Myth465 Posted March 3, 2011 Share Posted March 3, 2011 Wonder if Fairfax is in the offering. It beats treasuries but 2026 or whatever is a long time. Link to comment Share on other sites More sharing options...
bookie71 Posted March 3, 2011 Share Posted March 3, 2011 Would they maybe have a gain on the early payoff of the old debt? Link to comment Share on other sites More sharing options...
Myth465 Posted March 3, 2011 Share Posted March 3, 2011 Would they maybe have a gain on the early payoff of the old debt? I doubt it looks like they are paying it off at par plus unpaid dividends plus a small bit extra. I dont see a gain. I do see them earning a decent spread with the 1% rate reduction and also pushing it out to 2021 or whatever which is a good 10 years. I would love to see no maturities till 2020. That would be outstanding. With $1 billion in cash flow coming and hedges going out 3-4 years we would be pretty well insulated against declines in oil prices and could focus on drilling with all excess cash. Who knows these guys may also be able to find more cheap acreage. We also have a lovely call option on nat gas. I think we should buy some old rigs for now to ramp up drilling and to increase the ability to drill in the Pinion. Link to comment Share on other sites More sharing options...
Myth465 Posted March 4, 2011 Share Posted March 4, 2011 I agree with the Analyst here. http://www.cnbc.com/id/15840232?video=1826379675&play=1 I plan to ride out my calls and eventually exercise them. I like the program they have set up. We will get hit with a pullback at some point, but I think this is a good vehicle for playing energy. There are alot of levers they can pull, I plan to sit back and watch at least till I get long term gain status on the calls in my taxable account. Link to comment Share on other sites More sharing options...
brker_guy Posted March 4, 2011 Share Posted March 4, 2011 The video is a dead link, Myth... Link to comment Share on other sites More sharing options...
Myth465 Posted March 4, 2011 Share Posted March 4, 2011 The video is a dead link, Myth... CNBCs website sucks. Try this one. http://www.cnbc.com/id/15840232/?video=1826379675&play=1 Link to comment Share on other sites More sharing options...
txlaw Posted March 4, 2011 Share Posted March 4, 2011 Man, you guys are doing well on this one. Congrats. Link to comment Share on other sites More sharing options...
brker_guy Posted March 4, 2011 Share Posted March 4, 2011 TxLaw, not as well as Mr. Watsa, but happy to take any pennies as we can get from SD's rise. :-) Only LVLT can rise like SD or ATSG, life would be nice. :) ;D Myth, thanks for re-posting the link. Link to comment Share on other sites More sharing options...
vinod1 Posted March 5, 2011 Share Posted March 5, 2011 I too am having a hard time coming up with a valuation. This presentation helps quite a bit. I plan to spend the weekend reviewing hte investor day presentation, 10k, and various calls. http://www.thomson-webcast.net/us/dispatching/?event_id=8a2e602756c515e5f612d7e932ff7df9&portal_id=3f05139afebc9802474e076f0d87add4 http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9ODM1NjN8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 Page 89 gives me what I am looking for, A net asset value. At $36 a share with $100 oil. Not bad. Myth, On page 89, it lists "Resources" as $14,998 million. Do you know what assets this is referring to? Is this 2P+3P? Thanks Vinod Link to comment Share on other sites More sharing options...
