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ABX - a $5.6B blunder
Barrick Gold (ABX) will issue $3B in stock to eliminate all of its fixed-price gold hedges and a portion of its floating hedges, taking a $5.6B hit to third-quarter earnings.
To get an idea of the magnitude of this event, let us look at a few key facts:
More »Energy from wood – Back to basics
Wood is one of the first known sources of heat and energy. We seem to have come back a full circle to where it all started from. The company that takes us back to this primitive fuel, albeit with modern technology is We Energies, a subsidiary of Wisconsin Energy Corporation (NYSE: WEC).
We Energies, a $3B+ revenue utilities company serving the needs of 1.1 million electric and 1 million gas customers in Wisconsin announced the proposed construction of a $250 million biomass-fueled power plant at Domtar Corporation's Rothschild, Wisconsin paper mill site.
Wood, waste wood and sawdust will be used to produce 50 megawatts of electricity and will also support Domtar's sustainable papermaking operations. The project would be funded by We Energies.
The following table shows the capacity of WEC with renewable energy share at ~2%. Total energy supplied from renewable sources has to rise to 10% by 2015.The current renewable capacity consists of 88M of hydropower and 145 MW of wind power capacity. The dependable capacity of its wind farm is 29MW. Dependable capability is the net power output under average operating conditions with equipment in an average state of repair as of a given month in a given year. We are a summer peaking electric utility. The values were established by test and may change slightly from year to year.
The company is, also, setting up a 132MW to 207 MW wind mill capacity at Glacier Hills Wind Park, Wisconsin. This is expected to be operational in 2012. The new wiid energy capacity and 50 MW plant will go towards meeting the regulatory requirement by 2015.
Disclosures: No Holdings in WEC, UFS
Oil to gas price ratio - Is this tops?
We are currently well beyond 3xStandard deviation from the mean and close to the peak of 21.5. This does seem to be close to the top. It would be interesting to see whether the top is formed by falling oil prices or rise in gas prices.
Source: U.S. Department of Energy, Energy Information Administration
Disclosures: No holdings in any oil or gas companies
Low gas prices --> reduce production, cut-down on capital expenditure
As gas prices have fallen to levels that equal production costs (including sunk cost), gas companies should look to curtail production. The rationale here is that the sunk cost (exploration and development cost) is written-down (depleted) on a unit-of-production basis.
More »CYT results excites investors
Despite a loss in the 2nd quarter ended 30th June 2009, the CYT stock has moved up 10% as investors seem be positive about the future.
Cytec Industries Inc. reported a loss of $25 M as against a profit of $57 M a year ago. The key reason for this loss is the fall in demand across segments as seen from a 20% y/y company wide drop in volumes. A 9% drop in price due to lower raw material cost being passed through to consumers in the Building block segment and a 3% forex impact saw revenues drop 32% y/y.
While customers have been reducing inventory, the company also has slowed down manufacturing to reduce inventory. A 17% reduction in inventory has helped boost cash flow from operations for the quarter to $168 M from $44 M a year ago.
More »PTEN - rig numbers indicative of drop in Oil and gas exploration and development activity
PATTERSON-UTI ENERGY, INC reported a operating rig count of 60 for the month of May'09 and an average of 64 for the April-May'09. This is the lowest rig count reported by the company in the Gridstone Research coverage period beginning Mar-03.
From the Oil and gas exploration and production industry perspective, the sharp decline in number of rigs for PTEN is not a very positive indicator for the future. Oil and gas fields have limited lives and lower spend on finding new reserves and developing existing reserves will lead to lower production in the future.
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