BXE - Bellatrix Explorations

[Packer16]

The Blackstone article is too general to make any conclusions from.  Do they mean oil-sands?  do they mean gas?  It does not say.  In general, there are high cost projects in Canada.  If you look at BXE's presentation, they compare costs of Spirit River vs. other Marcellus operators.  If the arb is so big somebody will find a way to bring down to more reasonable difference.  Also the AECO futures are more indicative of prices.  Here is link to the AECO futures:

 

http://www.gasalberta.com/gas-market/market-prices

 

If the futures prices were in C$1 range I would be concerned but they are closer to C$2.5 to C$3.

 

 

Packer

[Cardboard]

One of the problems with this company is this highly promotional CEO and when you listen too much to him, you fail to look at what is available elsewhere in the patch.

 

So I bought and sold this stock a few times this year without making or losing anything. However, I lost a lot by not spending more time instead on Birchcliff or a true low cost, well managed natural gas producer and now expanding. I did very well with their preferred stock but, I wish that I had bought the stock too instead of spending any time on BXE.

 

Now, the difference between the two in quality will become even more important since the Alder Flatts plant was the key to drop their operating costs which looked very promising for a while. Now they essentially did a sale leaseback transaction and their cost will go up. Then you also have to deal with significant dilution now.

 

These are Q1 results:

BXE netbacks: $7.10/boe, opex: $7.37/boe, 28% liquids

BIR netbacks: $8.46/boe, opex: $3.71/boe, 12% liquids

 

And while BIR appeared more expensive on a boe/d basis during H1, it was actually cheaper on EV/reserves and EV/PDP NAV than BXE.

 

Cardboard

[Picasso]

when you guys say concentration what is the percentage that an investment actually becomes concentrated?  5%  10%.

 

People put huge portions of their worth on this kind of crap, 10% is a baby weighing compared to some people in this thing.

 

http://forum.thecontrarianinvestor.com/index.php?threads/gt-advanced-technologies-inc-gtat.69/

 

Read through this thread about GTAT, it will open your eyes as to what kind of % allocation some people with good intentions but bad judgement will do. The people that can pull off large concentration successfully are like 1 in a thousand, yet the number of people that attempt it seems reverse; 999 in a thousand.

 

There's also the concentration that happened with AAPL back in 2012/2013. 

 

http://fortune.com/2013/03/04/the-rise-and-fall-of-andy-zaky/

 

Zaky had taken under management more than $10.6 million of other people’s money and lost it all.

 

But those lost millions — suffered largely by well-to-do investors who knew the risks they were taking — pale next to the damage done to the 700 subscribers at Bullish Cross Pro. Many of these investors have since fled the site and joined a Google group called bc-subs (for “Bullish Cross subscribers”), where they commiserate about their lost retirement funds, their ruined marriages, their thoughts of suicide. Many lost hundreds of thousands of dollars. Some lost millions.

 

I remember watching it all develop from 2010, 2011, and seeing how badly they ignored risk management.  At a certain point no amount of good news would push up shares of Apple and their thesis just started morphing into all this technical analysis and swapping from stock to options.  The "market" was just so stupid for allowing Apple to go down and this fellow Zaky was incredibly arrogant about what would not happen.  He took down all his articles, but it was along the lines of "it won't go below $600."  Then it did.  "You're stupid if you think Google is worth more than Apple."  Google overtook Apple.  Then he just sat back and watched all these subscribers plow their whole life savings in AAPL options and said nothing. 

 

Someone should engineer a bot for this board that has a low level of AI.  Just enough AI to say "Hey buddy, your thesis is drifting out to sea.  Please explain why you're still in this again?'

[Jurgis]

I'm still in AAPL because I'm in love with Tim Cook.

 

 

 

 

OOPS wrong board.  :-[

[Guest roark33]

when you guys say concentration what is the percentage that an investment actually becomes concentrated?  5%  10%.

 

People put huge portions of their worth on this kind of crap, 10% is a baby weighing compared to some people in this thing.

 

http://forum.thecontrarianinvestor.com/index.php?threads/gt-advanced-technologies-inc-gtat.69/

 

Read through this thread about GTAT, it will open your eyes as to what kind of % allocation some people with good intentions but bad judgement will do. The people that can pull off large concentration successfully are like 1 in a thousand, yet the number of people that attempt it seems reverse; 999 in a thousand.

