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  • 5 Reasons Why I'm Short Tesla [View article]
    Short TSLA and AMZN in this market? Balls of steel.

    Both extremely overvalued but subject to major market irrationality. Good luck.
    Aug 21 06:59 AM | 21 Likes Like |Link to Comment
  • Lucas Energy Puts Up Another Poor Quarter, But There Could Be Hope [View article]
    Thanks for the reply.

    1. I'm not sure what you want me to say here? I think a two year secured 12% loan with stock warrants is a terrible deal especially with two year Treasurys at 0.36%? Not saying they are the same credit risk as the US govt, but 12% for two years and secured? Don't feel like its a good deal especially when most of it is going to fund the working capital deficit and the existing loan. Would rather see WC caught up with equity or asset sales. If they have some monster recompletions/re-entries, it might pay off. Also, the warrants were right at the money when issued, the stock has declined since.

    2. I don't think EBITDA is a good measurement considering that interest expense is a real cost and is what is actually allowing them to continue to operate. I think cash flow is much better. That being said...they have definitely cut costs. Blows my mind that they have cut so much and costs are still extremely high. What the hell was previous management doing?!?! I haven't checked your numbers but the most recent quarter which is 2014 Q1 shows negative cash from operations. It's crazy to me that a company can't generate cash at $100 oil with existing oil wells. If you include balance sheet changes, you can see the massive cash burn trying to catch up on the working capital. Even with that burn, the deficit widened.

    3. Let me start this one by saying that obviously I don't have detailed information about their wells, operations, etc, but I think eight months is plenty of time to turn a company around especially on the LOE side. Changes can be made immediately in the field. They only have ~59 (think thats right) wells and something like 19 produce 80% of the oil. Therefore, most of the wells are stripper wells. Why is the LOE so high on something that is likely on pumping unit running a fraction of the day? For that matter, most of these wells are likely on rod pump, why is the LOE so high? These should be easy easy cuts. They haven't done enough.

    4. They have 13 people. Their adjusted G&A was $900M in the last quarter. I understand there is an office to rent, etc, but that comes out to almost $300M per person per year. A little excessive I'd say. I say they have too many people for what they have. They have 59 wells and 180 BOPD. You don't need 13 people for that. I'm not sure why they hired more people between now and last quarter. Perhaps they will grow into it, but I think it would have been much better to cut G&A hard and allow the company to actually produce cash to grow further. It is definitely hurting them right now. Like I told Josh on his other thread, there's absolutely no reason that LEI shouldn't be cashflowing at least $500M a quarter.

    My article is onesided because I deal in numbers and the numbers are not good. Like I said though, there is a light at the end of the tunnel, but is it a train or the end of the tunnel? It's entirely dependent on management. I discount them some what considering that LOE and G&A are still so high after eight months. We'll see how they are doing next quarter I suppose. I did present what I'd like to see management do and I will certainly reevaluate when the next 10Q/material news comes out. If facts change, my opinion can and will change.

    Another author likes to talk about hope and what the neighbors are doing but he doesn't tell you that Lucas can't drill those wells without Marathon and that Marathon has a couple hundred thousand acres to HBP in the Eagle Ford. After they are done doing that, they will likely drill the highest ROR wells based on results they have seen. That probably puts Hagen down near the bottom of the list. Perhaps Marathon will throw up a surprise and want to drill Hagen, but I really doubt it. They will sometime, but when is the question. How long do you want to wait?

    In the end, I still think their best option is to raise cash with equity, JV their Austin Chalk acreage at around 50% and go drill some wells. Each well would cost around $1MM and the risk would not be concentrated in one single well. For reasons mentioned above, I place virtually no value on their Eagle Ford leases other than the production they have off of them. Depending on someone else is not a good business plan. If I was investing right now, I would simply think of the EFS acreage as a long shot bonus. I see no reason MRO would come and drill the acreage in the near future.

    Hopefully I didn't ramble too much. I'm trying to do about three things at once right now. Thanks again for the response. Hopefully I addressed your questions/issues. Let me know what you think. Take care!
    Aug 20 10:24 PM | Likes Like |Link to Comment
  • Egypt Turmoil Could Lead To Spike In Oil Prices - Investment Implications [View article]
    Not drilling wells in years is not a good reason to not be cashflow positive. The facts are that G&A and LOE are simply out of control. You don't have to drill wells to make money in the oilfield especially when you have ~180 BOPD of existing production. Revenue should always be much much higher than expenses on existing wells especially with oil above $100. G&A + LOE over $90/bbl is insanity. There's no reason they shouldn't be generating at LEAST $500,000 in cash per quarter and probably more. Not generating cash at $100 oil needs to get fixed.

    Can you point out what I have said that is frivolous or factually incorrect? Everything has been sourced from SEC filings of Lucas.

    My disclosure is the same since my first article. No position, long or short, in Lucas and am not paid or working for any holder of LEI securities, long or short. I've never made a penny off of LEI except from Seeking Alpha. I write on LEI because a buddy sent me a link to your first article. I did my own research and saw that the article was really nothing but an LEI (EOG?) pump with no numbers behind it. The numbers paint a different picture of the situation. Simply throwing NPV numbers out there with none of the details did not seem right to me. You neglected to mention the ball is in Marathon's court, the financial situation of the company, etc.

