JEF - Jefferies Group

[scorpioncapital]

So ex-unrealized gains in KCG and HRG they made net $10 million?

[jay21]

So ex-unrealized gains in KCG and HRG they made net $10 million?

 

More than that.  The $110 gain was given pre tax.

 

Ex-this it looks like they are close to PY results, however with a higher comp expense.  It seems like this is a play on if those compensation investments will pay off and revenue will increase and their comp ratio will go down.

[Guest ajc]

Indiana Supreme Court hands Leucadia a win

 

"The Indiana Supreme Court has handed the developers of a controversial coal-to-gas plant planned for Rockport a decisive victory in a battle over whether a deal to build it complied with state law.

 

The 5-0 ruling eliminates a significant hurdle for Leucadia National, the plant's developer, which had all but given up the project after legislative action made it likely it would need a new review. But the Supreme Court's decision essentially makes that moot.

"We won a complete and total victory," said Mark Lubbers, project manager for Leucadia.

 

Still, company officials weren't ready to talk about when or if they'll move forward with the plant.

Instead, Lubbers pointed to an April 30 statement in which the company said that even if it won in the courts, "only a clear reversal of position by the governor would enable the project to go forward."

The statement came just after Gov. Mike Pence had said he would sign a bill into law that was meant to provide a new review of the project. On Tuesday, a spokeswoman for Pence did not immediately respond to questions about the project or the court ruling.

 

The $2.8 billion Indiana Gasification project is the result of a sort of public-private partnership brokered by the company with the administration of former Gov. Mitch Daniels, for whom Lubbers had once been a top adviser..."

 

http://www.nuvo.net/indianapolis/indiana-supreme-court-hands-leucadia-a-win/Content?oid=2730625#.UrX509JdVBM

[jay21]

Indiana Supreme Court hands Leucadia a win

 

"The Indiana Supreme Court has handed the developers of a controversial coal-to-gas plant planned for Rockport a decisive victory in a battle over whether a deal to build it complied with state law.

 

The 5-0 ruling eliminates a significant hurdle for Leucadia National, the plant's developer, which had all but given up the project after legislative action made it likely it would need a new review. But the Supreme Court's decision essentially makes that moot.

"We won a complete and total victory," said Mark Lubbers, project manager for Leucadia.

 

Still, company officials weren't ready to talk about when or if they'll move forward with the plant.

Instead, Lubbers pointed to an April 30 statement in which the company said that even if it won in the courts, "only a clear reversal of position by the governor would enable the project to go forward."

The statement came just after Gov. Mike Pence had said he would sign a bill into law that was meant to provide a new review of the project. On Tuesday, a spokeswoman for Pence did not immediately respond to questions about the project or the court ruling.

 

The $2.8 billion Indiana Gasification project is the result of a sort of public-private partnership brokered by the company with the administration of former Gov. Mitch Daniels, for whom Lubbers had once been a top adviser..."

 

http://www.nuvo.net/indianapolis/indiana-supreme-court-hands-leucadia-a-win/Content?oid=2730625#.UrX509JdVBM

 

I'm still trying to wrap my head around the energy projects.  I do not know anything about energy and even rudimentary commentary may help me.  Does anyone have any insight they could share?

 

I found this on yahoo finance that is taking a stab at the potential earnings power:

 

http://finance.yahoo.com/mbview/threadview/;_ylt=AqGrHVmFa3ERYbCYD52_r23eAohG;_ylu=X3oDMTB2OWFnODMyBHBvcwM3OARzZWMDTWVkaWFNc2dCb2FyZHNYSFJVbHQ-;_ylg=X3oDMTBhYWM1a2sxBGxhbmcDZW4tVVM-;_ylv=3?&bn=19ae4497-92fa-3786-aa7d-551fc38c08ed&tid=1372196839396-cb9be200-56b3-4260-851c-59e5226b5cd0&tls=la%2Cd%2C39%2C0

[Guest ajc]

Leucadia Agrees With The State Of Oregon To Extend The Review Of Its CZMA Application To April 3rd

 

Near-term completion of State review expected. Record $6.3 billion investment in Oregon would provide critical construction jobs, state and local tax benefits, and a more reliable supply of natural gas to the Pacific Northwest.

