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David White  

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  • Good Results In The TMS Plus The Iraq War May Be Just What The Doctor Ordered For Halcon Resources
    Jun. 15, 2014 HK 32 Comments

    Summary

    • In its June 9, 2014 TMS update, HK reported the initial IP rate of the Hoseshoe Hill 11-22H-1 well at 1,548 Boe/d.
    • The Iraq War III may cause a 10% to 20% long-term price spike in oil. This would be tremendously positive for HK.
    • Recent HK results from the Bakken are much higher with EURs about +40% higher than previous wells.
  • Multiple Catalysts, Including The Iraq War III, Could Vault SandRidge Energy Into Profitability
    Jun. 14, 2014 SD 12 Comments

    Summary

    • Many believe the Iraq War III will lead to a 10% to 20% spike in oil prices. This should increase SandRidge's profits.
    • SD has cut its CapEx from $2.3B to $1.5B over the last two years mostly through increased efficiencies such as pad drilling.
    • SD continues to lead the way with the new "stacked wells." These have one vertical with a lateral into two different zone plays (two laterals).
    • SD recently divested itself of its Gulf of Mexico assets in order to concentrate on its core assets on whose development it is expert.
  • Quickly Improving Chesapeake Energy Could Grow Even Faster Due To The Iraq War
    Jun. 13, 2014 CHK 12 Comments

    Summary

    • Ukraine and Iraq geopolitical problems are leading to increased oil prices. This could mean another $300 million or so in profits for Chesapeake.
    • The raise in production guidance on the May 16, 2014 Analyst Day means more stock price upside.
    • The May 20, 2014 Moody's credit ratings increases to Ba1 (the top non-investment grade rating) are a big positive for Chesapeake.
    • Before the upgrade Chesapeake's cost of debt had fallen from 5.9% to 5.1% over the last two years. This resulted in a savings of about $250 million per year.
  • ECB QE And A Weak Global Economy Mean A Good Q2 2014 For Both Annaly And American Capital
    Jun. 13, 2014 AGNC, NLY 5 Comments

    Summary

    • The 12 bps drop in the 10 year US Treasury Note Yield from Q1E until June 12, 2014 should mean no book value losses for AGNC and NLY.
    • The relatively small move in yield should mean only a small negative change in net interest rate spreads for AGNC and NLY.
    • AGNC should be able to sustain its dividend. NLY may have to lower its dividend slightly.
  • GE Wants To Put Part Of Its $87B Cash Stash To Work In A Highly Synergistic Alstom Energy Business
    Jun. 11, 2014 GE 29 Comments

    Summary

    • GE is in the enviable position of being in good financial condition at a time when many EU companies are not.
    • GE has made an effective $13.5B offer for Alstom's energy business.
    • From a business standpoint this offer makes sense for both companies; but there is anti-US sentiment in the French government and France.
    • More palatable Siemens may make a counter offer by June 23, 2014. If not, the GE offer will likely be accepted.
    • GE expects about $1.2B per year in synergy savings after the acquisition.
  • Gilead Sciences: Killing The Competition With Sovaldi; But Does This Make Gilead A One-Trick Pony?
    Jun. 9, 2014 GILD 49 Comments

    Summary

    • Sovaldi sales were $2.27B in Q1 2014, or about 50% of antiviral sales and 45.5% of total revenues.
    • Many think there is considerable upside to Sovaldi's FY2014 sales estimates, which are already about $9B.
    • GILD also has a great pipeline that should add a good amount to sales over the next several years.
    • Based even on conservative Sovaldi sales estimates, GILD's PE should be 13 or lower at the end of 2014, at the current stock price. This gives the stock upside.
  • American Realty Capital Partners' Red Lobster Deal May Turn Out To Be A Real Albatross
    Jun. 9, 2014 ARCP 130 Comments

    Summary

    • ARCP paid $1.5B for the land on which 500 Red Lobster restaurants stand.
    • ARCP got leaseback deals with 93.5% 25 year lease and 6.5% an average of 18.7 year leases.
    • The above sounds great; but Red Lobster no longer has DRI's credit rating. I would not rate it investment grade.
    • Red Lobster reported an 8.8% decline in comparable store sales in Q1 2014. This continues Red Lobster's poor performance in recent years.
    • Red Lobster's continued poor performances will likely lead to store closings in future years. This will mean very poor performance for ARCP on the leases for those stores.
  • Location, Location, Location May Give Phillips 66 A Big Edge
    Jun. 6, 2014 PSX 13 Comments

