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Elliott Gue

 
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  • MLP Investing: Distribution Growth Trumps Yield [View article]
    Thanks for the compliment, Gary. I recently posted an extensive article on Energy Transfer Partners that may be of interest to you: http://seekingalpha.co...

    My publication also covers all 86 energy-related MLPs.
    Oct 30, 2012. 10:54 AM | Likes Like |Link to Comment
  • Under Pressure: Profit Margins On North American Hydraulic Fracturing [View article]
    That's true and it will ultimately push gas prices higher. However, I think the time frame for this is considerably after 2014. The thing is that the first plant or two will have only a modest impact because it will take time for exports to ramp up to a level that moves the needle on the supply glut.

    Also, keep in mind that there are a number of dry gas basins in the US (little liquids content) like the Haynesville, Barnett, Montney in Canada and part of the Marcellus Shale that have been essentially moth-balled as producers scale back drilling activity due to low gas prices. As demand for exports ticks up and prices begin to rise, I'd expect these plays to come back on stream, pushing supplies higher.

    Bottom line: while I believe your sentiment on LNG exports is directionally correct I think it will take longer than 2 years to get back to 6 to 8 dollar gas.
    Oct 9, 2012. 05:08 PM | Likes Like |Link to Comment
  • Under Pressure: Profit Margins On North American Hydraulic Fracturing [View article]
    Thanks for the comment. They did sound rather upbeat but I can't think of any reason they would be taking share.

    One thing that strikes me is that HAL and BHI also sounded more upbeat on the potential for a bottom in pressure pumping margins than Schlumberger (SLB). Since SLB is not that exposed to pressure pumping, they have less of an incentive to sound optimistic so I wonder if some of that upbeat tone might be wishful thinking.

    Long: $SLB
    Oct 9, 2012. 05:04 PM | Likes Like |Link to Comment
  • Under Pressure: Profit Margins On North American Hydraulic Fracturing [View article]
    Thanks for the comment. I am familiar with Gasfrac (Toronto: GFS, GSFVF) and have consistently suggested investors avoid the stock.

    Not only are they facing the same cyclical headwinds as I noted for $BHI and $HAL above, I just don't see much momentum developing behind their LPG (butane and propane) fracturing process. I can't think of a compelling reason producers would switch large-scale from water/sand based fracturing fluids in the current environment.
    Oct 8, 2012. 05:08 PM | Likes Like |Link to Comment
  • Plenty Of Opportunity To Increase Production For Legacy Reserves LP [View article]
    Mea Culpa: That should read million. The "M" and the "B" are far too close to one another on the keyboard.
    Jun 21, 2012. 12:57 PM | Likes Like |Link to Comment
  • Solid As Granite: Chesapeake Trust Ramping Up Distributions [View article]
    CHKR provides distribution projections for the trust through its termination date. To calculate fair value I typically calculate the net present value (NPV) of all future cash flows. I tend to look at a conservative case (lower distribution projections, higher discount rate) a base case (moderate distribution projections and a slightly lower discount rate) and an aggressive case (higher cash flow projections and a lower discount rate). To give you an idea of how this works, I offer a free article showing how I value Whiting USA Trust II here ($WHZ): http://bit.ly/HdKRQh

    As for $CHKR my base case valuation is about $25. I actually recommended selling some to readers of Energy Strategist when it was trading in the $27 to $30 area earlier this year as to get to that valuation, one had to make some heroic assumptions in terms of commodity prices or accept a discount rate of well under 5 percent annualized. At current prices I do think it's a buy.

    And, yes, I am also talking my own book.

    Disclosure: Long $CHKR
    Apr 23, 2012. 05:13 PM | Likes Like |Link to Comment
  • Solid As Granite: Chesapeake Trust Ramping Up Distributions [View article]
    Thanks for the kind comments about my articles. The April 18th Reuters article about Aubrey McClendon's loans doesn't change my opinion on $CHKR (or $CHK for that matter) in the least. I really don't think this was much of a revelation; we've known about the CEO's deal to acquire a piece of $CHK's wells for years and his contract doesn't prevent him from taking out loans based on his personal holdings. I really don't see how this represents a conflict of interest or anything scandalous or improper.

    The article that sparked all of this appears to be just dredging up old news. McClendon has always been a controversial CEO--people seem to love him or hate him--so this article is just playing into those sentiments.

    I don not currently recommend Chesapeake common stock in my newsletter, the Energy Strategist, due mainly to the fact that I don't like their exposure to natgas prices. That said, I do think they're executing well on their plans to dispose of assets and raise capital to help fund their development plans. I do recommend Chesapeake's preferred shares in the newsletter and am happy holding onto those.

    I don't think this has any impact on $CHKR. In fact, I have recommended $CHKR as a buy only on dips under $25; I recommended taking profits back in late February/early March when its valuations ran out of control. So, yesterday marked the first time since late January where I considered $CHKR a buy candidate. I see this as a buying opportunity.

    Disclosure: Long CHKR and CHK Preferred D
    Apr 19, 2012. 04:01 PM | Likes Like |Link to Comment
  • Growth In Deepwater Drilling: Ensco [View article]
    Thanks for all of the great comments on this article. While I agree with some of the comments about Transocean (RIG) being a decent value here, the fact is that the company has been a laggard compared to names like Ensco (http://bit.ly/Gztvwv) and Seadrill (http://bit.ly/u1d6zb).