 

In a statement issued in Portland today, Oregon LNG applauded the execution of a three-month stay agreement between Oregon LNG and the Department of Land Conservation and Development (DLCD) of the state of Oregon with respect to its completed Coastal Zone Management Act (CZMA) application. Oregon LNG has proposed a $6-plus billion liquefied natural gas (LNG) terminal and associated pipeline which will be sited near the mouth of the Columbia River in Warrenton, Oregon. Peter Hansen, CEO of Oregon LNG, stated: "The project remains on track to receive most of its federal permits by the end of 2014, making Oregon LNG one of the first LNG export projects on the West Coast of North America. We are excited about the economic progress, exports, and clean energy that this project will provide to the Pacific Northwest and the world."

 

http://www.4-traders.com/LEUCADIA-NATIONAL-CORP-13437/news/Leucadia-National-Corp--Oregon-LNG-Agrees-with-the-State-of-Oregon-to-Extend-to-April-3-2014-the-17736788/

[Guest ajc]

I'm still trying to wrap my head around the energy projects.  I do not know anything about energy and even rudimentary commentary may help me.  Does anyone have any insight they could share?

 

I found this on yahoo finance that is taking a stab at the potential earnings power:

 

http://finance.yahoo.com/mbview/threadview/;_ylt=AqGrHVmFa3ERYbCYD52_r23eAohG;_ylu=X3oDMTB2OWFnODMyBHBvcwM3OARzZWMDTWVkaWFNc2dCb2FyZHNYSFJVbHQ-;_ylg=X3oDMTBhYWM1a2sxBGxhbmcDZW4tVVM-;_ylv=3?&bn=19ae4497-92fa-3786-aa7d-551fc38c08ed&tid=1372196839396-cb9be200-56b3-4260-851c-59e5226b5cd0&tls=la%2Cd%2C39%2C0

 

Thanks for posting, and +1 (any help here would be appreciated).

 

According to this (

), natural gas sells for up to $16 per 1000 cubic feet in Japan with US production and overseas shipping costs coming in at a combined $8/$9 per 1000 cubic feet.

So, I think Oregon might simply be a play on that disparity.

 

Regarding coal gasification, I have no idea. From the bits I've read, the flexibility it provides is key and the US has massive coal reserves which need to be used in a clean way - hence gasification. Also, the main cost-inefficiency seems to be the upfront costs of building the plant, but Leucadia have been able to strike a reasonably good deal in that respect if I'm not mistaken.

 

I've just found these via some googling, not sure what use they'll be (if any):

 

- The Economics Of Gasification: A Market-Based Approach www.mdpi.com/1996-1073/2/3/662/pdf

 

- Cost Estimates Of Coal Gasification For Chemical And Motor Fuels http://www.intechopen.com/books/gasification-for-practical-applications/cost-estimates-of-coal-gasification-for-chemicals-and-motor-fuels

 

- Coal Gasification Could Unlock Coal’s Future http://www.energybiz.com/article/13/04/coal-gasification-could-unlock-coal-s-future

[jay21]

I'm reading XOM's energy outlook: http://ir.exxonmobil.com/phoenix.zhtml?c=115024&p=irol-reportsEnergy

 

Here's their writeup on LNG:

 

Shale, LNG continue to reshape natural gas market

 

Two significant developments in natural gas — shale gas production in North America and the growth of the global LNG market — are likely to play a major role in expanding and reshaping natural gas supplies over the coming decades.

 

Unconventional gas — including shale gas, tight gas and coalbed methane — accounts for about 40 percent of the world’s remaining recoverable gas resource, according to IEA estimates. Unconventional development is expected to play an increasing role in the global gas supply.

 

Advances in technology and favorable market conditions have unlocked North America’s vast resources of shale gas and other unconventional sources such as tight gas and tight oil. From 2010 to 2040, unconventional gas production in North America is expected to grow by around 65 billion cubic feet per day, which is about the size of total U.S. gas production today. This abundant supply is expected to enable North America to shift from a net importer to a net exporter of natural gas by 2020 as production outpaces demand.

 

There is also large potential for unconventional gas production in other parts of the world, notably Asia Pacific. Australia, China and Indonesia, along with Argentina and other nations, are actively promoting exploration and development of their unconventional gas resources, aspiring to replicate North America’s success. In each country, the pace of development will depend on geology, appropriate technology adaptations, governing policies and development economics.