    My opinion on Lucas is bearish at least until the next quarterly report or some other material news. If they are able to turn their situation around, then my opinion might change. We'll see what the numbers look like. They need to get their expenses down drastically. Look at what this company could do if they got their expenses down to earth. They would be able to fund a small drilling program organically. Instead, they rely on high interest loans to stay above water.

    Since they are not generating cash from operations, they are incredibly levered to the success of these recompletions and reentries, etc. They have roughly $2MM to use after the WC hole is filled and after paying off the other loan. What happens if they don't increase production as expected or operational snafus occur? Where will cash come from to continue operations? Not debt. That well has been tapped. Equity? Who's going to be there to buy? Those are some big questions that need answered.

    Sorry you feel threatened by negative comments, however, they are part of business, the stock market, and the oil industry. The numbers/facts are what they are. It's reality. You seem to want to ignore them simply because EOG is drilling good wells nearby.

    I leave you with another question I have posed before: Marathon paid I think $25,000 an acre to get into the EFS. Lucas has 4,000 net acres of EFS rights in Gonzales. That's $100MM just for Lucas' EFS acreage with no value given to anything else. Why don't they buy Lucas or at least make an attempt? A generous 100% premium is only $70MM and would be a great deal to lock up the remaining 15% of those "premium" leases especially since they are HBP.
    Aug 20 05:32 PM | 3 Likes Like |Link to Comment
  • Egypt Turmoil Could Lead To Spike In Oil Prices - Investment Implications [View article]
    You always seem to forget that they are at the mercy of Marathon for any development on their so called "prime" EFS acreage. MRO has little incentive to go back and drill 85% WI acreage when they have hundreds of thousands of acres to HBP and are likely getting better results elsewhere. You never mention a timeframe on when you think these assets will be developed.

    JY: "The 14% loan was a bridge loan. With their PDP they should be able to borrow more than they currently owe on a 4% reserve based loan. At the time of the loan, they had $22 million of "debt" on their balance sheet and were in the midst of multiple lawsuits. That "debt" is gone, as are most of the lawsuits. The situation is very different now than it even was a few months ago, and the loan Lucas takes out to pay back that bridge loan will likely be at much lower interest."

    Pretty big miss there. Anyways, after Lucas pays off the other loan and the existing WC deficit, they are going to end up with $2MM. Hardly a game changer especially with what they want to do regarding deepening wells and extending laterals. These guys can't generate positive cash flow with oil over $100 on existing wells. Why should an investor be confident in their ability to perform recompletions and re-entries which can turn, even for large operators, into a train wreck in a hurry?

    I really don't see how you can overlook the fact that they aren't making money right now on existing oil wells.

    Lastly, I have to ask again, if this company is so incredibly undervalued, why haven't you guys taken it private? Insiders own a quarter or third of the company already. It seems like the board has some folks with money, and surely with your and Meson's connections you could find money to buy out the other 75% of the stock since it is such a deal. Wouldn't it be great to own 100% of the company and not even have to worry about those pesky SEC filings and other nuisances that come with being public.
    Aug 20 03:23 PM | 1 Like Like |Link to Comment
  • SandRidge Permian Trust: Benefit From The 14.9% Yield [View article]
    That's a pretty lame answer to his question with no insight on how this will affect the trust. It sure seems that production is going to take a huge dive from natural decline when SD is done drilling. I haven't checked where the above data came from, but it represents a 4% YOY decline while drilling 142 wells. They can't even stay flat! That's going to hurt bad when drilling stops. There are only 307 wells left to drill.

    The most recent 10Q shows a 21 MBOE drop in production from Q1 2012 to Q1 2013 while the average producing well count went up by 188. The model presented basically consists of discounting target distributions that SD presented in their IPO prospectus two years ago. That's a pretty weak analysis especially given that in Q3 and Q4 this year SD has to produce a total of ~1000 MBOE to match their projected ~1700 MBOE production for 2013 from the prospectus type curve. Given the fact that the most recent quarter was only 341 and the fact that I don't think they have ever produced 500 MBOE a quarter, hitting this target does not seem likely. These production misses are likely to accelerate unless new well performance greatly increases.

    Also, on the NPV front, the latest 10K shows $700MM NPV10 currently comparable to the market cap of the trust. This is at 90 oil and 2 gas so it is probably a bit higher now, however this number from the reserve auditors is an NPV for the whole trust and does not account for the fact that half of the remaining NPV in 2031 will be reverting to SD. I would guess that investors are taking this NPV number at face value and not accounting for the 50% haircut at expiration.