 

There's also the concentration that happened with AAPL back in 2012/2013. 

 

http://fortune.com/2013/03/04/the-rise-and-fall-of-andy-zaky/

 

Zaky had taken under management more than $10.6 million of other people’s money and lost it all.

 

But those lost millions — suffered largely by well-to-do investors who knew the risks they were taking — pale next to the damage done to the 700 subscribers at Bullish Cross Pro. Many of these investors have since fled the site and joined a Google group called bc-subs (for “Bullish Cross subscribers”), where they commiserate about their lost retirement funds, their ruined marriages, their thoughts of suicide. Many lost hundreds of thousands of dollars. Some lost millions.

 

I remember watching it all develop from 2010, 2011, and seeing how badly they ignored risk management.  At a certain point no amount of good news would push up shares of Apple and their thesis just started morphing into all this technical analysis and swapping from stock to options.  The "market" was just so stupid for allowing Apple to go down and this fellow Zaky was incredibly arrogant about what would not happen.  He took down all his articles, but it was along the lines of "it won't go below $600."  Then it did.  "You're stupid if you think Google is worth more than Apple."  Google overtook Apple.  Then he just sat back and watched all these subscribers plow their whole life savings in AAPL options and said nothing. 

 

Someone should engineer a bot for this board that has a low level of AI.  Just enough AI to say "Hey buddy, your thesis is drifting out to sea.  Please explain why you're still in this again?'

 

This stuff is just depressing, Picasso.  Please don't post this stuff.  You may push a borderline recovering alcoholic back onto the hard stuff.

[Spekulatius]

when you guys say concentration what is the percentage that an investment actually becomes concentrated?  5%  10%.

 

People put huge portions of their worth on this kind of crap, 10% is a baby weighing compared to some people in this thing.

 

http://forum.thecontrarianinvestor.com/index.php?threads/gt-advanced-technologies-inc-gtat.69/

 

Read through this thread about GTAT, it will open your eyes as to what kind of % allocation some people with good intentions but bad judgement will do. The people that can pull off large concentration successfully are like 1 in a thousand, yet the number of people that attempt it seems reverse; 999 in a thousand.

 

It appears one should short, what the folks on this website invest in. This  GTET thread is quite a read. I am surprised how many folks invest their life savings in a microcap with a checkered history but a good sounding story.

[Oreo]

I think what many of you folks wrote here is incredibly illuminating. Special props to Picasso.

 

From my POV, what this whole thing really boils down to is sizing. When to be a pig and when not to be. When to oversize and when to keep it at a size that won't kill you if you are wrong or it takes longer to be proven right. When to step into leveraged situations and when to stay out. When to put multiple correlated bets on (e.g. linked to commodities prices) and when to sit it out.

 

And of course - circle of competence. I'll be bold and wager that most of the people who oversized BXE were not resources investors with a decent understanding of credit and distressed situations.

 

In conclusion? If something is a binary, call option-like investment, don't size it more than 1% of the portfolio (I'm being arbitrary here, but 1% sounds about right), unless you literally spent 100hrs of hours researching it and can comfortably claim to be in the top 5% people in the market in terms of understanding the situation. Think about Michael Burry going full-on Aspergers and poring through 100s of pages of MBS docs.

 

I found out about this kind of thing the hard way through oversizing OTM call option purchases and the above is now a rule that I live by, and am much happier for it.

 

I guess final thing is the concept of dominance. An example: if a prospective investment depends on commodity prices going to a certain range (e.g. BXE), why not take a step back and find a different investment that will do *really* well if commodity prices increase, but will also do OK if they don't? For example, is QIWI (both today and in 2015) not a strictly dominant investment vs BXE? etc etc.

[alertmeipp]

One of the problems with this company is this highly promotional CEO and when you listen too much to him, you fail to look at what is available elsewhere in the patch.

 

So I bought and sold this stock a few times this year without making or losing anything. However, I lost a lot by not spending more time instead on Birchcliff or a true low cost, well managed natural gas producer and now expanding. I did very well with their preferred stock but, I wish that I had bought the stock too instead of spending any time on BXE.