    Summary

    • PSX outperforms peers in every category of its business.
    • Some Refining Capacity near the Bakken and Canada should allow PSX to glean great crack spread rates.
    • New pipeline capacity that will transport cheaper oil to the Gulf Coast should help PSX's Gulf Coast refineries crack spreads.
    • Some refining capacity near the Cushing, Oklahoma hug should benefit from that location.
  • These Rigs Are Walking Their Way To Big Profits For Oil Service Companies - Part I
    Jun. 4, 2014 BHI, HAL, WFT 3 Comments

    Summary

    • One of the biggest efficiencies of pad drilling is that it allows for rigs to be "walked" to another drill site on a pad without being disassembled and re-assembled.
    • "Walking" a rig to a new site on the same pad takes a matter of hours instead of days. This can save up to $1 million per move.
    • The "Walking" rigs usually have any number of other innovations that allow them to drill faster, more efficiently, and to use less labor.
    • Baker Hughes, Schlumberger, Halliburton, and Weatherford are four of the most advanced suppliers of oilfield services. They should reap high profits.
    • There is an uptrend in oil drilling. Fundamentals indicate that an uptrend in natural gas drilling is about to start. This means growth for oilfield services companies.
  • What Agency Mortgage REIT Portfolio Characteristics Produced Good Economic Returns In Q1 2014?
    Jun. 3, 2014 ARR, CYS, WMC 7 Comments

    Summary

    • CYS Investments produced a total economic return of 8.2%.
    • American Capital Agency Corp produced a 5.1% total economic return.
    • ARMOUR Residential REIT produced a 1.68% total economic return.
    • Western Asset Mortgage Capital produced a -2.69% total economic return.
  • Linn Energy's Partial 1031 Exchange Of Its Midland Assets Is Good News For Its 10% Distribution
    Jun. 2, 2014 LINE, LNCO 27 Comments

    Summary

    • LINE gets approximately 500,000 net acres in the Hugoton Field from Exxon Mobil with current production of 85 MMcfe/d and total reserves of 700 Bcfe.
    • LINE gives up only about 2,000 Boe/d of production, 25,000 net acres of Midland Basin leaseholdings, and 1,000 net acres in Lea County, New Mexico.
    • LINE retains 15,000 Boe/d of production from its Midland Basin assets. It retains 30,000 net acres of Midland Basin leaseholdings.
    • LINE estimates the deal will be accretive to cash available for distribution by $30 million to $40 million annually.
    • The 1031 exchange format should allow LINE to avoid taxes on the exchange.
  • Permian Basin Small E&Ps That Bucked The Russell 2000 Decline Trend
    May. 28, 2014 FANG 1 Comment

    Summary

    • The Permian Basin was a prolific vertical well play. Now it is becoming a prolific horizontal well play.
    • Small E&P companies often offer the potential for large profits, especially when they are operating in prolific fields.
    • Three companies: FANG, CWEI, and CPE, are among the small companies that could bring investors good profits.
    • All three of the above companies remained above their 50-day SMAs during a recent Russell 2000 downturn of about 9%. This shows strength.
  • Major Changes At Encana Make It A Legitimate Oil Growth Play Now
    Editors' Pick • May. 22, 2014 ECA 10 Comments

    Summary

    • Encana revenues and earnings benefited from higher natural gas prices in Q1 2014.
    • Encana management has made several positive fiscal moves.
    • Encana announced the acquisition of 45,500 net acres of Eagle Ford Shale. These will be immediately accretive to earnings.
    • Recent EOG results with both higher levels of fracking proppant and slick water fracking will likely increase IPs and EURs by huge amounts.
    • Encana should be able to copy EOG’s technology for its Eagle Ford acreage. This should increase current estimates significantly, including reserves.
  • How Do Halcon Resources' Recent Bakken Wells Compare To EOG's And Continental's?
    Editors' Pick • May. 19, 2014 HK 68 Comments