 

About 65 percent of the growth in natural gas supplies through 2040 is expected to be from unconventional sources, which will account for one-third of global production by 2040. North America will lead unconventional gas production, accounting for more than half the growth through most of the Outlook period.

 

Like oil, natural gas is often found in remote areas, far from large, urban energy demand centers. LNG, or liquefied natural gas, can be transported by ship, enabling gas to be delivered economically to more distant markets than can be reached by pipeline.

 

All around the world — from the highlands of Papua New Guinea, to the deep water off east Africa, to frigid far east Russia, to the U.S. Gulf Coast — LNG projects are in various stages of planning and development to produce gas destined for faraway ports. These projects will bring jobs and economic opportunity to gas-rich regions, while supplying much-needed cleaner energy to burgeoning cities.

 

An increasing share of global natural gas demand through 2040 is expected to be met by gas imported as LNG.

 

LNG volume is expected to triple over the Outlook period to meet approximately 15 percent of global gas demand. The growth of the LNG market will facilitate trade between regions, helping to balance global supply and demand of natural gas.

 

Overall, international trade of natural gas in 2040 is expected to be 2.5 times the 2010 level, growing from about 15 percent of gas demand in 2010 to 25 percent by 2040. Most of this traded volume will be LNG, particularly in Asia Pacific. By 2040, about 40 percent of Asia Pacific’s natural gas demand will be satisfied by LNG, with another 10 percent supplied by pipeline imports. Europe’s regional gas imports are also likely to increase from about 45 to 60 percent as local production declines.

[Guest ajc]

I'm reading XOM's energy outlook: http://ir.exxonmobil.com/phoenix.zhtml?c=115024&p=irol-reportsEnergy

 

Thanks jay21.

 

That seems like the Oregon bet in a nutshell.

 

Again, I don't know enough about energy to have a worthwhile opinion at this point but if there is one global region with people and a need for energy over the next century then Asia is it.

The Pacific Northwest is obviously well located to take advantage of North America's low-cost energy producer status in that regard.

 

My inexpert view of it is that it's fundamentally a long-term arbitrage opportunity.

Demand in Asia is going to rise far quicker than supply there, and the US has the cheapest gas.

That's my neophytic view on it anyway.

 

Also, I think you might find this interesting: http://www.gasification.org/page_1.asp?a=8

Mind the sales pitch, but there's still some useful stuff in there besides.

 

My thoughts on the coal gasification deals is that from what I've read those plants can convert multiple resources into electricity (plus of course, there's the CO2 and other by-products that can be sold).

 

Maybe I'm being too clever by half here, but if gas prices fall drastically then you can use that to produce power or if coal prices slump then you can use that.

If you can get reasonable upfront terms like Leucadia seem to be getting for the construction aspect, then for the production part you're able to keep costs low at all times because of the flexibility that coal gasification plants offer.

 

Perhaps, that's incorrect though. I really don't claim to have much energy-related expertise.

 

Finally, here's just a snapshot of some Leucadia gasification production projections (click on the right for the others): http://www.globalccsinstitute.com/project/mississippi-gasification-leucadia

 

I think from those we could get a range of values for what each plant might earn annually.

 

[rogermunibond]

Cattle prices rising.  National Beef may not see improvement in 2014.

 

http://online.wsj.com/news/articles/SB10001424052702304325004579298392616017708

[bookie71]

Shouldn't hurt them as they are like a bookie in they get the spread.

 

[rogermunibond]

It would hurt them on volume and revs (offset by replacing Walmart business) depending on how much the price rises reduce beef demand from consumers. Plus, the spread is the lowest its been over the past ten years. We're going to need a few years before cattle herds expand.

 

From the recent 10-Q

 

The USDA reports market values for cattle, beef, offal and other products produced by ranchers, farmers and beef processors.  Generally, National Beef expects its profitability to improve as the ratio of the USDA comprehensive boxed beef cutout (a weekly reported measure of the total value of all USDA inspected beef primal cuts, grind and trim produced from fed cattle) to the USDA 5-area weekly average slaughter cattle price increases and for profitability to decline as the ratio decreases.  The ratio during the nine months of 2012 was the lowest for the corresponding periods during the past ten years and was largely unchanged during the nine months of 2013.