Myth465 Posted March 5, 2011 Share Posted March 5, 2011 I am still working through the investor day, I am pretty sure they detail out how they came up with the calculation. I will post back once I finish it. I would assume its 2P and 3P, or perhaps Nat Gas acre which doesnt have a P due to the pricing, but still has value. --- From the presentation it looks like its playing with spacing and infill drilling. Sounds basically like 2P and 3P, except not probably or possible but, there just not booked. I think they know they have more oil in the Permian and Miss, but havent booked them as reserves. They also said that if you put reserves on the books, after 5 years you have to write them off. They put back 80% of their gas back on with $4 pricing. Perhaps they are being very conservative, and adding what they can drill / sell, then they will add more next year as reserve replacement and more the following year. Thats my best guess from listening to the bulk of the investor day, and understanding how accounting can shape business decisions and reporting. I may put in a call to investor relations for a recon to the SEC PV10 or strip PV10. Here are some links to go with my theory - This also explains why Ward (a member of his team) said if gas prices dont rebound in 5 years they would consider monetizing them. He said gas was at the end of the 5 year development plan. Also explains CHK selling gas and acre. After 5 years you kinda get no create accounting wise for your land and undrilled reserves. I would add slowly. I predict a JV is announced sooner rather than later. They have a clock running against them between lease expiries and have an incentive to get it done in a $100 oil environment. http://www.velaw.com/uploadedFiles/VEsite/Resources/NewSecOilGasReserveRulesRaisingIssue.pdf http://blogs.oilandgasinvestor.com/blog/2009/01/27/2010-sec-reserve-reporting-rules-may-affect-ma-deal-making-as-soon-as-now/ “The SEC says five years is a reasonable plan of development. Anything past five years, there should be some circumstance that makes sense for (booking) that.” For example, an operator may have a several-year history of drilling 20 wells per year in a play with predictable results, and all indications are that this program will continue beyond five years. The operator may have a good claim to book more of the reserves as proved than only what may be drilled in the next five years. ------- Can anyone suggest a book or another resource for valuation of oil & gas companies? I have been valuing these based on estimated production, all in costs and some conservative guess on what future oil prices will be & then by doing a discounted cash flow analysis. I think what you are doing is what everyone seems to do. Its what I do. I look at Finding and Development costs, reserves, and production. I think $100 oil over the decade is conservative, and prefer to see PV10 based on $85 oil. I tend to discount this and if everything looks good I buy. SD of course is a special case, it sucks on all of these metrics except for reserves and strip PV10. I dont think a book would be useful given the SEC changes. I focus on the analyst reports and questions to see what they are looking at. After following 5-10 companies you tend to get a feel. Canadian Value also has a good process. ------- Finally I really like the new CFO. The old one was good, and had a much crappier situation to work with. This new one seems very profession and is taking care of the blocking and tackling. Pushing out maturities, addressing funding gaps for 2011, 2012. Addressing maturities up till 2020. Lowering rates, expanding the credit facility. Ward is also quite impressive. He has been burned and his shares are underwater. All indications show that they plan to hedge the hell out of that oil out 4-5 years. I think I heard they will go over 100%. Link to comment Share on other sites More sharing options...
vinod1 Posted March 6, 2011 Share Posted March 6, 2011 Thanks Myth! Link to comment Share on other sites More sharing options...
vinod1 Posted March 6, 2011 Share Posted March 6, 2011 Can anyone suggest a book or another resource for valuation of oil & gas companies? I have been valuing these based on estimated production, all in costs and some conservative guess on what future oil prices will be & then by doing a discounted cash flow analysis. Security Analysis on Wall Street by Jeffery Hooke has a section on O&G valuation. This book has a section on valuing some of the special cases like P&C, Banks, O&G. It is pretty good book, less on theory and more on actual practical application Vinod Link to comment Share on other sites More sharing options...
Myth465 Posted March 24, 2011 Share Posted March 24, 2011 Anyone taken the time to compare the two filings. I know its up due to the updated filing, but I havent compared the two to see the big changes. We have the trust 1. A JV agreement at some point. Perhaps a trust 2. Additional Hedges. And finally general operating results all as potential catalysts. I forgot who mentioned it, but with hedges SD has turned into a Manufacturing company. Link to comment Share on other sites More sharing options...
valuecfa Posted March 24, 2011 Share Posted March 24, 2011 Congrats on the Sandridge leaps Myth! I've closed 1/3rd of my leap position over the past few days. I don't have any idea how much higher oil will go, but it is getting a little frothy (along with most other commodities) in my opinion. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted March 24, 2011 Share Posted March 24, 2011 Security Analysis on Wall Street by Jeffery Hooke has a section on O&G valuation. Thanks Vinod1 Link to comment Share on other sites More sharing options...
Myth465 Posted March 24, 2011 Share Posted March 24, 2011 Congrats on the Sandridge leaps Myth! I've closed 1/3rd of my leap position over the past few days. I don't have any idea how much higher oil will go, but it is getting a little frothy (along with most other commodities) in my opinion. Thanks Valuecfa. How often do you use leaps? I am holding SD and ATPG. Will take some off of ATPG and will likely sell the offshore drillers to reduce oil exposure overall. I dont know whats going on. Either the economy goes or oil falls, but you have real issues in the middle east. Its tough. I love the prospects with SD and the hedges, they have no real commodity risk, but will tank like everything else will. My value brain says hold to see what the JV and Trust do. The other piece of me says lock in your gain you idiot. With the JV and Trust you can assign a private market value to all of the acreage. Link to comment Share on other sites More sharing options...