    Summary

    • EOG's recent Eagle Ford wells are, on average, better than HK's Bakken wells.
    • HK's El Halcon (east Eagle Ford) recent wells IPs do not begin to compare with EOG's recent Eagle Ford wells IPs.
    • HK's recent Bakken wells are roughly comparable to CLR's recent Bakken wells IPs.
    • From a value standpoint, both EOG and CLR beat HK.
  • 14%+ Dividend Payers Armour Residential And New York Mortgage Show Vastly Different Results
    May. 16, 2014 NYMT, NLY, CYS 16 Comments

    Summary

    • Both ARR and NYMT pay 14%+ dividends.
    • ARR lost book value in Q1 2014 ($4.75 per common share December 31, 2013 to $4.67 per common share March 31, 2014).
    • NYMT gained book value in Q1 2014 ($6.33 per common share December 31, 2013 to $6.48 per common share March 31, 2014).
    • NYMT far outperformed ARR in total economic return (+5.56% for Q1 for NYMT versus +1.66% for Q1 for ARR).
    • Both companies' performances for Q2 2014 look very promising.
  • EOG Will Continue Its Fast Growth With The Addition Of 4 New Horizontal Development Plays
    May. 14, 2014 EOG 9 Comments

    Summary

    • EOG turned in a great Q1 2014. It beat EPS estimates by $0.20 per share. It raised oil and condensate production growth estimates to 29% from 27%.
    • EOG added 400 MMBoe of potential oil and gas reserves in Q1 2014 by moving four fields from evaluation status to drilling development status.
    • These 400 MMBoe will like increase EOG's "proved reserves" significantly by year end 2014.
    • EOG has over 6 million net acres of oil and gas leaseholdings worldwide. However, only 2.66 million are in development stage. EOG has lots of room to grow.
    • In the US, EOG has 1,452,786 net acres in development stage and 2,706,054 net acres in undeveloped status as of December 31, 2014.
  • 10%+ Dividend Payer Annaly Capital Is Still A Safe Place To Put Your Money
    May. 12, 2014 NLY 43 Comments

    Summary

    • Book value increased from $12.13 at the end of Q4 2013 to $12.30 at the end of Q1 2014.
    • NLY paid a $0.30 dividend per common share for Q1 2014.
    • Combining both the above, NLY produced a 3.87% total economic return for Q1 2014 alone (about 15.5% annualized).
    • Interest rates, far from skyrocketing in 2014 as many forecast, are down in both Q1 and Q2 from the end of 2013.
    • Economic events in 2014 so far indicate a slowing world economy. This should be a positive for Agency mortgage REIT book values.
  • The Beat And Raise By Chesapeake Indicates Good Management And Improving Natural Gas Fundamentals
    May. 9, 2014 CHK 3 Comments

    Summary

    • Chesapeake Energy beat adjusted earnings estimates by a whopping +$0.11 per share ($0.59 versus and expected $0.48 and a year ago $0.30).
    • Chesapeake raised FY2014 adjusted production growth from 8%-10% to 9%-12% (or by 1.5% using the range midpoints).
    • Chesapeake raised its FY2014 operating cash flow outlook from $5.1B - $5.3B to $5.8B - $6.0B (or by $0.7B using the range midpoints -- 13.5% higher).
    • Chesapeake accomplished the above while shrinking its CapEx by approximately 50% year over year to $850 million for Q1 2014.
    • Chesapeake has an average analysts’ next 5 years’ EPS growth per annum of 35.03%. This far outstrips most E&P companies of its size and stability.
  • 10% Dividend Payer Linn Energy's Plan For A Big 1031 Exchange Could Lift The Stock Considerably
    May. 7, 2014 LINE, LNCO 29 Comments

    Summary

    • LINE/LNCO's acquisition of Berry Petroleum has improved its financials significantly.
    • LINE has approximately 55,000 net development acres in the Midland Basin that it plans to spend $275 million in CapEx on in 2014.
    • LINE management is indicating that it would like to do a 1031 like kind exchange for more mature assets.
    • If LINE manages a like kind exchange, that should have a highly positive impact on its cash available for distribution.
    • LINE's apparent net loss in Q1 2014 appears to be a mirage created non-realized derivatives losses that seem likely to be regained over time.
  • American Capital And CYS Both Posted Great Q1 2014 Results - CYS Seems To Have Led The Way
    May. 5, 2014 AGNC, CYS 5 Comments

