BrotherMaynard

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  • Energy Roundup: Chesapeake Changes Its Plans
    What happens to CHK if nat gas prices go to $4?

    $3?

    If you can't answer those questions, you shouldn't be investing around CHK.
    Dec 08 17:00 pm |Rating: +1 -1 |Link to Comment |View article
  • With China's Oil Demand Up, Watch A-Power Energy
    This guy is dangerous. If he would dig a little deeper than CNBC nonsense he would realize that China's demand decline (second derivative of demand) between June and October of this year was a massive 778k BD. Percentage wise, this exceeds the US demand destruction over the same period. Diesel demand growth during Oct was the lowest of the year...6.7% compared to double that during the pre-olympic buildup.

    china is choking on its inventories after the massive olympic and price-cut build ups...they have over 30 days of consumption for gasoline (double 2006's level) and 20 days of diesel consumption on hand (4x 2006 levels).

    Folks, its a big mistake to extrapolate unsustainable trends. China's hoarding/stockpiling throughout the first half of the year was one of those trends. Those are the anomolies rather than some "new world order" which every oil long and opec member would want you to believe.
    Dec 08 16:56 pm |Rating: +1 -1 |Link to Comment |View article
  • Oil Sector Flush with Cash, Expect M&A - Canaccord Analyst
    Rather than rely on a completely random variable such as oil prices, why not model for the worst? All I ever read on this site is how oil is going to triple digits right quick. But what if that doesn't happen? What If a company can't operate at $30bbl? If thats the case you shouldnt own it any more than you should go to the casino. That thought process is about as rational as it gets.

    The EIA is required to make guesses. They're obviously no better than the next guy as they were about 50% off the mark this time around. It's irrational to believe that the EIA or anyone else for that matter can divine what the price of oil will be in the future.

    For instance:

    "As a result of the sputtering economy and lower petroleum demand, the price for the U.S. benchmark West Texas Intermediate oil will average $63.50 a barrel next year, the EIA said."

    www.reuters.com/articl...







    On Nov 27 10:26 AM jayjayjay1212 wrote:

    > HAHAHA 30$ oil... What an irrational investor, I'm guessing he was
    > the first one to call oil at 250$ when it was trading at 140$ + ...
    >
    >
    > By the way, the integrated companies know the long term equilibrium
    > price should be more towards 100-120$ in real dollars, just as the
    > International Energy Agency mentioned in their study. BrotherMaynard,
    > if you know more than the IEA, please tell us how you got this good
    > and why you are not CEO or on the board of any of the big energy
    > companies!
    >
    > As Warren Buffett says, better to buy a great company at a good price
    > than an average company at a great price. The great names in Oil
    > Sands (Suncor, Canadian Natural Resources and Encana) would fit in
    > the former category, so the big guys in Energy are likely shopping
    > around as we speak in order to boost their growth prospects.
    >
    > As for your ''Time to move on'' statement, most of us are actually
    > WORKING in this sector, so this is our job, we are not ''moving on''
    > to the next ''hot sector'' as I'm sure you already have done. We
    > actually study the fundamentals, not what Roubini or Cramer are saying.
    >
    >
    > Disclaimer: I own Suncor shares
    >
    Nov 28 11:40 am |Rating: +1 0 |Link to Comment |View article
  • Oil Sector Flush with Cash, Expect M&A - Canaccord Analyst
    omg, this site is relentless about hoping for commodity names. integrateds have been around for almost centuries now...and that for good reason. They don't make crazy assumptions, esp. given the crazy nature of crude. $49 of oil is historically extremely expensive. Integrateds know this. So why would they pay for an incompetent company that can't manage when oil falls below $60 now, rather than wait until oil hits $30 and it goes out of business...just buy it from the Ch 11 judges.

    It was a bubble folks...time to move on.
    Nov 21 12:37 pm |Rating: +1 -1 |Link to Comment |View article
  • Chesapeake Energy Continues to Shore Up Its Balance Sheet
    Furthermore, there are PLENTY of other companies out there that aren't even close to violating covenants (maybe or maybe not in the energy sector) yet trade at similar if not even more distressed valuations...so its time to move on folks. It was a bubble. Let it go!
    Nov 19 21:18 pm |Rating: +1 0 |Link to Comment |View article
  • Chesapeake Energy Continues to Shore Up Its Balance Sheet
    fyi...here is the RJ news piece via platts that i cited above:

    www.platts.com/Natural...
    Nov 19 20:56 pm |Rating: 0 0 |Link to Comment |View article
  • Chesapeake Energy Continues to Shore Up Its Balance Sheet
    A little common sense goes a long way here. Berkshire hathaway is arguably one of the most well capitalized companies on the planet and they are getting hammered by credit markets...with $40bn in cash.

