BXE - Bellatrix Explorations

[jawn619]

I think it's both. If oil/natural gas prices stay where they are, you can expect the company to do about $100-120M funds flow. after paying off $60M of interest costs, the company has $40-60M of capex.

 

This money can be used towards drilling Cardium or drilling Spirit River. If they drill in Cardium, all of the money spent will be maintenance capex. If they drill in spirit river, the same $40-60M will be enough to pay for both maintenance and growth capex.

 

Packer and Wilson explained earlier that the economics of spirit river are insane because the all in costs are so low. The added option of higher natural gas prices is nice.

 

Sale of assets would be nice because paying off debt will speed up the compounding of Spirit River investment.

[cogitator8]

I agree BXE is certainly not an option on NG prices. It think here people are extrapolating past holdings of Klarman, every investor, big or small, loose money from time to time. It is same thing like being a doctor, you can't be right every single time !

[Wilson-TPC]

I think it's both. If oil/natural gas prices stay where they are, you can expect the company to do about $100-120M funds flow. after paying off $60M of interest costs, the company has $40-60M of capex.

 

This money can be used towards drilling Cardium or drilling Spirit River. If they drill in Cardium, all of the money spent will be maintenance capex. If they drill in spirit river, the same $40-60M will be enough to pay for both maintenance and growth capex.

 

Packer and Wilson explained earlier that the economics of spirit river are insane because the all in costs are so low. The added option of higher natural gas prices is nice.

 

Sale of assets would be nice because paying off debt will speed up the compounding of Spirit River investment.

 

I have much higher cash flow and much lower interest costs than you are estimating. Operating cash flow already includes interest expenses fyi. The capex you illustrate is also off, as next year's capex is going to be C$140 million.

 

Capital efficiency is C$8,000 boe/d, so use that to calculate growth and maintenance in production.

[influx]

I wanted to mention this before given some experience with other Klarman involved commodity plays.

 

At one time a few years back, Baupost had a large position in Allied Nevada (ANV).  Given their large production in Nevada (one of the largest mines in the world) and decline in share price relative to gold, it seemed quite interesting.  I bought around $27 (below Klarman's cost) and eventually sold for $19.  Shares ended up going to zero.  It looked inexpensive all the way down to zero.  All the stock needed was a streaming deal of the silver byproduct to cover the debt.  I haven't followed it recently to see what happened, but if the deal ever happened it happened too late.

 

Another one Baupost was involved with at the time was Gabriel Resources (GBU).  That one's done a bit better.  Went from $8 to $0.32. 

 

ANV went bankrupt, delisted and it is in restructuring.

GBU is still present and waits better prices :) though fighting with the gov of Romania

"On July 21, 2015, Gabriel filed a request for arbitration against Romania before the World Bank's

International Centre for Settlement of Investment Disputes (“Request for Arbitration”). This action relates to

the Company’s dispute with Romania over the development of the Roşia Montană gold and silver project

(“Project”), of which Gabriel holds an indirect 80.69% interest, and violations by the Government of

Romania of the protections afforded by certain bi-lateral investment treaties. "

 

I apologize for the previous (ill-formatted) version of this post.

[undervalued]

I agree BXE is certainly not an option on NG prices. It think here people are extrapolating past holdings of Klarman, every investor, big or small, loose money from time to time. It is same thing like being a doctor, you can't be right every single time !

 

If you're following into Klarman, why wouldn't you choose his bigger conviction ideas such as LNG, PXD, etc?

[Picasso]

I guess my point was, Klarman holdings often display no margin of safety.  There are many securities in their portfolio whose downside possibilities are "zero."

 

Yes he is a successful value investor but he's a lot different than the typical value investor.  He seems to arbitrage probabilities across his equity portfolio versus finding a lot of "heads I win, tails I don't lose much."  The strategy looks more like "heads I win big, tails I lose it all" but when done across many holdings it looks more like "heads I win, tails I don't lose much."  I think when you deal with natural resource stocks, you kind of need that because these are cyclical, complicated and very levered to fixed costs and debt as well.  So you want to win big if you're right because if you keep investing in this space without big wins you aren't going to get great returns.  This sector is notorious for destroying investors capital.

