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Brian McMorris

 
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  • Penn West Should Cut Its Dividend; If It Does I Will Buy More [View article]
    I did. NSG is way off, to the point that if is really a CFA, then he is intentionally lieing to help his short position.
    Dec 17, 2014. 08:23 PM | 1 Like Like |Link to Comment
  • Penn West Should Cut Its Dividend; If It Does I Will Buy More [View article]
    "Penn West has 3.6x more debt than Baytex."

    NSG....Where do you get your numbers?! Just go to the company website or SEDAR and download the financials. That way you will be accurate and not be a laughing-stock. BTE is $1.7B in debt and PWE is $1.9B in debt. They are practically the same. They have similar production with BTE around 90K/day and PWE around 100K/day. The Q3 BV on BTE is $14.7B and on PWE is $13.1B (I did not look this up again, but that is what I remember from the last time I did). We can argue about the quality of BV (the goodwill question), but the numbers are close enough so that is a bit pointless. Tennvol has already made the case that the real assets are audited by a 3rd party so let's agree that the number is accurate since neither you nor I are experts at oilfield evaluation.

    BTE and PWE have roughly the same financial value but BTE sells for 5 times the price of PWE. I will take the company that is 20% of the other on price. It gives me a very large margin of safety, something the great investors (not the NSG investors) look for
    Dec 17, 2014. 08:20 PM | 4 Likes Like |Link to Comment
  • Penn West Should Cut Its Dividend; If It Does I Will Buy More [View article]
    It is true that BV has declined for PWE the past 2-3 months with value declines in its oil-bearing assets. But that is true for the entire industry. Comparatively, nothing has changed in BV between industry peers.
    Dec 17, 2014. 08:14 PM | 1 Like Like |Link to Comment
  • Penn West Should Cut Its Dividend; If It Does I Will Buy More [View article]
    Shorties who rip PWE but tout other oil companies are wrong, wrong, wrong. The entire industry is getting hurt. Contrary to the opinion of some here, PWE is more secure than many others in the industry. Its lead in price decline owes to very negative sentiment going into the oil price free-fall that had to do with the leftover negativity from previous bad management / bad acquisitions / bad drilling and production efficiency plus the specter of massive lawsuits. The lawsuits are deader than a door nail. No court is going to touch that since the accounting was corrected with no apparent financial report damage and the recent industry price performance overwhelms any of the damages due to potential accounting irregularities.

    Maybe the class action law firms would now rather sue Saudi Arabia and OPEC for causing so much financial damage, quantum multiples of any damage from PWE.

    Doing any number of objective financial comparisons to industry peers, PWE shines. BTE is 5X the price on the same financials. That is the one I would be selling.
    Dec 17, 2014. 08:10 PM | 4 Likes Like |Link to Comment
  • Penn West Should Cut Its Dividend; If It Does I Will Buy More [View article]
    Ruben, I agree. This concern over bankruptcy is way overblown. It takes quite a bit of financial mismanagement to go bust. The formula for insolvency is that cash in the door does not even cover debt service. But PWE only has around $100M annual debt service (at reported average 6% on $1.9B). It can cut all other expenses quite a bit. Reported Depreciation of $700M does not count towards insolvency. It is a book keeping entry for tax and balance sheet purposes. It is no drag on cash flow since the money was already expended in previous years. Taxes go to zero at negative earnings. Royalties drop dramatically on lower oil prices. Operating expenses drop on less production. CAPEX is optional and will be / has been dropped. Lets say oil drops to $30, its very short term low at the 2008-09 bottom. On 100K / Day BOE or 35M bbls per year, they will generate around $1B in revenue. They can probably get close to break even and avoid insolvency even at $30 bbl with aggressive expense management.
    Dec 17, 2014. 08:05 PM | 3 Likes Like |Link to Comment
  • Penn West Should Cut Its Dividend; If It Does I Will Buy More [View article]
    And they did exactly that today, Mr. Blair. They are secure at $40. $20 is a different story, but for the entire industry, not just PWE
    Dec 17, 2014. 07:58 PM | 2 Likes Like |Link to Comment
  • Penn West Should Cut Its Dividend; If It Does I Will Buy More [View article]
    Do your own research. Bank analysts are probably some 22 year old business grad. I can do better research than some of these clowns sitting in my sofa at home reading the SEDAR financials.

    Check out my estimates above. They will be close to the mark unless oil goes to $10. Then it is lights out for all of Canada. You won't be worrying about your investments any more.
    Dec 17, 2014. 07:56 PM | 2 Likes Like |Link to Comment
  • Penn West Should Cut Its Dividend; If It Does I Will Buy More [View article]
    Pie....do you know what EBITDA is? Let me help you. Earnings Before Interest Taxes Depreciation/Depletion and Amortization. We can go to the most recent income statement and extrapolate from 9 months to 12 months for backwards look at EBITDA. Then we can adjust revenue and expenses downward by an estimated 1/3 for both. Debt at that time is fixed.