    Some of this underperformance is due to a "Macondo" discount but RIG has also had its share of operational issues including the cancellation of a contract in Malaysia due to rig issues and generally higher-than-expected rig downtime over the past few quarters. The company also recently suspended its dividend; RIG had paid out $0.79 per quarter over the past four quarters.

    I think RIG will perform reasonably well as the offshore contract drilling market tightens, particularly for deepwater rigs but I just prefer other names. My favourites are Seadrill (http://bit.ly/u1d6zb), a high-yield name I have written about repeatedly on Seeking Alpha over the past few years, Ensco (http://bit.ly/Gztvwv) as highlighted above and Pacific Drilling (http://bit.ly/GztvMR), a relatively new IPO. As one reader commented above, PACD has a couple of new drillships due to enter the market that I think will garner impressive dayrates.

    Disclosure: Long SDRL
    Mar 19, 2012. 07:01 PM | Likes Like |Link to Comment
  • Going Deep: Oil Service Providers Should Benefit From Boom In Deepwater Drilling [View article]
    Thanks for the comment. I don't think you'll see dayrates collapse overnight. For the most part these deepwater and ultra-deepwater rigs are contracted for years into the future at more or less fixed rates.
    Feb 18, 2012. 05:27 PM | Likes Like |Link to Comment
  • Going Deep: Oil Service Providers Should Benefit From Boom In Deepwater Drilling [View article]
    Thanks for the comment. Industry insiders have been looking for deepwater activity to heat up this year but they did seem a bit surprised at how quickly it's happening. Some of these discoveries are quit recent though and may have sparked a change of sentiment.
    Feb 18, 2012. 05:25 PM | Likes Like |Link to Comment
  • Going Deep: Oil Service Providers Should Benefit From Boom In Deepwater Drilling [View article]
    Thanks for the comment. The rumors aren't at all unfounded in my view. After all Noble just signed a deepwater rig for $610,000 so $625,000 wouldn't be that much of a leap. Moreover, given just how few rigs are available in the deepwater/ultra-deepwater class, there's an obvious scarcity premium.
    Feb 18, 2012. 05:23 PM | Likes Like |Link to Comment
  • The State Of Agricultural Commodities [View article]
    Thank you both for the interest. The website http://bit.ly/yzGDu8 has links to all my e-letters.

    And, if it helps, I lived in the UK for four years while doing my undergraduate and masters degrees.
    Feb 10, 2012. 01:20 PM | Likes Like |Link to Comment
  • Merger Madness To Continue In 2012 [View article]
    Absolutely a valid observation. The proposed acquisition of Minefinders (MFN) by Pan American Silver (PAAS) announced on January 23rd is proof that the consolidation you speak of is already underway.
    Feb 7, 2012. 10:03 AM | Likes Like |Link to Comment
  • 9 Dividend Paying Basic Materials Stocks With Low P/E Ratios [View article]
    Investors should be extremely careful about using earnings and ratios derived from earnings like P/E when evaluating Master Limited Partnerships (MLPs) like APL, ARLP and TNH mentioned in the article.

    MLPs are a unique structure in that they're pass-through vehicles. They do not pay corporate-level taxation but pass through their cash flows to individual unitholders (MLP equivalent of shareholders) in the form of regular (usually quarterly) distributions. In addition to passing through the cash they generate they are also able to pass through certain tax shields to unitholders such as depreciation and depletion allowances.

    Basically, the portion of your income that is covered by these allowances is taxed as a return of capital, meaning that taxes are deferred until you sell the MLP.

    To make a long story short, MLPs try to maximize their depreciation allowances to pass through more tax advantages to unitholders. Since most, like APL, own significant fixed assets like pipelines, gas processing plants, etc.. they have particularly large depreciation charges. That has the impact of artificially reducing earnings.

    Another problem is that if you compare an MLPs distributions to its earnings it will often appear the MLP isn't covering its payout.
    Distributable cash flow--a measure that strips out non-cash accounting charges from earnings--is a more appropriate metric for MLPs than earnings.
    Feb 2, 2012. 01:07 PM | Likes Like |Link to Comment
  • Solid As Granite: Chesapeake Trust Ramping Up Distributions [View article]
    Thanks for the comment. I think there's some confusion here. The trust's distributions are actually likely to continue rising through 2013 and then flatten out for a bit and then decline after that. As I mentioned in the comment above, this is a function of the fact that Chesapeake Energy (CHK) will be drilling 118 new wells on the area of mutual interest before roughly June 30, 2015.

    The trust will NOT cease to exist in 2015. Rather, these wells will continue to produce and throw off cash flows that underpin further distributions. Yes, as wells mature that production will drop off over time but mature wells can remain economic for years -- there's a long tail of profitability.

    The trust will not cease to exist until 2031 so you have nearly 20 years of distributions followed by a final distribution to reflect the sale of the properties associated with the trust.

    If CHKR simply meets its targets (the first distribution was above-target), then the trust will pay a total of $17.12 in distributions per unit between now and the second quarter of 2017. After that, of course you could expect another nearly 14 years worth of distributions albeit at a declining quarterly rate. With the units currently trading in the $23 to $24 area that looks like a good deal to me.

    Generally speaking, I do tend to like new trusts (those that have recently IPO'd) the most as they have the best potential for near-term distribution growth. Distribution growth attracts investors.
    Jan 23, 2012. 01:56 AM | Likes Like |Link to Comment
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