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Brian McMorris

 
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  • Penn West Sensitivity Analysis [View article]
    Hey NSG, how are those lawsuits against PWE working out for you? One of your many inaccurate observations. Haven't heard a peep about lawsuits for a couple of months now. Guess that was just another smoke screen.

    What would be nice is if you would admit your lousy analysis (if it is that) was bailed out by an unforseen crash in oil prices. Unless you were hanging out with the Saudi princes, I am not sure how you would have known that was coming. No one else did, not even the CEOs of the biggest oil companies in the world. But then again, maybe that is why you think you are great.

    You will get credit when you earn it
    Jan 25, 2015. 10:03 PM | 1 Like Like |Link to Comment
  • Can Penn West Survive 2015? [View article]
    DVL....I would never use WikiInvestor as a site for my research. Who knows where that data comes from there is no accountability. I use the company site, which references its regulatory filings, or the regulator site itself (SEC EDGAR or the Canadian regulatory site, SEDAR).

    The $600M in formal income losses for the past 12 months includes the $663M "kitchen sink" quarter in 2013-Q4 when the new management flushed the toilet. That is not something that can be extrapolated. Instead, if the first three Qs of 2014 are added together and extrapolated to a fourth quarter, income is flat. But if you really research PWE, you will know they are very aggressive in writing down their depreciable assets and so income is really not meaningful. The negative net income numbers are likewise meaningless in this industry which is very capital intensive (with capex a balance sheet entry) and therefore has continuous and significant asset depreciation leading to frequent losses. This is true for the peers of PWE.

    Instead, look at FFO (funds flow from operations), which is the important metric in the O&G industry. This shows around $1.1B in operating cash flow for the past 12 months. It will be hit hard in Q4 no doubt, but provides a much better insight. Free cash flow is another important metric. It is basically FFO less annual capex. It was positive in 2013 and 2014.

    Total debt on the Barrons page you sent shows $2.46B, but that is for 2013. This company has been aggressively paying down debt and it is now around $1.7B US. The latest Q3 filing will show a higher number but they closed the sale of property in October that will show up in the Q4 filings.
    Jan 25, 2015. 09:05 PM | 2 Likes Like |Link to Comment
  • Penn West Sensitivity Analysis [View article]
    It is all he has got, Jim. For a "Great CFA" he never offers an ounce of honest and documented analysis.
    Jan 25, 2015. 05:26 PM | 1 Like Like |Link to Comment
  • Penn West Sensitivity Analysis [View article]
    I made a post on another string that suggests creditors will have no interest in pressing PWE into a default and bankruptcy. They have nothing to gain since there is no one waiting in the wings to take over PWE and make the creditors whole. Anyone wanting to do a deal for PWE at this point (one of the big integrateds or a hedge fund) would want to do so for pennies on the dollar requiring the creditors to take a big haircut. Their best bet is to work with PWE to ride through the downturn. They are in better shape than many having right-sized and streamlined the past two years.
    Jan 25, 2015. 05:23 PM | 1 Like Like |Link to Comment
  • Penn West Sensitivity Analysis [View article]
    Thanks 7422981 (people should just use their name as such good comments have even more credibility when not anonymous). I was going to make the same point to Jim. The Q3 report, while it is all we have, has been left in the dust by circumstances. The expense assumptions are as incorrect as the revenue assumptions. There will be big decreases in all the variable expenses (except something like a building lease) that will greatly affect assumptions used. It is a big mistake to hold expenses constant while reducing revenue as the oil industry collapses.
    Jan 25, 2015. 05:19 PM | 2 Likes Like |Link to Comment
  • ECB Monetary Dominance With 1.14 Trillion Euro QE For March 2015 To September 2016 [View article]
    What I know is that regardless of the effectiveness (or not) of QE, Drahgi has done wonders for my $EUO position. It has been one of the best currency trades ever (only surpassed by the Yen due to Abenomics). It would be my only position if not for the fact there are practical limits to the devaluation of the EURO vs. the USD. America can not take excess devaluation from any of its major trading partners. This will go on until parity, or a little less, is reached. After that, all bets are off and the Fed may need to rev up its own QE engine to keep pace with the Euro and Yen.

    What a world!
    Jan 25, 2015. 04:43 PM | Likes Like |Link to Comment
  • Penn West: Oil For Pennies On The Dollar [View article]
    OW....you get points for consistency ;-)
    Jan 25, 2015. 04:36 PM | Likes Like |Link to Comment
  • Penn West: Oil For Pennies On The Dollar [View article]
    Tennvol...you bring up a good point here: the bankers must be in this for the long haul. They already have issued the debt. This is not a case of a bad management crew (as it was previously) that are running the business into the ground. That is what debt covenants are designed for so that the creditors can force the assets into better hands and recover their investment.

    But in the case of PWE, like all energy companies, there is no saving the debt by better management. It is a systemic issue. So creditors will need to decide how their investment will best be served. I am speculating with my $$ that the PWE creditors will look around and decide they really have no better options than the Roberts crew. This team has been very forthright all along the way and has demonstrated in two years they are very good stewards of the resources of PWE.