 

Maybe the answer to "what is the worst that happens with BXE?" is a downside around the current share price.  But I tend to think a commodity stock that loses 80% in a year is pretty closely tied to commodity prices.  And no matter how great the natural resource asset, there is always a chance that the commodity price will destroy your initial thesis.  Maybe this is a different situation, in which case why isn't Baupost making the position bigger?  They tend to size according to risk and this is one of their smallest positions.

[RadMan24]

I agree BXE is certainly not an option on NG prices. It think here people are extrapolating past holdings of Klarman, every investor, big or small, loose money from time to time. It is same thing like being a doctor, you can't be right every single time !

 

If you're following into Klarman, why wouldn't you choose his bigger conviction ideas such as LNG, PXD, etc?

 

This is a very valid point. You still have to do your own research..relying on him approving it as an investment does not mean it will be a double or triple.

[Guest notorious546]

http://www.valueinvestorsclub.com/idea/BELLATRIX_EXPLORATION_LTD/136862

[Simple Investor]

I assume he doesn’t make a bigger position in BXE because the company is too small.  In the end the performance of BXE for Baupost is meaningless.  Perhaps he is after information for other investments. 

[jawn619]

I assume he doesn’t make a bigger position in BXE because the company is too small.  In the end the performance of BXE for Baupost is meaningless.  Perhaps he is after information for other investments.

 

Baupost owns the maximum legal position in KERX and TBPH, which are about the same market cap. Maybe they don't see as much upside compared to those two names... or they are not as comfortable with the story or risk/reward.

[Simple Investor]

In the fund that Baupost owns BXE it seems to be a $6 billion dollar fund.  I added up the filings and at this point it looks like BXE is a .6% to .8% weighting in the portfolio. 

 

A separate discussion but this fund seems to be getting crushed. I wouldn’t be shocked if the fund is down 30% over the past 12 months.  Who knows what the purpose of the fund is but it does own a lot of energy companies. 

 

If my analysis is wrong I apologize. 

http://www.sec.gov/Archives/edgar/data/1061768/000114036115031735/xslForm13F_X01/form13fInfoTable.xml

 

[WideMoat]

In the fund that Baupost owns BXE it seems to be a $6 billion dollar fund.  I added up the filings and at this point it looks like BXE is a .6% to .8% weighting in the portfolio. 

 

A separate discussion but this fund seems to be getting crushed. I wouldn’t be shocked if the fund is down 30% over the past 12 months.  Who knows what the purpose of the fund is but it does own a lot of energy companies. 

 

If my analysis is wrong I apologize. 

http://www.sec.gov/Archives/edgar/data/1061768/000114036115031735/xslForm13F_X01/form13fInfoTable.xml

 

The majority of Baupost's assets are not disclosed here.  Their aggregate AUM is probably around $28 billion, so this $6 billion equity portion will not move the needle as much as you suggest.

[Simple Investor]

agreed. but does anyone know how he is operating.  Maybe this fund was all new money.  It could be possible that people/institutions invested in this fund are only invested in this fund.  Or maybe they get access to legacy holdings.  I’m not sure. 

 

BXE in relation to 28 Billion .15% or so.  Immaterial.  He is probably just forgetting to buy it as it goes down.  Oh yeah we own BXE?  Haha.  Just kidding.

 

I own BXE. 

 

[undervalued]

I assume he doesn’t make a bigger position in BXE because the company is too small.  In the end the performance of BXE for Baupost is meaningless.  Perhaps he is after information for other investments.

 

Baupost owns the maximum legal position in KERX and TBPH, which are about the same market cap. Maybe they don't see as much upside compared to those two names... or they are not as comfortable with the story or risk/reward.

 

Do you know where I can find that information? How much is the maximum legal position for each fund? He owns 25% of KERX, 16% of THRX and 19% of TBPH as of July 2015 according to yahoo finance.

 

He owns 11% or 21.84M out of 191.96M outstanding shares.

[jawn619]

http://www.sec.gov/Archives/edgar/data/1061768/000106176814000038/keryx13gamend1.htm for KERX

http://www.sec.gov/Archives/edgar/data/1061768/000114036115006561/doc1.htm for TBPH

 

20% is the legal limit.

http://www.investmentfundlawblog.com/resources/investments-by-funds/acquiring-more-than-5-of-a-publicly-traded-company/

 

TBPH has a clause where if someone other than GSK goes over the 20% limit, GSK has the right to buy TBPH.