 

Now, the difference between the two in quality will become even more important since the Alder Flatts plant was the key to drop their operating costs which looked very promising for a while. Now they essentially did a sale leaseback transaction and their cost will go up. Then you also have to deal with significant dilution now.

 

These are Q1 results:

BXE netbacks: $7.10/boe, opex: $7.37/boe, 28% liquids

BIR netbacks: $8.46/boe, opex: $3.71/boe, 12% liquids

 

And while BIR appeared more expensive on a boe/d basis during H1, it was actually cheaper on EV/reserves and EV/PDP NAV than BXE.

 

Cardboard

 

?? BXE 2P NAV is ~$4, BIR is around $9 after acquisition?

 

BXE is cheaper by a long mile. BXE's NGL is getting disaster pricing... thus high opex and low netback.

[Guest wellmont]

but...but...management can't buy right now!! they are restricted!

 

cc: @bagholderquotes

 

This is about .0025% of my portfolio, which is peanuts thankfully for a well to do value investor gentlemen like myself.  Sorry to rub it in for anyone that made a concentrated bet.  If baupost never owned i would have never looked at this.         

     

There was a poster earlier in the thread that mentioned mgmt was shit.  They were shut down/ignored but were 100% right.  Capital allocation good mgmt is paramount in the commodity business.  There were red flags. 

 

Also i saw no insider buying as the stock tanked, another red flag, the stock is a buck CAD and these guys ain't buying.  A kit kat costs 1.69 before tax. 

 

kit kat > bellatrix exploration.

[Cardboard]

I was using stock prices: BIR at $5 and BXE at $1.35 which were available after Q1 results were published.

 

BXE NAV was around $4.27 per share or as you stated. However, BIR NAV was at around $19.08. I would be surprised if their recent acquisition killed NAV as you mentioned.

 

BXE 2P reserves at Q1 rate would last 16.7 years, BIR would last 35.4 years!

 

Please let me know if my BIR numbers are wrong and why?

 

Cardboard

 

 

[Packer16]

BIR's current 2P NAV per the latest presentation is C$16.72 so it did go down slightly.  My latest 2P NAV estimate for BXE is US$5.23.

 

Packer

[StevieV]

The differential in the spot pricing has narrowed dramatically since our postings a week ago.  AECO pricing (not differential) from $0.66 last Wednesday (the date of Packer's last post) up to $2.56 yesterday.  Appears to be mostly an issue of pipeline - maintenance and toll pricing.

 

The natural gas storage numbers have also been bullish.  Lower injections that are normal this time of year.  It seems like the worst case storage concerns are starting to be moved off the table and the low injections should also be bullish from a supply/demand perspective.  There is a lot of supply that can be brought on-line, so I am not saying natural gas prices are going to be off to the races, but some optimism is warranted.

 

AECO futures prices remain substantially below that of a year ago.  A significant move upward in those prices would really be of a benefit to BXE.

[StevieV]

BXE had a recent Cardium asset sale for $47 million.  $42 million cash and $5 million in shares of InPlay.  In BXE's position, I figure the cash is better and at least it is the majority.

 

This is the type of sale the BXE has been trying to get done.  The metrics are nothing to get excited about.  "Non-core".  I think that is relatively meaningless as companies will simply call whatever they want to non-core.  Anything a company is able to sell is "non-core" and anything they keep is "core".

 

It can be trick to analyze companies like BXE with debt that is too high and that are undertaking asset sales.  If they get enough for their assets, they emerge with a leaner company and balance sheet in a position to make good money.  If they fall short in the prices, there isn't value left.

 

Of the O&G companies I own, I admittedly know BXE the least well.  Any discussion of the recent sale would be appreciated.  Packer?  A glorious return by Wilson?  Anyone else?

 

I still like the diversification as it is much more NG than the other O&G companies I own.

[StevieV]

AECO still has some work to do, but continues to firm up a bit.  About $2.70 CDN today.  The US storage picture has changed Dramatically.  From greatly oversupplied to in the 5-year band range.  Some of the forecasting for a very cold winter seems to have softened.

 

Still looking for increased AECO and liquids prices for BXE.  The stock price has not reacted to the improvements that have happened in any significant way yet.

 

[tede02]

Today's transaction must be raising cash to close out the remaining term facility due in November.  Why else sell stock for only $10m?

