

Today we bought in the last of those shares we had previously sold.

 

It's essentially a 150/50 Long-Short position until closed out via a buy-in at our choice.

 

Pisses off the market because its simple, there is no net value gain/loss at 50% (therefore truly a hedge), & you are guaranteed a cash gain if you can buy in at less than you sold for. You are being rewarded for patience, & not playing the game.

 

No make believe required, just simple application.

 

SD

[Picasso]

Sorry, I just have a hard time believing that someone who thinks oil is low and will rebound back to triple digits as the middle east unravels would hedge anything. 

 

While everyone else is losing their shirt on various energy names and SD is pumping up how cheap they are, he is suddenly hedged out and closes the last of them out at the lows today.  Uh huh.

 

Anyway doesn't really matter and hope it doesn't come across as too nasty.  I just feel like the board should be more honest about positions and strategies versus make believe strategies that hide the real pain.  Maybe I'm the only one that thinks that way or it's just better off not to call people on their shit.

[Picasso]

We sold 50% of our full long position a while back, at higher prices; with the intent of repurchasing at lower prices.

Today we bought in the last of those shares we had previously sold.

 

It's essentially a 150/50 Long-Short position until closed out via a buy-in at our choice.

 

SD

 

That's not a hedge....

 

Anyway I'm moving on.  Good luck.

[SharperDingaan]

Sorry, I just have a hard time believing that someone who thinks oil is low and will rebound back to triple digits as the middle east unravels would hedge anything. 

 

While everyone else is losing their shirt on various energy names and SD is pumping up how cheap they are, he is suddenly hedged out and closes the last of them out at the lows today.  Uh huh.

 

Anyway doesn't really matter and hope it doesn't come across as too nasty.  I just feel like the board should be more honest about positions and strategies versus make believe strategies that hide the real pain.  Maybe I'm the only one that thinks that way or it's just better off not to call people on their shit.

 

We agree oil prices are low.

We have not said anything about triple digit oil. We simply posted an article indicating it was quite possible. Not probable.

We have had hedges on both PD and PWT for quite some time, and have voluntarily disclosed it on numerous previous occasions.

We hedge a 10,000 share position at 50%, we are still long 5,000 shares. It is the same story. We also need higher prices.

We won this time out, & were able to take $ off the table. Nothing wrong in that, & we don't apologize for it.

We agree many are losing $ in o/g. We are too & were down significantly last year.

We have long advocated hedging, & long published our approach to it. It is not a mystery.

 

We (retail) made sophisticated people look stupid, and dared to make $ when they didn't - an unforgivable sin.

We did not buy in at the low, and disclosed in the morning that we had bought in - that morning

We're back to a full position - that should tell you something right there.

We read, and can use a calendar - apparently many cannot.

 

We don't need to prove anything and are not going to.

You do your own DD, make your own decisions, & eat your own cooking.

We think we eat pretty well.

 

Good luck to you

 

SD

 

 

 

 

 

 

 

 

 

[Uccmal]

Well I sold some today about 1/7 at a significant loss.  Also sold some WCP and Arx. 

 

I wanted to deploy the money in other beaten down stocks higher  up the quality curve: Potash Corp.,  Enbridge

 

Sucks not having unlimited cash at times like this. 

[Cardboard]

The problem I have SD with your terminology and apparently others is that it is not hedging. You are selling a portion of your holdings at hopefully higher prices than your purchase price. To me that is reducing a position, not hedging.

 

To be honest I had the same issue when you were talking about hedging your SFK Pulp. That one had no options available on it and no easy commodity contract to hedge against. People were wondering what you were up to?

 

That is why I asked about what kind of hedging you were using on PWT.

 

Cardboard

[SharperDingaan]

We hear you.

 

In the interest of clarity;

1) Assume a holding of 10,000 shares. Cost of $5. Total investment of $50,000

2) Price falls to $3. Unrealized loss of $2 (20K). Decision made to hedge.