valuecfa Posted March 24, 2011 Share Posted March 24, 2011 Congrats on the Sandridge leaps Myth! I've closed 1/3rd of my leap position over the past few days. I don't have any idea how much higher oil will go, but it is getting a little frothy (along with most other commodities) in my opinion. Thanks Valuecfa. How often do you use leaps? I am holding SD and ATPG. Will take some off of ATPG and will likely sell the offshore drillers to reduce oil exposure overall. I dont know whats going on. Either the economy goes or oil falls, but you have real issues in the middle east. Its tough. I love the prospects with SD and the hedges, they have no real commodity risk, but will tank like everything else will. My value brain says hold to see what the JV and Trust do. The other piece of me says lock in your gain you idiot. With the JV and Trust you can assign a private market value to all of the acreage. I recall an SD leap discussion with you back when we (or maybe just i) were about underwater, nice to have this reversal of late. I seem to nearly always have 1 to 3 leap positions on, usually with large, historically low volatility names that are trading at a meaningful discount, with a possible catalyst that may, or may not, develop. -example: SD partnering or asset sales, oil & NG price, JNJ arbitration victory, MSFT change in capital structure policy. Link to comment Share on other sites More sharing options...
Myth465 Posted March 24, 2011 Share Posted March 24, 2011 Humm interesting, I do remember that. I sold 7.50s for a loss and doubled down on the 5s. It worked out quite well. I switched the roth to 2013s (should have gone the other way) and that too has worked out well. I should probably sell out my basis considering how far its up. I like Deep in the money leaps, and you are right. I tend to focus on a catalyst. I will have to look into MSFT, never could find the catalyst for that one, but you have identified one. Link to comment Share on other sites More sharing options...
Shane Posted March 25, 2011 Share Posted March 25, 2011 Out of curiosity, what appraised value are you all finding for SD? I bought a small position in hopes of learning about the industry by having skin in the game, but have been way to busy to break down their articles... in fact am supposed to be studying for a mid-term right now. I thought about getting out now that I doubled my money, but recently heard from a friend in the industry that they just now bought! I was surprised to hear he was so late and still optimistic, but he has been very successful for a number of years. Link to comment Share on other sites More sharing options...
Myth465 Posted March 31, 2011 Share Posted March 31, 2011 Interesting read. I hope it corrects now vs. crashing later. I would like to hold my shares, but if things get too far out of wack I may be forced to sell. Any thoughts. http://www.gurufocus.com/news.php?id=127583 Link to comment Share on other sites More sharing options...
ericd1 Posted March 31, 2011 Share Posted March 31, 2011 Interesting article... Let's see Libyan production cut (2% of world) other MENA countries not really increasing supply, Japan demand cut (how much really?) and now the U.S. is floating in crude oil (no where else to go???), but U.S. gasoline demand is down...down 0.1% yoy because of higher prices. Myth - I'm really surprised you don't know how to play this one...LOL I doubt oil is going much below $90 this year and producers profits will be up...If this shows up anywhere I'd expect it at the pump. How about shorting UGA (US gasoline)? And I thought we were at or near peak oil - WTF - Turn off the faucet... Link to comment Share on other sites More sharing options...
Myth465 Posted March 31, 2011 Share Posted March 31, 2011 Well I have been a bit torn for the last two weeks. Oil is about 50% of my portfolio mainly because SD is up significantly. I love SD and its pospects but I think oil is a bit ahead of itself (I dont buy this recovery, I feel like things are getting better but its not back to the races), articles like this kinda make me think. So far I have just slept on it and its paid off quite nicely over the last 2 weeks. I will probably continue to sleep on it (just too many near term catalyst). ;D. SD will be fine long term, but will correct like everyone else should oil move towards $95 or so. Its weird $80 is the new $40 and those are low prices. I dont do 2 things. I dont short, and I dont cut my winners unless I find something better. I may have to break one of those rules sooner or later (probably wont be the shorting one). Im a peak oil guy (well actually a peak cheap oil guy), but things get ahead and then correct. Link to comment Share on other sites More sharing options...
ericd1 Posted March 31, 2011 Share Posted March 31, 2011 This is crazy - on the news this morning they said US national gasoline prices moved up again...I'm wondering if this is all a conspiracy... :) Link to comment Share on other sites More sharing options...
Myth465 Posted April 1, 2011 Share Posted April 1, 2011 We have liftoff and they have started the IPO. Where do you some of you smarter guys place IV at? http://galaxystocks.com/7515/business-news/sandridge-energy-inc-initiates-initial-public-offering-nysesd/ We still have 3-4 other catalysts within the next 5-6 months. --- Eric mid east is real, but we have alot of storage pure that last article. Not sure what to make of all this. I think its pricing in further mideast issues in the summer, not so much supply and demand. Link to comment Share on other sites More sharing options...
Guest Bronco Posted April 1, 2011 Share Posted April 1, 2011 Myth, you are the man, myth and legend on this one. $5 calls way back when were the way to go. All I ask is that you consider me for employment when you start your investment company. Link to comment Share on other sites More sharing options...
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