Cardboard Posted May 8, 2018 Share Posted May 8, 2018 Look at that: https://www.marketwatch.com/topics/organizations/american-petroleum-institute And Trump puts an end to the stupid Iran deal. Go to hell Obama!!! Cardboard Link to comment Share on other sites More sharing options...
sculpin Posted May 11, 2018 Author Share Posted May 11, 2018 https://seekingalpha.com/article/4173007-2018-best-ideas-update-headed Gear Energy (GXE.TO) (OTCPK:GENGF) Gear was a favorite pick of ours in 2017 and in 2018. The stock didn't fare well in 2017 due to negative investor sentiment surrounding oil and energy equities. But that's starting to turn, and as the fundamentals of the business continue to improve unabated, we think this year could be the year for when the stock inflects higher. The first 3-months of the year saw Canadian investors stampede out of the energy sector due to concerns over constraints in takeaway capacity. In addition, the Transmountain drama has further negatively impacted investor sentiment. The stock price was so discounted that we wrote a piece in March titled, "This Small-Cap Oil Producer Is Too Cheap To Ignore." Since then, the stock is up more than 50%. But our analysis indicates Gear is still trading at a fraction of where it's supposed to trade. For example, if WTI averages at $70/bbl next year, we have Gear trading at 1.9x EV/DACF 2019 estimates. That's 1/3rd of the multiple peers trade at, and the stock would have to rerate to C$3.50 per share to close the valuation gap. Similar to our CRC analysis, we have an expected value of C$7.55 per share for Gear using 2022-2023 price targets. With WTI now above $70/bbl, even if oil prices were to stay flat from here, we see Gear growing at ~25%+ a year while spending within cash flow. We think this is still one of the cheapest energy names in the market today with possibly one of the best management teams in the industry. Link to comment Share on other sites More sharing options...
tombgrt Posted May 11, 2018 Share Posted May 11, 2018 Thanks. I'd surely retire (at 33 in 2023 haha) if his Gear bull case became reality. :P A lot can happen in that timeframe so not yet celebrating just yet. Link to comment Share on other sites More sharing options...
Paarslaars Posted May 12, 2018 Share Posted May 12, 2018 Out of curiosity, what does the oil basket look like for you guys? My two biggest positions are OBE & GXE, followed by BTE & PPR. Not very satisfied with OBE that took no advantage of the oil rally due to their hedge and it does not appear to be in a better position than other companies to do so in the near future (yes Cardboard, you warned us :) ). Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 12, 2018 Share Posted May 12, 2018 Out of curiosity, what does the oil basket look like for you guys? My two biggest positions are OBE & GXE, followed by BTE & PPR. Not very satisfied with OBE that took no advantage of the oil rally due to their hedge and it does not appear to be in a better position than other companies to do so in the near future (yes Cardboard, you warned us :) ). I have PPR, GXE, ATU, IPO, CPG and ZAR.DB.A in that order although the first three are all of similar size. PPR has catalysts for this year with the NAFTA lawsuit and QC regulations even if oil didn’t turn. 6-12 months was supposed to be the time line for a decision on the lawsuit and we are 6 months post the final arbitration hearing. It also has the most financial and operational leverage but the stock is certainly not reflecting that. Hopefully Q2 will demonstrate that leverage in cash flow. ATU seems primed to increase their capital spend and guidance given realized pricing they must be experiencing right now. With almost no leverage and high capital efficiency it seems like a great idea but their full year guidance was very conservative so perhaps they will wait to the second half to do that. They will report this week. ZAR.DB.A is about a 25% YTM with a real kicker with a $1.25 conversion price if oil stays strong. There is a good argument to own the common instead but I like the income and return potential with the equity as a buffer. The YTM could be even better if they do an asset sale that helps them refinance the debentures early. They report this week, as well. Link to comment Share on other sites More sharing options...
jimjam Posted May 12, 2018 Share Posted May 12, 2018 Cale Smith's update on his Tarpon fund (concentrated in oil and gas): Link to comment Share on other sites More sharing options...
tombgrt Posted May 13, 2018 Share Posted May 13, 2018 Eric Nuttall presentation 04/25: Link to comment Share on other sites More sharing options...
tombgrt Posted May 13, 2018 Share Posted May 13, 2018 Also good: https://www.bnnbloomberg.ca/video/the-outlook-for-oil-after-trump-pulls-out-of-iran-nuclear-deal-part-2~1392840 Link to comment Share on other sites More sharing options...
