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Christopher Wallace

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  • Still No Reason To Buy The Dip In Natural Gas [View article]
    The cure for low prices has always been low prices and I suspect that capex should fall off markedly with prices at these levels. I think that Paulo has it right in that the evidence of production curtailment is not in....yet. My view is slightly different than his in that at the low $3s this commodity is so uneconomic that I don't see prices going below that level or at least not staying there for any amount of time. Speculators could reasonably anticipate a bottom sometime soon; investors will want to see more of the evidence on production declines first. I am not long but anticipate getting long nattie soon.
    Dec 23, 2014. 03:02 PM | 1 Like Like |Link to Comment
  • BlackBerry Ekes Out A Profit Despite Sales Tanking [View article]
    A good, sober, rational analysis, Michael. I sold my BBRY near the open for a small loss on the trade. I appreciate the effort and results that Chen has created. But ultimately device sales are needed to justify the investment case for BBRY in my mind. The revenue miss here is enough to send me to the sidelines until I see more evidence of traction gained for that segment. I would return to this name if BBRY puts out numbers showing greater take-up of their phones or perhaps if the stock gets dragged down by a general downdraft in the market. Upside from $10 strikes me as limited in the present circumstances and so I will look for other places to invest that capital, particularly when I contemplate the risk in this name.
    Dec 20, 2014. 12:37 PM | 8 Likes Like |Link to Comment
  • Can Long Run Exploration Sustain Its 30% Dividend Yield? [View article]
    Two more insider purchases totaling over 100,000 shares filed yesterday (12/18).
    Dec 19, 2014. 12:24 PM | 1 Like Like |Link to Comment
  • Decisive Cuts In Dividends And Capital Outlays Make Washed Out Oil And Gas Producers A Good Bet [View article]
    I too have put my toe into the E&P water recently. But I should add that I have a unfortunate habit of coming to the party early.
    Dec 18, 2014. 11:43 PM | 1 Like Like |Link to Comment
  • Can Long Run Exploration Sustain Its 30% Dividend Yield? [View article]
    Expect LOTS of volatility with this and all the other intermediate producers, particularly those that are levered. The swings will no doubt allow for lots of trades. Me, I am viewing this more simply: I suspect they will be able to sustain their dividend at the current level and that translates to value in the $2 range. I also suspect the current rout in the commodity markets may be approaching its nadir. If those two suspicions turn out correct I will earn a 15% yield as I watch this erratically make its way about 35% higher. No certainty as to outcome, but that is my strategy for this one.
    Dec 18, 2014. 11:39 AM | 1 Like Like |Link to Comment
  • Can Long Run Exploration Sustain Its 30% Dividend Yield? [View article]
    Update: several banks have reduced their target on LRE to $2, which aligns with my thinking as stated in these comments. Also, Chairman Bill Andrew picked up just over 400,000 shares at $1.40 yesterday.
    Dec 18, 2014. 10:49 AM | 1 Like Like |Link to Comment
  • Can Long Run Exploration Sustain Its 30% Dividend Yield? [View article]
    @Rob1492, given their hedge book and gas production they should be cash flow break even at current prices. The other wild card not discussed here is the CDN dollar. Any rise in that currency (where their costs are denominated) is like a fall in commodity prices. And the converse is true for a decline in the dollar. LRE remains a highly levered intermediate which means it has huge sensitivity to commodity prices. It is a very risky play. But given my analysis on their funds flow and given their recent guidance I remain of the opinion that it is a decent punt at these levels. I agree that it is not the time to "back up the truck" but I did add to my position this morning. I will stay with that number of shares until more stability returns to the commodities markets. If oil and gas prices stabilize around these levels I see LRE trading with a 2 handle.
    Dec 16, 2014. 11:29 AM | 1 Like Like |Link to Comment
  • Can Long Run Exploration Sustain Its 30% Dividend Yield? [View article]
    Because I apply all of the percentage commodity price decline to their Q3 revenue. In reality, such as in Q4, you will see a smaller decline in revenue than my model but a huge jump in realized and un-realized gain on derivatives. The idea here was to get approximate numbers in a wildly fluctuating commodity price environment as opposed to absolute precision.
    Dec 16, 2014. 10:08 AM | 1 Like Like |Link to Comment
  • BlackBerry slides ahead of earnings; analysts cautious [View news story]
    My view on BBRY is that their hardware sales are challenged but not that challenged. Bearish sentiment has pervaded BBRY for a while and that seems to colour the majority view of how their devices are moving. Blackberry is not doing anything revolutionary with devices; they are doing something evolutionary. They are giving the customer the larger real estate, the keypad and the security they expect/demand/want. That is not the sales disaster the market has priced in over the past week. BBRY is certainly more than hardware, but I think the market is unduly discounting the comeback their hardware is beginning to make and consequently excessively punishing the value of the enterprise as a whole. Like GS, at this juncture, I would not rule out a short squeeze on even mildly positive revenue data on the 19th. Short term calls are actually starting to look attractive.
    Dec 16, 2014. 02:06 AM | 3 Likes Like |Link to Comment
  • Can Long Run Exploration Sustain Its 30% Dividend Yield? [View article]
    There are never any certainties in the stock market and we are all entitled to our own opinions but not our own facts. Time will tell whether my predictions come trues or not, and I recognize the risks in dealing with making predictions about a intermediate producer in a volatile commodity market. But your comment that the article "is fatally flawed because it does not take into account the decline rate" is just plain wrong. Guidance just provided sustains current production with capex within the revised funds flow. Decline rates are taken into account.
    Dec 16, 2014. 01:36 AM | 3 Likes Like |Link to Comment
  • Flyer's Basket Strategy: Bought 300 Long Run Exploration At USD $2.69 [View article]
    @South Gent: the recently revised guidance gives some support to your thesis as advanced in this article and I suspect you will see a fair amount of your losses re-couped in the short term, other things being equal such as the price of WTI, Nat Gas and the CDN dollar. They are all moving parts so expect a wild ride. But a 10% yield strikes me as more reasonable than a 17% yield for this name. Time will tell.
    Dec 16, 2014. 01:07 AM | 1 Like Like |Link to Comment
  • Can Long Run Exploration Sustain Its 30% Dividend Yield? [View article]
    Long Run has provided their revised guidance:

    The sum and substance of that guidance is $200 - $210 of funds flow based on $70 WTI and $3.50 gas and $1.145 CDN dollar. (My model differs on the dollar but had we shared the same assumption we end up at roughly the same place.) The funds flow is allocated as to $165 capex to sustain 35 - 36k BOE production and $40 mil dividend, which halves the current rate to $0.175 monthly. The board feels this is sustainable. At the current stock price that predicts a forward yield of 16.8%. That equates to a payout ratio of about 20%. Personally, I cheer this development and it will be interesting to see what the market does tomorrow. My guess is that over time this should trade, if valued on a yield basis in a crap market like this, at a 10% yield or maybe lower. That implies a price of $2.10. I look for that as a near term target and will add to my position in the morning, other things equal. From a fundamental perspective, Long Run appears mis-priced at these levels and consequently I remain bullish on the name. Commodity prices and the CDN dollar will, together with sentiment, cause wide fluctuations in the stock price. Definitely not for the faint of heart, but if you understand the risks, the rewards are compelling at this level and the guidance, in my humble opinion, bolsters that view. I know that is a pretty unambiguous call; we'll see just how embarrassed I become over the next few days and weeks. Good luck and good trading to all.
    Dec 16, 2014. 12:56 AM | 3 Likes Like |Link to Comment
  • Can Long Run Exploration Sustain Its 30% Dividend Yield? [View article]
    Thank you all for some excellent comments. Obviously debt levels are a concern as expressed here in these comments and for the market too. But at current oil and gas prices, LRE should generate about $120 million of funds flow after interest and after payment of the dividend, annually. Capex is likely to be cut dramatically at LRE and at all producers as it makes little sense to extract resources at these prices. The conclusion being that LRE is likely to be making debt principal reductions already, without having to use monies otherwise marked for dividend payments.

    Still, perception is a powerful thing and I would not rule out a reduction in the dividend. My own speculative thinking is that any reduction in dividend would come a little later. The drop in oil prices has been fast and brutal there is no certainty that a recovery in price from these lows will not occur. I think the board might look rash cutting immediately. An outright elimination seems unlikely to me given their stated strategy. However, if they felt the need to raise equity, then all bets would be off, and they would almost certainly eliminate the dividend before issuing new shares. But these are the actions required by $45 oil and $2.75 gas. The point of my article is that the market is pricing those numbers in already, as a certainty. Perhaps the market will be right. If so, what is the downside from in LRE here? But if the lows are not far off, there is huge upside in LRE. It is a risky strategy, but at the same time compelling for those with an appetite for risk.

    I think a good pairs trade is to go long LRE and buy cheap puts on USO. In any event, this is the stock market and you just never know with the stock market. I have invested roughly 1/3 of the maximum capital I will allocate to this trade. I will look for opportunities to add to this trade, and a washout day on a dividend cut announcement I would consider such an opportunity.
    Dec 13, 2014. 11:29 AM | 3 Likes Like |Link to Comment
  • Flyer's Basket Strategy: Bought 300 Long Run Exploration At USD $2.69 [View article]
    I published my thoughts and my funds flow model in an article here:
    Dec 12, 2014. 10:22 PM | 1 Like Like |Link to Comment
  • Flyer's Basket Strategy: Bought 300 Long Run Exploration At USD $2.69 [View article]
    A dividend reduction I can see, but not an outright elimination at this point, that would surprise me if that were to happen. I can see them announcing a reduction in dividend to be used towards reducing debt, but that is window dressing only since monthly dividends are now only $7 million and total debt is over $700 million. A sell off next week on any dividend cut announcement would be a reason to buy, IMO.
    Dec 12, 2014. 11:04 AM | 1 Like Like |Link to Comment