    Forcing default and bankruptcy presumes there are better options around the corner. In the energy market, there are no better options. Dave Roberts said as much in the quote from the Whistler Conference
    Jan 25, 2015. 04:33 PM | 1 Like Like |Link to Comment
  • Can Penn West Survive 2015? [View article]
    So at $1.50, how is PWE "pernicious to one's bankroll"? What a joke of a statement. Anyone over-committed to the energy segment regardless of the name, faces the same "hazard". PWE is where all other E&Ps will soon be. It is leading the pack down, just as the Saudi's intend. There are really ZERO energy companies in North America that can survive a prolonged effort by the Saudis to drive them out of business. They have very good flowing wells in THE best light oil formation in the world with no need to service debt or produce a profit. They have almost $1T in the bank to support their government social obligations. Anyone on this blog should understand that the entire industry will face what PWE is now facing. It will be those that are best at convincing their debtors and stockholders they have a plan and can minimize the damage that survive. No one should be getting cocky here.

    My energy exposure is pretty much limited to PWE. At less than 1% of my portfolio now, I am happy to sit by and watch what happens. Maybe others in the world: Iran, Russia, will take exception to the Saudi strategy and do something about it. I am not wishing for that nor making predictions, but it is a clear possibility at least as good as bankruptcy for PWE.
    Jan 25, 2015. 04:18 PM | 2 Likes Like |Link to Comment
  • Can Penn West Survive 2015? [View article]
    DVL...where do you get your numbers? They are way off. $1.9B of debt, not $4B. Never $600M in losses in a year, by any measure. Plz research before posting so you can make your case with accurate data. Company was not "struggling mightily" when oil was $100. It was turning a profit even as it worked its way out of previous horrible management decisions.
    Jan 25, 2015. 04:12 PM | 1 Like Like |Link to Comment
  • 16 Investing Lessons From A SuperInvestor The World Forgot [View article]
    At the time of "Security Analysis", Brand and its bookkeeping entry, Goodwill, were not as big a deal as they are today. From reading Security Analysis myself several years ago, I can say the case studies are heavy metal industries like railroads, where real assets are fairly easy to value.

    Brand did not become an important asset until the Age of Advertising (1950s-60s) made it so. That was the era when all the big consumer brand names came to the front, driven by broadcast media and by the "big boxing" of retail which concentrated brand power into a few hands
    Jan 22, 2015. 05:35 PM | 4 Likes Like |Link to Comment
  • Can Penn West Survive 2015? [View article]
    Stating the obvious here: "Penn West's future is dire with its long-term viability as an independent entity questionable. The stock will not recover until oil prices show some sort of a bottom."

    Of course, and true for about every small to mid-cap public energy company in the world. But as pointed out in the post, PWE does at least have options with the bank line (other E&Ps aren't so fortunate / far-sighted). This is the exact situation for which that line was created. PWE will be able to drive down operating and SGA costs to lower its break-even point and should not need much help from that line to carry through.

    But AA saves the post with: "there is considerable value hidden in Penn West, especially in its reserves. The company is basically trading at under 25% of its NAV net of debt."

    Yes, and PWE has a better chance to survive than many others, especially those in the frack space. At least PWE has a dividend to cut and is producing with long-lived wells to ride through the oil price crash.

    "As a result, there is substantial upside available for those who love risk. However, I myself would stay away from this stock. There are simply better and safer options out there."

    Yes. Those of us invested in PWE might wish we had put that money elsewhere at this point. Hind sight is always perfect. But if invested at this point, it is best to stay the course. PWE, along with many other smaller cap energy companies, has become a cheap option on the recovery of oil prices.
    Jan 21, 2015. 06:32 AM | 8 Likes Like |Link to Comment
  • 16 Investing Lessons From A SuperInvestor The World Forgot [View article]
    Had the Fed not interfered in the stock market sell-off in 2009 the decks would have been cleared and there would have been a 20 year period of low priced and under-valued stocks to evaluate and buy. By pumping back up the market and creating a "v" bottom, nothing ever got really cheap and now the market is more over-priced than in 2007 on a P/B basis. Not easy to follow Graham's principles in 2015
    Jan 20, 2015. 05:52 AM | 2 Likes Like |Link to Comment
  • IWM Divergence: Small Caps Are Still Overpriced [View article]
    Scott....there are 2000 stocks and no place that publishes the individual earnings of each. That would be quite a research project.

    But aggregate earnings are available as are other metrics like Price to Book (2.31), P/E ex-negative earnings (22.69) and it is a lot higher with aggregate trailing earnings, including stocks with losses, over 66.

    http://www.etf.com/IWM
    Jan 15, 2015. 10:30 PM | Likes Like |Link to Comment
  • Penn West Should Cut Its Dividend; If It Does I Will Buy More [View article]
    What regulatory filings are your reading Not So Great? Where do you get this 4X debt BS? It isn't a fact if you can't back it up. Debt at BTE has risen from $1.7B to now $2.3B. They are tapping their life line to get the money they desperately need. Meanwhile, PWE has reduced its debt from $2.2B to $1.9B the past six months. PWE has not even touched its credit line of $1.7B. Sounds like PWE is the winner where debt coverage and balance sheet quality is concerned. Get your facts straight. You continue to be one Very Bad CFA
    Jan 14, 2015. 10:41 PM | 1 Like Like |Link to Comment
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