Uccmal Posted May 15, 2018 Share Posted May 15, 2018 One thing really bothers me with Cale Smith and other super bullish forecasters. What happens if there is a recession of some significance? High oil prices, and rising interest rates will start to put a drag on the general economy. Link to comment Share on other sites More sharing options...
tombgrt Posted May 15, 2018 Share Posted May 15, 2018 You can't predict a recession either. So big losses before we actually see anything in the economic data. I disagree with oil prices being a likely drag on the general economy. Adjusted for inflation, we would need $100 to be at previous $100 level and that wasn't really an issue before. I'm more worried about China's debt bubble and general recession risks. Link to comment Share on other sites More sharing options...
SharperDingaan Posted May 15, 2018 Share Posted May 15, 2018 One thing really bothers me with Cale Smith and other super bullish forecasters. What happens if there is a recession of some significance? High oil prices, and rising interest rates will start to put a drag on the general economy. Most of the bullish case rests on a compounding declining global supply. The further out the likelihood of a recession is, the less of an bearish impact there is - as it is offset against multiple years of net depletion and facility decay (Venezuela, Nigeria, etc.). The risk is that material amounts of capital that would have gone into the long-term off-shore fields goes into short-cycle shale instead - rapidly increasing supply. SD Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 15, 2018 Share Posted May 15, 2018 Curious what people think of this move by Altura (ATU.V) to sell about half its production and reinvest the proceeds in its Leduc-Woodbend play? http://docs.wixstatic.com/ugd/d63ee4_071049f621cb41039e97c07d747e4503.pdf Link to comment Share on other sites More sharing options...
Zorrofan Posted May 16, 2018 Share Posted May 16, 2018 One thing really bothers me with Cale Smith and other super bullish forecasters. What happens if there is a recession of some significance? High oil prices, and rising interest rates will start to put a drag on the general economy. Most of the bullish case rests on a compounding declining global supply. The further out the likelihood of a recession is, the less of an bearish impact there is - as it is offset against multiple years of net depletion and facility decay (Venezuela, Nigeria, etc.). The risk is that material amounts of capital that would have gone into the long-term off-shore fields goes into short-cycle shale instead - rapidly increasing supply. SD SD, I agree with you that there could be a rush into shale if oil did surge to $100 (or $80 or whatever) but then you run into capacity constraints - not enough crews, pipelines etc. And at some point given the high initial decline rates for shale you have to reach a level of production where the declines are so large you need a tremendous amount of drilling just to maintain production. I just don't see shale as the savior everyone thinks it will be. Or am I missing something? cheers Zorro Link to comment Share on other sites More sharing options...
SharperDingaan Posted May 16, 2018 Share Posted May 16, 2018 Agreed the limiting factor on shale is take-away capacity & drill crew availability. However there's a lot of unfilled capacity in the pipe and the lighter grade of shale will also displace the heavier grades in the pipe, allowing rapid and high incremental supply to drive price down quite a bit. Venezuelan & Nigerian crude also hasn't gone away, and the crimal element isn't going to be paying for depreciation or depletion. They will be getting market price less just the cost of bribes and bullets - under the table, & not showing on anyones forecasts. SD Link to comment Share on other sites More sharing options...
Cardboard Posted May 16, 2018 Share Posted May 16, 2018 "However there's a lot of unfilled capacity in the pipe and the lighter grade of shale will also displace the heavier grades in the pipe, allowing rapid and high incremental supply to drive price down quite a bit." Huh? Pipelines out of the Permian are already full and all light grade. They are now desperate and shipping excess via trucks. Truckers are hard to get by and freight costs are up 10-15%. Permian discount is now close to WCS-WTI! Pipelines out of Canada full also and Gulf coast refineries need the heavier grades. A diesel crisis is starting to develop. Cardboard Link to comment Share on other sites More sharing options...