3) Sell 5,000 shares at $3. Take on the intent, but not the obligation, to buy back the shares at a future date. Proceeds of 15K, realized cash loss of 10K, and a synthetic short of 5,000 shares.

 

Is this a hedge?

 

Price falls to $1. Repurchase the 5,000 shares at $1.

Unrealized value loss on the 5,000 long shares of -$10K (($1-$3) x 5000)

Realized value gain on the 5,000 short shares of +$10K (($3-$1) x 5000)

Cash gain of 10K (15K sale proceeds – 5K repurchase cost)

 

Price rises to $5. Repurchase the 5,000 shares at $5.

Unrealized value gain on the 5,000 long shares of +$10K (($5-$3) x 5000)

Realized value loss on the 5,000 short shares of -$10K (($3-$5) x 5000)

Cash loss of 10K (15K sale proceeds – 25K repurchase cost)

 

There is zero value change to a significant change in price, up or down; the standard IFRS test for whether a hedge is effective or not. This is clearly a hedge – it is just not what we are accustomed to.

 

Is this 150 Long/50 Short?

 

Convention is that the long and short investments are different firms; so that the same $100 net investment, generates from two alpha sources. If the long and short are the same firm, it is simply a $100 long investment.

 

Practice is that the long and short can just as easily be different investment time horizons on the same firm. 150 long term + 50 short term via the intent, but not the obligation, to buy back the shares at a future date. This is clearly a 150 long/50 short – it is just not what we are accustomed to.

 

Why is this so controversial?

 

Apparently you cannot have a long and short view, on the same security, at the same time. You can.

We don’t record ‘intent’. Record it as the short it is, and this entire conversation disappears.

Hedge means no value loss, AND no cash change on close-out. Sorry, this is not true.

Not in the textbook. Not industry convention.  Neither is Mick Jagger routinely performing at age 72.

 

What is really occurring?

 

The hedge includes an open option: the intent, but not the obligation, to buy back the shares at a future date. The cash gain or loss on closing the position is the options premium. You control how big the premium will be when you close out the hedge. Obviously, if you can buy your shares back for less than you sold them for; you get paid for it.

 

Looks incredibly complicated, but it is actually very simple.

The better applications usually are.

 

SD

 

[Picasso]

My head is going to explode. You can't count losses you avoided from trading around a position as a profit.

[enoch01]

My head is going to explode. You can't count losses you avoided from trading around a position as a profit.

 

It's new math, get with the program.  Call it "synthetic profits", or something like that.

[oddballstocks]

My head is going to explode. You can't count losses you avoided from trading around a position as a profit.

 

It's new math, get with the program.  Call it "synthetic profits", or something like that.

 

A little bit of synthetic profits plus some of the Beardstown Ladies math and you have the makings of the next Buffett.  I believe it's infinitely scalable as well.  We've found it, the famed fountain of endless profits!!

 

I know I'll be flamed for this, but I'm going to expose the secret formula to the whole world.  People pay millions for the knowledge, but I'm going to just give it away:

 

1. Collect money

2. Do nothing, avoid losses --- BOOK GAINS

3. Collect more deposits ---- BOOK GAINS

4. Withdrawal performance fee for being a genius

5. Rinse and repeat

[goldfinger]

Did anyone listen to Whistler Conference?

I heard that they were saying that debt is not increasing, covenants still fine and can be renegotiated given peers experience and experience at being proactive with lenders.

Strong interest on non core assets - buyers are struggling to find financing at this point though... No fire sale for neither non core or core assets.

Budget within cash flow waiting out the storm.

Monetization of exchange rates hedges this quarter.

Cardium super strong results.

Additional cost reductions through optimizations (10% ?).

Anything else?

[Jurgis]

Anyone has access to PWE bond quotes? Not looking to buy, since they are not US accessible, but wonder what they are trading at. Or are they totally illiquid and no quote at all?