    The debt at PWE is $1.9B. EBITDA is $1080M on a Q3 annualized basis ($140M (E) + $140M (I) + $100M (T) + $700M (D) = $1080M. That ratio is therefore more like 2X, not 3.5X as you report. On a go-forward basis, it is all a guess, but lets say the (E)arnings at PWE falls to $1.5B from $2.2B as of Q3 annualized. If all expenses stay constant the Earnings will fall to (-500M). Add back $800M of Depreciation, $100M of taxes and $140M of Interest and you get $540M. The multiple will be 4X EBITDA, not 8.5X.

    Note, this assumes constant expenses. But they will definitely fall in this horrible industry environment. Operating expenses of $700M will fall by at least $200M. SG&A will fall by $50M. Royalties of $450M will fall by at least $150M. PWE's EBITDA will be much better than $440M and probably more like $600-700M. The multiple on debt MAY expand to 3X from 2X.

    Work on your accounting skills, Pie.
    Dec 17, 2014. 07:53 PM | 4 Likes Like |Link to Comment
  • Penn West slashes dividend, cuts 2015 capital budget by 26% [View news story]
    I think the governments will suspend royalties to save the industry. This is not a company specific problem in which case the market would purge the weak. Canada cannot afford to lose its oil industry altogether.
    Dec 17, 2014. 07:18 PM | Likes Like |Link to Comment
  • Penn West slashes dividend, cuts 2015 capital budget by 26% [View news story]
    DRIP has an expense component because it is discounted against market price. It shows up each quarter in the P&L
    Dec 17, 2014. 10:39 AM | 1 Like Like |Link to Comment
  • Penn West slashes dividend, cuts 2015 capital budget by 26% [View news story]
    The bears got what they asked for and now they think PWE will go bust? At least be consistent, Gringo. PWE did what most of us thought they needed to do to survive. Others in the patch, especially frackers, will not be so lucky. There is no indication of any problems with PWE solvency. They have plenty of production in place to service debt and pay overhead. $625K CAPEX is enough to service existing wells and drill replacement production. DRIP was suspended which is responsible to all stake holders. The PWE management team is acting like the big boys they are. We do have a few adults in the room

    When does provincial / Canadian national govt suspend royalties to protect their oil / gas industry? That must also be coming soon.
    Dec 17, 2014. 10:38 AM | 1 Like Like |Link to Comment
  • Penn West Should Cut Its Dividend; If It Does I Will Buy More [View article]
    Tennvol....they navigated the potential covenant breaches during the accounting review quite well. Management was proactive discussing the issues with its creditors and received waivers from all of them. I think they are equally astute at this time. Creditors should appreciate the conservative nature of this mgmt team and will go out of their way to support them through this. Canadian bankers have been there and done this. They know this industry is cyclical in nature. I am fairly confident regarding PWE's prospects. If they go, there will be many others that have already gone out and the world will be facing a depression. The glib and smug commenters here will have other worries unless they are short the entire market (as I am with a portion of my portfolio).
    Dec 15, 2014. 06:34 PM | 3 Likes Like |Link to Comment
  • Baytex Energy Slashes Dividend 60%, Now Yields 8.3% [View article]
    you sure are a lot more friendly to BTE than PWE. Why? They are cut from the same AB cloth. They have the same financials. Only difference is BTE is 5X more expensive with a lot of room to fall. PWE has already had its dive. If it goes bust, so will BTE.
    Dec 13, 2014. 07:41 PM | 2 Likes Like |Link to Comment
  • Baytex Energy Slashes Dividend 60%, Now Yields 8.3% [View article]
    Bermuda....the leverage differential is less than minimal. BTE will have production of around 90K bbl / day and PWE around 100 in 2015. Debt is $1.7B and $1.9B respectively. Hardly any difference at all on a per bbl basis. The big difference is P / BV multiple. Much in BTE's favor. But it can't stay that way. One will move toward the other over time.

    PWE has made no more strategic errors (other than hedging error that was made by many companies, including Harold Hamm at Continental). BTE chased fracking which was a huge error that I have been warning of. Fracking is not economically superior to conventional. It is much more expensive on a total well production basis, due to fast decline rates and costly drilling with long string runs. BTE should have stuck to its knitting.
    Dec 13, 2014. 07:38 PM | 2 Likes Like |Link to Comment
  • Baytex Energy Slashes Dividend 60%, Now Yields 8.3% [View article]
    Interesting how the BTE bulls have had a rude awakening. Many of the BTE bulls believed its prospects were far better than PWE, along with its balance sheet. Turns out, not so much. The fact is all North American (and Russian and Latin American) oil producers will be hurt by lower oil prices, which is the point of the Saudi over-production to drive down price and eliminate competitors.

    BTE may survive alongside PWE. A review of their balance sheets shows similar circumstances ($14B and $13B on last Q report) and debt levels ($1.7B and $1.9B respectively). The big difference is the price multiple on book with BTE still around 1.0 time book with PWE below 0.20. The difference makes no economic sense and is mostly sentiment. BTE did not make the same mistakes over the past 10 years as did PWE. So either BTE must drop toward 0.20 or PWE must increase in price back towards 1.0 of book. My bet would be on the former as oil price is not going back up soon. BTE owners are in for a lot more pain.
    Dec 13, 2014. 07:32 PM | 1 Like Like |Link to Comment
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