Cardboard Posted May 16, 2018 Share Posted May 16, 2018 "Curious what people think of this move by Altura (ATU.V) to sell about half its production and reinvest the proceeds in its Leduc-Woodbend play?" Surge Energy appears to be the buyer: https://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aSGY-2609806&symbol=SGY®ion=C You end up with a company that will exit 2018 with 1,900 boe/d, roughly no net debt (cash flow + sale proceeds will about cover capex). At $0.44/share that is roughly $25,000 per boe/d. Not bad but, that is still a very small company or few barrels to spread costs over. For example, G&A of $4.05/boe makes me cringe. If you want to see a company that always seems to do more with less check out Yangarra. Isn't the move also increasing their heavy oil percentage as the assets sold to SGY would be most or all their medium? Cardboard Link to comment Share on other sites More sharing options...
tombgrt Posted May 16, 2018 Share Posted May 16, 2018 Sure Cardboard but they are going to put their cash position to good use growing Leduc. Expect strong growth beyond 2018 as well. Costs per boe should come down over time no? 4% position for me but looks more attractive now. Link to comment Share on other sites More sharing options...
Cardboard Posted May 16, 2018 Share Posted May 16, 2018 It is now trading at $29,000 per flowing. Really good one day pop! At that price, I would sell some and look at competition in heavy: GXE, ATH. ATH is trading at $31,000 per flowing, has a nice mix of bitumen and light and if they go ahead with their infrastructure sale it will be incredibly cheap, again... PPR is also much cheaper than all of these right now. However, I don't think it will do anything unless this arbitration is positive. That is the impact of a management team with a high G&A, multiple equity raises. Simply no trust. Cardboard Link to comment Share on other sites More sharing options...
tombgrt Posted May 16, 2018 Share Posted May 16, 2018 I own way too much GXE and PPR already. As you said, PPR might be dead money for a little while. Link to comment Share on other sites More sharing options...
SharperDingaan Posted May 16, 2018 Share Posted May 16, 2018 "However there's a lot of unfilled capacity in the pipe and the lighter grade of shale will also displace the heavier grades in the pipe, allowing rapid and high incremental supply to drive price down quite a bit." Huh? Pipelines out of the Permian are already full and all light grade. They are now desperate and shipping excess via trucks. Truckers are hard to get by and freight costs are up 10-15%. Permian discount is now close to WCS-WTI! Pipelines out of Canada full also and Gulf coast refineries need the heavier grades. A diesel crisis is starting to develop. Cardboard This is in the context of take-away capacity; so trucks, rail, and pipeline are part of the 'pipe'. Pipeline is just one component. To increase trucking capacity either add more/bigger trucks (not realistic) or shorten distance traveled (to a rail yard). The truck does just the 'last mile', rail does the rest - no different to inter-modal transportation in a goods supply-chain. The limiting factor is rail-cars, and the further you are from the refinery - the harder it is to get them. Simply because in the time it takes to do a round-trip from Galveston to Alberta, 2 round-trips (or more) could have been made from the Permian. Grain vs oil railcar congestion in the Alberta yards is also a factor that the Permian doesn't have. We are really relying on the best targets in the Permian having being drilled first, and high decline rates. Successor wells producing lower initial spikes with higher declines, and there not being enough incremental drill capacity to compensate for the net production decline. In the short-term - drill-pigs and rail being added to the Permian as short-term (but expensive) fixes; how much - being dictated by the spot rate for crude. SD Link to comment Share on other sites More sharing options...