 

As a rule, I would use SEC filings over yahoo finance. yahoo finance is great for a brief picture but I find that going to the source is probably your best bet if you want accurate information.

[theantilibrary]

Hi Jawn, thank you very much for the information regarding ownership limits for Baupost in TBPH and KERX. I see the reference to the 20% clause regarding TBPH, but does KERX have such a limit? What happens if a holder were to breach KERX's 25% limit, and where can you find that information? I looked at the KERX 13G you linked to, but didn't find anything there related to a 25% ownership limit. Any light you can shed on the KERX ownership limit is very appreciated!

[influx]

Hi Jawn, thank you very much for the information regarding ownership limits for Baupost in TBPH and KERX. I see the reference to the 20% clause regarding TBPH, but does KERX have such a limit? What happens if a holder were to breach KERX's 25% limit, and where can you find that information? I looked at the KERX 13G you linked to, but didn't find anything there related to a 25% ownership limit. Any light you can shed on the KERX ownership limit is very appreciated!

 

This is BXE thread, please

[jawn619]

http://www.beyondproxy.com/bellatrix-exploration/

[Guest notorious546]

i'm surprised we've been at ~$2.50 natural gas prices for so long. can't imagine this quarter is good for many E&P's! I wonder if BXE has been as impacted by the TCPL outages as much  as companies like PEYTO have been. PEY has built up about ~20,000 boe/d of volumes behind pipe but have just been struggling to find way to get their production to market.

 

 

 

[Cardboard]

That was a good conference call. The analyst from Wells Fargo was really drooling over Spirit River well results. I would expect some upgrades.

 

Cardboard

[influx]

That was a good conference call. The analyst from Wells Fargo was really drooling over Spirit River well results. I would expect some upgrades.

 

Cardboard

 

Please share more?

 

I just dont understand why this is not available online....without having to make international call and incur expenses

[dolce far niente]

You can download it here:

http://investors.bellatrixexploration.com/webcasts

[influx]

You can download it here:

http://investors.bellatrixexploration.com/webcasts

 

Woah, I apologize and I thank you :)

[Wilson-TPC]

Hey guys,

 

A quick update on what I think about the Q3 numbers.

 

BXE’s Q3 numbers came out and productions were slightly below my estimates due to pipeline constraints and midstream maintenance. Approximately 1,000 boe/d of productions were held back, so the production numbers would’ve hit my estimates.

 

In terms of the overall report, nothing too special aside from the fact that opex/boe came in at C$7.38, which is way below my estimates of C$7.75. This is definitely a good sign as my original assumption that operating costs should dramatically shift lower as the company only drills in the Spirit River going forward. What also contributed to the much lower opex/boe is the fact that the gas plant is now fully operational, which not only results in higher NGL, but the overall cost of processing the gas decreases.

 

Another point of highlight is the G&A went from C$1.75/boe to C$1.34/boe. This is also thanks to the cost initiatives the company is doing.

 

All in all, the NGL and oil weakness was known prior to the release as any market participant could’ve looked at the daily Edmonton prices and determine what the average pricing would’ve been.

 

 

 

[influx]

an update

http://web.tmxmoney.com/article.php?newsid=80948178&qm_symbol=BXE

 

1. credit facility decreased

"The revised borrowing base incorporates a redetermination based on the syndicate's review of the current estimated value of the Company's proved reserves under the syndicate's pricing assumptions, and is anticipated to result in lower standby fees charged on unutilized amounts available under the Credit Facility."

 

2. orange capital no longer feels necessary to formally have an agreement to push for better capital allocation

"Bellatrix also announces that the Company and Orange Capital LLC ("Orange Capital") have mutually agreed to allow the expiration, as of November 30, 2015, of the shareholder agreement entered into on December 12, 2014 (the "Shareholder Agreement"). Through its two director nominees, Orange Capital continues to work collaboratively with Bellatrix management and the board of directors with the shared goal to maximize long-term value for all shareholders. "