    High oil prices right now seem to be masking the problems with this trust. The price component is helping support the lagging production component. Once drilling stops, production is likely to plummet. High oil prices won't be able to arrest the drop in revenues. Double whammy if oil prices weaken. A year after drilling stops, subordination stops which will likely further drop distributions. The price may come under attack further as SD potentially sells units to raise cash. It sure seems like investors are greatly overpaying for PER given all of the above.
    Aug 17 01:19 PM | 2 Likes Like |Link to Comment
  • Avoid A Sale - 100% Undervalued: BlackBerry's Potential Playbook [View article]
    If Fairfax was going to buy the company, why would they want it to come out that they wanted to take it private? Why not stay quiet and keep sucking up shares at ~$9.25?
    Aug 15 08:36 PM | Likes Like |Link to Comment
  • Lucas Energy: Eagle Ford Acreage Will Be Developed, Financing In Place [View article]
    Quick on the draw with the article Josh. I'm still working on mine. Had been waiting on the 10-Q. Why don't you talk numbers in your article?

    Why did you not talk about how LOE + G&A for this company is almost $95/BOE? Or how the WC deficit is still increasing? Or how $3.25MM of this loan is going to repay the upcoming loan due in October? Or how the loan is a two year loan SECURED BY ALL OF LUCAS' ASSETS at 12% with almost 300,000 stock warrants attached? I thought you said this company would have relatively cheap access to capital given their assets?

    You mentioned no equity dilution is coming. Are you sure? Did you read the 10-Q? "A post-closing condition to the funding is that the Company complete an equity funding equal to $1 million on or before the six month anniversary of the closing. "

    Oil is at $105 and they are losing $1MM a quarter? Come on.
    Aug 15 10:47 AM | 5 Likes Like |Link to Comment
  • Dendreon Revenue And Cost Trends [View article]
    Isn't Provenge something like $100k for the treatment and didn't it only add around three months to life?
    Aug 13 02:22 PM | Likes Like |Link to Comment
  • mREITs: An Opportunity To Be Greedy When Others Are Fearful [View article]
    Are you talking about public vs intragovernmental holdings? I'm not sure of the public/intragovernmental debt breakdown regarding maturities, etc so I can't really comment on that. I'm not sure if that is even published? I would assume they have mostly longer term Treasuries in the intragovernmental category but I don't know. The intragovernmental category brings up another keg waiting to go boom. The government has to convert those non-marketable securities into cash by going to the bond market and issuing marketable securities. If rates are high when they need to do that, the problem just gets worse.

    The Fed transfers don't really matter much when talking short term interest rate increases as the Fed has no short term treasuries.

    Any rise in short term rates is going to be a disaster for the US budget. Rolling over all of the maturing debt plus new issuance is going to be painful.
    Aug 13 11:37 AM | Likes Like |Link to Comment
  • Avoid A Sale - 100% Undervalued: BlackBerry's Potential Playbook [View article]
    Huh? That doesn't really make sense. Fairfax owns ~10% of the company. Say the average price is $18 like you say. So they buyout the rest of the shares for $14. That only brings their average price for all of the shares up to $14.4. Hardly a deal killer for something they supposedly think is worth $40?
    Aug 13 11:17 AM | 1 Like Like |Link to Comment
  • Avoid A Sale - 100% Undervalued: BlackBerry's Potential Playbook [View article]
    Isn't the whole premise of this runup that someone has the cash to buy the company and sees more value than the current price? Why wouldn't they be acquiring shares instead of blabbing to the world that they are going to take the company private without actually making an offer? Doesn't make sense.
    Aug 13 11:06 AM | Likes Like |Link to Comment
  • Avoid A Sale - 100% Undervalued: BlackBerry's Potential Playbook [View article]
    Another question I have: If this is worth so much, why would the fund/BBRY not vacuum up shares at 9.25 instead of coming out about going private and ramping the price up?
    Aug 13 09:39 AM | Likes Like |Link to Comment
  • Avoid A Sale - 100% Undervalued: BlackBerry's Potential Playbook [View article]
    Where's the advertising? How do you sell phones without advertising?
    Aug 13 08:08 AM | 5 Likes Like |Link to Comment
  • mREITs: An Opportunity To Be Greedy When Others Are Fearful [View article]
    In 2000, the CBO also said there would be no debt by 2010, IIRC. Not sure the CBO is a decent source.

    Your 3% of GDP number would put interest expense at somewhere around $480B. FY 2013 is already at $370B with two months to go. Looks like it will end up around $400B or so which jives with the average interest rate of US debt being ~2.4%. So we are already almost to your 3% number with rates being held low!

    Half of the US debt matures in ~2-3 years. That's a huge problem if short term rates go up.

    The bottom line is that the US has gone to the short end of the curve because ZIRP is too tempting for deficit spending. With interest expense already at $400B, any meaningful rise in short term rates and there is a significant problem. Interest payments tripling would mean another $800B a year added to the deficit. Where's that coming from? More debt? The start of a compounding death spiral?
    Aug 13 07:28 AM | 2 Likes Like |Link to Comment
  • mREITs: An Opportunity To Be Greedy When Others Are Fearful [View article]
    I just don't see how the US govt/Fed let rates rise significantly. What happens to US govt interest expense under your scenario here? It goes to the moon and causes some rather large problems especially given the short average duration of US debt.
    Aug 12 04:56 PM | 3 Likes Like |Link to Comment