Cardboard Posted May 16, 2018 Share Posted May 16, 2018 "However there's a lot of unfilled capacity in the pipe and the lighter grade of shale will also displace the heavier grades in the pipe, allowing rapid and high incremental supply to drive price down quite a bit." Your explanation still makes no sense. You have constraints everywhere in the shipment chain within NA. So how do you have rapid and high incremental supply to drive price down quite a bit? Plus, the product that is being produced in mass quantity in the Permian (very light) is largely exported out: see today's EIA report. "The limiting factor is rail-cars, and the further you are from the refinery - the harder it is to get them. " On that one, you were wrong and keep repeating it. The issue is getting locomotives/drivers not railcars. That is what prevents right now crude-on-rail to ramp-up. Cenovus explained that pretty clearly. Cardboard Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 16, 2018 Share Posted May 16, 2018 It is now trading at $29,000 per flowing. Really good one day pop! At that price, I would sell some and look at competition in heavy: GXE, ATH. ATH is trading at $31,000 per flowing, has a nice mix of bitumen and light and if they go ahead with their infrastructure sale it will be incredibly cheap, again... PPR is also much cheaper than all of these right now. However, I don't think it will do anything unless this arbitration is positive. That is the impact of a management team with a high G&A, multiple equity raises. Simply no trust. Cardboard On ATU, GMP has them at $0.20 CFPS on strip for 2019E with no debt, at spot, I get them closer to $0.30 CFPS but I’m just doing it back of the envelope. Hopefully PPR can put up a good Q2 although hedges will still hurt. Link to comment Share on other sites More sharing options...
sculpin Posted May 16, 2018 Author Share Posted May 16, 2018 Major moves in CDN oil pricing, medium oil finally getting it's due.... WCS closed at C$74.43 Compared to last year at C$52.65 and YTD average of C$53.26 https://www.investorvillage.com/groups.asp?mb=19168&mn=145953&pt=msg&mid=18295919 Link to comment Share on other sites More sharing options...
SharperDingaan Posted May 16, 2018 Share Posted May 16, 2018 See the responses in italics Agreed that currently, all NA transport infrastructure is constained. Agreed that today that is helping to raise the price of crude - by essentially shutting in any material incremental new total NA supply. I simply point that that there is TOO MUCH light oil shale, shale production spikes are not constrained as the oil displaces heavier grades in the infrastrucure 'pipe', and it sets up downward pressure on crude prices. When lobster becomes cheap I eat more of it. To persuade me to keep eating the same amount of steak, lamb, or chicken - the price of those foods (heavier grades of oil) has to come down as well. SD "However there's a lot of unfilled capacity in the pipe and the lighter grade of shale will also displace the heavier grades in the pipe, allowing rapid and high incremental supply to drive price down quite a bit." Your explanation still makes no sense. You have constraints everywhere in the shipment chain within NA. So how do you have rapid and high incremental supply to drive price down quite a bit? The highest value product (light) gets shipped first. More light supply against the same demand lowers the price of light. To maintain sales - all other grades must decline in price as well. Plus, the product that is being produced in mass quantity in the Permian (very light) is largely exported out: see today's EIA report. To get to tidewater it still has to go through either pipeline, truck, or rail. Taking up room in the infrastructure 'pipe' "The limiting factor is rail-cars, and the further you are from the refinery - the harder it is to get them. " On that one, you were wrong and keep repeating it. The issue is getting locomotives/drivers not railcars. That is what prevents right now crude-on-rail to ramp-up. Cenovus explained that pretty clearly. They are the same. No locomotive to pull the rail cars, equals no rail cars in the right place at the right time, equals same result. Cardboard Link to comment Share on other sites More sharing options...
Cardboard Posted May 16, 2018 Share Posted May 16, 2018 "I simply point that that there is TOO MUCH light oil shale, shale production spikes are not constrained as the oil displaces heavier grades in the infrastrucure 'pipe', and it sets up downward pressure on crude prices." What goes in the pipe is what people want. And the only consumer of crude oil in the world are refineries. So if they want heavy, they will price things accordingly and that is exactly what we are seing at the moment with WCS skyrocketing and Permian light going down. "They are the same. No locomotive to pull the rail cars, equals no rail cars in the right place at the right time, equals same result." No it is not the same. You were blaming Alberta for not owning a large fleet of rail cars to store oil. So far, it has not been the issue at all. Pretty inefficient to have a massive amount of railcars sitting in various places while you have no locomotives nor operators to move them around. Cardboard Link to comment Share on other sites More sharing options...
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