    The fact that CHK is levered 1.5x, and runs a perpetually diminished cash balance, should be viewed as totally unacceptable by any prudent investor...esp. those investors that give two bits about management. Its the hubris of management that will kill this company, as they fail to care or believe that Nat gas sunk to as low as 2.50 during the last recession (and that was not a consumer led recession). Lord knows demand isn't going to pick up in this environment save for a ridiculously cold winter (4 months out of the year), but even then, industrial capacity is being laid idle writ large....yet supply is at levels net seen in a long time (b/c of finds like CHK's). We can't export the stuff (need LNG capacity for that...and its as big an eyesore as refiners, apparently), so we have to deal with what we pump. As a result, Raymond James made this prediction:

    "With the exception of a brief winter spike, US natural gas prices will
    have to tank in 2009 to rebalance a glutted market...[RJ's] model, which is based on 30-year average weather, shows the US reaching a theoretical 4.25 Tcf of gas in storage at the end of 2009's injection season based on gains in US production and a slackening of demand in a weak US economy... "This cannot physically happen (due to storage constraints)," Adkins said, noting that there is only about 3.75 Tcf of US gas storage available. "This means that gas prices must fall sufficiently to whack the gas rig count and force some producers to shut in gas production over the next year. For that to happen, the gas market will need to take prices even lower than our current forecast to rebalance the system."

    Meanwhile, addressing the covenants that mmarrk is complaining about, we will cite a Johnson and Rice piece from 10/13/08:

    "The key covenant is the debt-to-EBITDA ratio which is maxed out in the covenants at 3.75x. As of September 30, 2008, this stood at roughly 2.05:1...to push CHK into violation of this covenant, we estimate that all hedging positions must be lost (failure of counter parties?), not just the knock-out provisions, and NYMEX gas and oil prices would have to fall to $4/mcf and $60/bbl for a prolonged period, basically a doomsday scenario."

    So there you have it. $4 is more real than anyone wants to admit given the RJ comments and where nat gas went last recession. $60 oil has been breached.

    You have been warned.


    Nov 19 20:55 pm |Rating: +1 0 |Link to Comment |View article
  • Chesapeake Energy Unlikely To Remain this Cheap
    "They don't show something below $5 because that scenario is just a 1% probability."

    I'm not sure where you derived that probability from...but how soon everyone forgets...the 2001-2002 recession saw sub $2.50
    gas. CHK likely doesn't exist (assuming this capital structure) at $2.50

    tfc-charts.w2d.com/his... (pull use the pull down menu to view year by year)
    Nov 14 15:20 pm |Rating: 0 0 |Link to Comment |View article
  • Time to Fill Up on the Strategic Petroleum Reserve
    why don't we wait until oil hits $30 until we fill up.
    Nov 14 15:10 pm |Rating: 0 0 |Link to Comment |View article
  • Chesapeake Energy Unlikely To Remain this Cheap
    come to think of it....here's the most recent presentation from their site (10/14, analyst day...its a big file, like 12mb just to warn you): media.corporate-ir.net...

    Go to page 3.

    Look at NAV with a $5 nat gas scenario...$29 pershare (a lot higher than today, obviously). However, notice the difference between NAV at $6 and NAV at $5 (or the second derivative of change)...its a 37% drop. The drop is the same from $7 to $6. Yet from $8 to $7 it was only a 25% change...so the lower the prices go, the faster the NAV falls. If nat gas hits $4 will NAV be worth maybe, 50% less? Who knows...they, for whatever reason, won't show us.
    Nov 12 16:46 pm |Rating: 0 0 |Link to Comment |View article
  • Chesapeake Energy Unlikely To Remain this Cheap
    Show me one presentation given by CHK that gives an NAV scenario with nat gas at $4.

    I sure haven't found one...maybe if they illustrated what happens to their model at $4, more people would be buyers.

    there are ebitda covenents on their debt and ebitda is directly tied to nat gas prices...therefore, if nat gas drops below $5, they are really going to have problems with the liability side. this is what the XOM's and CVX's are waiting for...picking through the wreckage of independant E&P's that extrapolated the most fleeting of overly optimistic trends at the very top.
    Nov 12 16:37 pm |Rating: 0 0 |Link to Comment |View article
  • Gold Miners: Biggest Drag on My Portfolio, Yet the Biggest Opportunity
    take ag/commodity prices today and whack those in half...then ask your self if you would want to own the equity names. i promise those names you mentioned above would all of the sudden look extremely expensive (NOV might be the exception).
    Nov 07 16:41 pm |Rating: 0 0 |Link to Comment |View article
  • Gold Miners: Biggest Drag on My Portfolio, Yet the Biggest Opportunity
    Wow a bunch of commodity/ag plays. lots of imagination there.
    Nov 07 16:39 pm |Rating: 0 0 |Link to Comment |View article
  • Why I Sold National Oilwell Varco and Bought WMS Industries
    As far as NOV goes, you did exactly the wrong thing. All i can say is, with the vix this high, you should be buying the dips and selling the rips.
    Nov 03 00:14 am |Rating: 0 0 |Link to Comment |View article
  • Chesapeake Energy Unlikely To Remain this Cheap
    nat gas at $4mcf renders this company near b/k. keep in mind, the long-term historical average price for nat gas is in fact markedly lower than $4. Nothing has changed with respect to the nat gas demand pic back when nat gas was sub $4 vs. today...we still can't export it...yet we increased drilling to levels not seen since the 80's.
    Nov 02 01:31 am |Rating: 0 0 |Link to Comment |View article

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