    Summary

    • CYS had a Q1 2014 economic return of 8.2%. This was comprised of a $0.32 per share dividend and a $0.44 increase in book value.
    • AGNC had a Q1 2014 economic return of 5.1%. This was comprised of a $0.65 per share dividend and a $0.56 increase in book value.
    • CYS ended Q1 2014 with leverage of 6.32x. It had a net interest rate spread of 1.89% and a CPR of 5.6% for Q1.
    • AGNC ended Q1 2014 with leverage of 7.6x. It had a net interest rate spread of 1.43% and a CPR of 7.0% for Q1.
    • CYS beat AGNC in performance in Q1 2014, but AGNC may be significantly safer.
  • Chesapeake Energy Is Finally Joining EOG Resources In Its Oil Success Story
    Apr. 30, 2014 CHK 15 Comments

    Summary

    • CHK and EOG both started as primarily natural gas companies.
    • EOG became a successful natural gas to liquids convert quickly. It now gets 88% of its revenues from liquids.
    • CHK was much slower to convert due to its huge debt problems. However, it has turned the corner on those; and it now gets 62% of its revenues from liquids.
    • Both stocks are good investments. But for the longer term investors have to like CHK's next 5 years' EPS growth per annum of 35.03% versus EOG's 6.63%.
    • CHK also has 10 -15 million net acres of great oil and gas development fields. EOG has only about 2 million net acres.
  • 8% To 10% Dividend Payers BreitBurn And Vanguard Will Benefit From Increasing NatGas Prices
    Apr. 28, 2014 VNR, BBEP 58 Comments

    Summary

    • Natural gas in US storage is roughly -50% below its norm after a colder than normal winter of 2013-2014.
    • LNG exports are expected to start in late 2015. This should put upward pressure on natural gas prices, even before LNG exports start.
    • Both BBEP and VNR will benefit greatly from higher natural gas prices in the long term.
    • VNR has a proved reserves distribution of 66% natural gas and 34% liquids. BBEP has a proved reserves distribution of 40% natural gas and 60% liquids.
    • Both VNR and BBEP have made significant acquisitions recently which should be nicely accretive to their distributions in the future.
  • With A 10.5% Dividend, Annaly Capital May Be One Of The Safer Investments In 2014
    Apr. 15, 2014 NLY 18 Comments

    Summary

    • Annaly Capital should see a book value gain from $12.13 to $12.40+ per share in Q1 2014 from its Agency RMBS portfolio.
    • Annaly Capital should see a book value gain (or possibly a flat quarter) from its commercial real estate holdings.
    • Annaly Capital should see a slight waning of its net interest rate spread in Q1 2014.
    • Annaly has already announced a $0.30/common share dividend for Q1 2014. The ex-date was March 28, 2014.
    • The above make Annaly a safe, high yielding investment for 2014.
  • Magnum Hunter: Bakken/Marcellus/Utica Junior Is Betting On Natural Gas And NGLs
       • Apr. 10, 2014 MHR 8 Comments

    Summary

    • MHR has had so-so results in the Bakken/Three Forks (mostly oil).
    • MHR has had generally good results in the Marcellus (mostly natural gas and NGLs).
    • MHR is currently seeing some potentially great results in the Utica (mostly natural gas and NGLs).
    • MHR is putting most of its capital budget for 2014 into the Utica and the Marcellus.
    • Natural gas prices and NGLs prices have risen in the last year. Many indicators point to further gains. This could help MHR considerably.
  • Bakken Junior Emerald Oil Is Worth A Strong Look
    Editors' Pick • Mar. 28, 2014 EOX 60 Comments

    Summary

    • Emerald Oil is a Bakken junior with 85,000 net acres.
    • Its recent wells in McKenzie county are outperforming the average 30-day IPs of peers.
    • Emerald's enterprise value per acre is among the lowest among juniors (good). It's about one sixth of KOG's.
    • Growth has been fantastic; and that is expected to continue in the next few years.
  • Why And How To Buy Corporate Bonds In A Likely Increasing Interest Rate Environment
    Mar. 26, 2014 CHK, ITR, JNK 37 Comments