 

Revenues were largely unchanged during 2013 as compared to 2012 due primarily to slightly higher selling prices but fewer cattle processed.  Cost of sales per head increased during 2013 as compared to 2012 as cattle prices rose to record high levels, due in part to the declining U.S. cattle herd, which was exacerbated by drought conditions across key cattle raising areas in 2012.

 

 

 

[greenwave]

Anyone have thoughts on significant volume increase in LUK  today ?

 

Over 6 M. shares traded . Possibly  related to Berkowitz recent disclosure in his hedge fund ?

 

--------

 

greenwave

[rogermunibond]

http://business.financialpost.com/2014/01/13/new-york-based-oregon-lng-applies-to-export-canadian-natural-gas/

 

Oregon LNG applying to export Canadian nat gas

[Grenville]

Anyone have thoughts on significant volume increase in LUK  today ?

 

Over 6 M. shares traded . Possibly  related to Berkowitz recent disclosure in his hedge fund ?

 

--------

 

greenwave

 

My guess is it's Ian Cumming selling more stock. He's below reporting thresholds now, so we won't get confirmation if it is him.

[gfp]

The share blocks definitely look to be initiated by the seller rather than the buyer(s).

[fareastwarriors]

What are people thoughts about LUK post merger?  The merger closed for a few quarters now.

With an ibank in the mix, I'm just not sure how to think about the whole company.

[adesigar]

What are people thoughts about LUK post merger?  The merger closed for a few quarters now.

With an ibank in the mix, I'm just not sure how to think the whole company.

 

Not as great as it once was with C&S in charge. Nice leadership handover to Richard Handler and Brian Friedman. I think they will focus more on the big parts of LUK and sell of the small bits and pieces. Should make it easier to understand and value. Will stay undervalued because it now considered a financial so will be linked to book value. Very high chance of continued long term outperformance relative to market and financials.

[Myth465]

A decent Value Inventor who has owned it for years think they will build up the IB, and sell it in a bull market for 2x BV once the cycle turns.

I have a small bit of LUK and like that they are leaving the smaller bits and pieces. Will hold and add overtime.

[Liberty]

A decent Value Inventor who has owned it for years think they will build up the IB, and sell it in a bull market for 2x BV once the cycle turns.

 

Interesting. Personally, I would be seriously surprised if that happened.

 

With Handler and Friedman both coming from Jeffries where they were big shareholders and helped build the business over many years, I think they're probably more familiar and more attached to it than to anything else in LUK. I see it as a permanent part of the business now, kind of like the insurance operations of Berkshire or the BNSF now.

[constructive]

A decent Value Inventor who has owned it for years think they will build up the IB, and sell it in a bull market for 2x BV once the cycle turns.

I have a small bit of LUK and like that they are leaving the smaller bits and pieces. Will hold and add overtime.

 

I think completely the opposite - all other businesses are for sale at the right price but not Jefferies.

 

Handler is an investment banker at heart, not a beef processor.

[Grenville]

I agree. I don't see Jefferies leaving LUK as long as Handler and Friedman are around unless they spin it off to shareholders as a separate company.

[Myth465]

I believe it was this guy.

 

http://www.bengrahaminvesting.ca/Resources/Video_Presentations/Guest_Speakers/2013/Robotti_2013.htm

 

Theoretically they wouldnt have to sell Jefferies, but he said it gives LUK shareholders a more liquid security which will eventually be repriced at 2x book value.

 

I really liked the thesis and like that they are highgrading the portfolio.

 

 

[Sportgamma]

What are people thoughts about LUK post merger?  The merger closed for a few quarters now.

With an ibank in the mix, I'm just not sure how to think the whole company.

 

The way I view LUK is that is becoming a collection of businesses that process stuff (transactions of corporate assets, mortages, autos, beef, ) without having to carry much inventory.

 

Its undervalued and cash rich.

 

Regarding Jefferies, they did pass that real-life stress test of 2008 with flying colours and by looking at the multiples LUK was acquiring shares of JEF, it seems C&S thought 2x book was fair value.

[rogermunibond]

True they were fine in 08-09 but really the MF Global and Egan Jones smear job almost did them in. Does point to the fragility of an IB book value multiple.

[ValueBuff]

True they were fine in 08-09 but really the MF Global and Egan Jones smear job almost did them in. Does point to the fragility of an IB book value multiple.

 

That will not matter in 10 years.  Any multiple wrothy will be back on the business.