[Guest notorious546]

Today's transaction must be raising cash to close out the remaining term facility due in November.  Why else sell stock for only $10m?

 

CDE financing usually done at a premium to common stock offerings, so it's cheaper than some of their alternatives.

 

as for why that amount i'm not sure.

[Simple Investor]

aeco gas flying off the handle and BXE stock bleeds.  Frustrating. 

[Picasso]

aeco gas flying off the handle and BXE stock bleeds.  Frustrating.

 

Isn't the issue that the rest of the AECO curve has not moved very much?  I hear investors talk up the cold winter as a catalyst (granted better to have spot at $3-4 than the $0.50 it was a month or so ago) but as an owner of BXE it seems like you're much more interested in the total cash flow of the next decade discounted back to today.  Cash flow on spot over the next several months is a really small part of NAV.

 

I'd have to plug the current curve into Wilson's old BXE model but I'm guessing it still doesn't look pretty.

[jawn619]

Oaktree files 13G

[nafregnum]

GuruFocus shows OakTree (Howard Marks) made a new buy of 18,750,000 shares. 

 

To me that's a vote of confidence that they won't go bankrupt anytime soon, and 18.7M shares I bet will not be for sale for at least a year. 

 

To you who watch both BXE and PWE, which do you consider to be the better bet?

[influx]

GuruFocus shows OakTree (Howard Marks) made a new buy of 18,750,000 shares. 

 

To me that's a vote of confidence that they won't go bankrupt anytime soon, and 18.7M shares I bet will not be for sale for at least a year. 

 

Yeah vote of confidence, abit :), based on the size, ~$20M in capital invested, it looks me to be someone more junior in rank compared to the total AUM. Doesnt look like Howard would get involved with this much money. I may be wrong though. This is how I think. While I am sure they are not into this to test the person responsible for pulling the trigger by allowing/having a permanent capital loss. That is part of the learning process and they have to allow it.

@ Oaktree, I do wonder because I dont know how many people are looking at a potential investment before pulling the trigger.

 

I'd vote for a PWE because it is oil and seems to me to have better chair, management. I dont have a position anymore in either of them. I am just observing.

[StevieV]

GuruFocus shows OakTree (Howard Marks) made a new buy of 18,750,000 shares. 

 

To me that's a vote of confidence that they won't go bankrupt anytime soon, and 18.7M shares I bet will not be for sale for at least a year. 

 

Yeah vote of confidence, abit :), based on the size, ~$20M in capital invested, it looks me to be someone more junior in rank compared to the total AUM. Doesnt look like Howard would get involved with this much money. I may be wrong though. This is how I think. While I am sure they are not into this to test the person responsible for pulling the trigger by allowing/having a permanent capital loss. That is part of the learning process and they have to allow it.

@ Oaktree, I do wonder because I dont know how many people are looking at a potential investment before pulling the trigger.

 

I'd vote for a PWE because it is oil and seems to me to have better chair, management. I dont have a position anymore in either of them. I am just observing.

 

Howard Marks doesn't run funds anymore and OAK has a huge amount of funds (about $100B AUM in total for the firm).  Howard Marks was almost certainly not involved with this investment.  The only thing I think is that OAK is generally a intelligent organization and their buy here means someone at the organization thinks BXE will go up.  Better than nothing.

 

I own both BXE and PWE and own significantly more PWE.

[tede02]

The deleveraging continues (for the best I hope):

 

http://investors.bellatrixexploration.com/2016-12-05-Bellatrix-announces-80-million-non-core-asset-sale

 

 

 

[StevieV]

Already a NG company.  Becoming even more of a pure NG play.  Are they going to get where they want to on the costs and debt?

 

NG prices are much improved as is the AECO differential.  They will need to start showing some cashflow at these prices.  It starts in the Q4 report, but I am looking for good reports through 2017 to really move the share price.

 

I think one could do well from here.  FWIW, my cost basis is still a little higher than the current price.  Wish it were lower or I had allocated the capital to one of the other E&P stocks that have done better.  However, this was part of my diversification strategy and it is somewhat different than my other E&P holdings.  So, it has offered some diversification.  Unfortunately, not with a good result yet.

[Simple Investor]

nice moves!