    Summary

    • The 5-year bull market is likely ending soon. The average bear market drops 38% within two years.
    • Intermediate-term corporate bonds are likely a better investment to be in than equities, if the equities market drops.
    • The ITR ETF is a good intermediate-term corporate bond fund.
    • The JNK ETF is a good high-yield bond fund with a four-star Morningstar rating.
    • Bonds of improving companies, such as CHK, WY, and MHR often have lower ratings than they deserve, and so, higher yields.
  • When Momentum Favorites Netflix, Tesla, Amazon, Et Al Sell Off, It May Signal A Market Turn
    Mar. 25, 2014 AMZN, DIA, IWM 6 Comments

    Summary

    • Large sell offs in momentum leaders (NFLX, TSLA, AMZN, etc.) are one sign of a possible overall market reversal.
    • Link to the article, "Evidence Is Piling Up That The Market Is In For A Downturn." This article contains more specific indicators.
    • The economic news from China has been terrible lately. FY2014 GDP growth may be far less than 7.5%.
    • China has significant bad loan problems which could lead to a financial crisis as bad or worse than the EU and the US crises.
    • Russia's annexation of the Crimea may cause a trade war between Russia and the EU and US with dire economic consequences.
  • Bakken Producers Like Continental And Whiting Are Finding Profits By Going 'Green'
    Mar. 20, 2014 WLL, CLR 4 Comments

    Summary

    • Bakken producers have been flaring natural gas for many years. Many are now moving to be "greener".
    • Whiting and Continental both say they are committed to zero flaring.
    • Both Continental and Whiting are seeing increased profits from the now captured natural gas; and this trend should continue.
  • Tyson Foods Should See Increased Profits On Soaring Pork And Beef Prices
    Mar. 18, 2014 TSN 4 Comments

    Summary

    • US Pork prices are up nearly 45% in the last three months due to Porcine Epidemic Diarrhea Virus (not harmful to humans).
    • US Live Cattle prices are up 11% in the last three months.
    • The higher pork and beef commodity prices should spur profit growth in US meat food producers in 2014.
    • The uptrends in both commodities seem likely to continue near term.
    • There is a secular growth story in meat foods worldwide. This should provide good growth for food manufacturers over the long term.
  • The Emerging Markets' Mediated Flight To Quality Bodes Well For Mortgage REITs Near Term
    Mar. 13, 2014 AGNC, NLY 3 Comments

    Summary

    • Serial bad economic news from China is causing a flight to quality; and China trouble is likely to continue.
    • The trouble in the Ukraine has caused a flight to quality. It is ongoing.
    • Flat or decreasing interest rates make fixed rate agency assets of NLY and AGNC likely to gain book value in Q1 2014.
    • Discounts to Q4 2013E book values make NLY and AGNC attractive when most stocks are overvalued.
    • +32 bps of 10 year U.S. Treasury note yield decreases in hand so far in Q1 2014 make the discounts to book value even greater.
  • Evidence Is Piling Up That The Market Is In For A Downturn
    Mar. 12, 2014 IWM, QQQ, SPY 15 Comments

    Summary

    • The 25.16 CAPE for the S&P 500 is far above the average of 16.53.
    • The margin debt peak has marked recent downturns; and we are likely seeing one.
    • The Fed is tapering (tightening).
    • The Chinese manufacturing PMI for February 2014 was 48.5; and the trade deficit for February was -$23B versus an expectation of +$6.8B.
    • There is a huge amount of Chinese debt that will have to be written off; that the Chaori effective default was allowed may signal write-offs are coming.
  • Industrial Metals' Dramatic Drops Show Miners Probably Have A Tough Road Ahead In 2014
    Editors' Pick • Mar. 11, 2014 CLF 20 Comments

    Summary

    • Negative China economic events have caused dramatic down moves in iron ore prices.
    • The biggest iron ore producers are "risky" investments under the current circumstances.
    • A general worlwide economic softening should contribute to this problem.
    • Cliffs Natural Resources is especially at risk. Some analysts are worried about a bankruptcy in its future.