JJ Butler

Newsletter provider
JJ Butler
Newsletter provider
Contributor since: 2012
Company: Independent Stock Analysis
Arch coal has declared bankruptcy.
I think NIHD goes to zero.
Third quarter results were an unmitigated disaster. Run from the stock. Take the ticker off your screen!
As a long time market observer, bankruptcy's always occur before debt maturity's and sooner than expected by a balance sheet study. Consider PCX as exhibit A...
The asset sale must be considered in light of EV (enterprise value, equity + debt) which tells a very different story. Further, exports are down this year as this essay linked...
ACI, ANR, JRCC and even mighty BTU have reported significant losses and shut operations. Unfortunately for the coal mining business, the statement is all to true.
John Maynard Keynes: “When the facts change, I change my mind. What do you do, sir?”
Except for Cloud Peak Energy (CLD)...
Brazil doesn't plan on releasing 4G spectrum until 2015 and Mexico is further behind.
The possibility is why we watch the stock so closely...
Mr. Hyperinflation:
1) If gold and silver and gold average $13.5 and $965 the metals complex would be beat down so badly that SLW's current guidance would be outrageously off...
2) Four and a half years until debt free is far from encouraging...
3) Did dividends stop in your model?
Thanks for sharing your work!
Mr. Hyperinflation: All mines were included in estimates provided by the company.
"If two events occur, however, Silver Wheaton shares would quickly become distressed. The first event would be significant further stream acquisitions, something management clearly states the intent to accomplish. The second event would be a meaningful fall in the price of silver."
Two updates:
1) At SLW's latest investor presentation the idea of further stream acquisitions was ignored instead as opposed to trumpeted only two months ago.
2) The price of silver has fallen modestly.
A price of silver under $20 shows a very rich valuation and with debt repayment slightly arduous...while a $50 POS in 2016 would see SLW drowning in cash...the position is interesting, almost binary.
Yes, the unnecessary risk is created with the short term debt against the (fantastic) long term assets. Thus in the financial crisis SLW fell to $2.xx while FNV and RGLD held up much better...they avoid the risk the financing risk.

As for hedging, which would mitigate the risk, we would see shareholders revolt. The rich valuation could disappear without the call-like upside.
1) The industry on whole has a negative combined ratio. 2) Price directly effects conservative (Jim Grant: "There are no bad bonds, only bad bond prices.") 3) In the long run the conservative take from the speculative. 4) A CNA positions was not advocated...L's was suggested.
Meanwhile, natural gas suddenly looks the best it has in two years...
"The approximate 2% average override in about 880,000 acres in Ohio could generate cash flow of $50 million or more per year within 5 years."
The royalty business is my favorite...
Ah, the challenges of a conglomerate: I know something about E&P's but little about insurance.
CNA: 1) CNA is not reaching for yield, and if and when rates rise CNA looks to have a competitive advantage. 2) The book value is $43 a share. 3) Loews demands subs to be conservative; in the financial crisis L helped CNA but TARP was not even an option. 4) Perhaps the management changes of the past several years flow into results.
HighMount: What's ones view on natural gas? With the withdrawal season almost complete natural gas isn't going far until at least the end of the 2013. Jim Tisch opines "between $4.50 and $5 per million Btu for the next 5 years to 7 years" which is nothing to get excited about. Loews has owned HighMount for 5 and a half years and I consider them excellent operators because the book value only dropped 16% from the purchase price while eliminating 2/3rds of the E&P debt.
Now, the good news is that after this year HighMount might be able to send modest capital back to the mothership.
To this point SLW's tumble is merely mirror's the sector. Scarey version? Smallwood wants to lever the company with more short term debt matched against long term assets! http://bit.ly/Xqm72H
<<Coal demand set to surge in 2013>> Meanwhile, the latest from the company:
"Even though coal production from our properties held up remarkably well during 2012, we began hearing from our lessees near the end of last year that they were planning to idle some mines and reduce production at other mines that will likely impact tonnage from NRP properties in 2013 and possibly beyond... "These actions by our lessees, including many of our large publicly traded producers as well as numerous small independent operators, have caused us to reduce our forecast for production from NRP's properties in Central Appalachia by approximately 9 million tons. Further, the lower production forecast, coupled with lower projected prices for both met and steam coal, results in NRP lowering its coal royalty revenue forecast by $25 million to $50 million compared to the 2012 actuals."
I like NRP for very different reasons...
Over the past seven quarters, NOG has used every dollar of cashflow for capex, blew through a $200 million cash balance and borrowed another $300+ million. Investors expect more growth...http://bit.ly/OXe3Be
The great irony is MHR's crown jewel Eagle Ford assets has the highest returns is on the block to shore up the balance sheet. Still asset rich...http://bit.ly/OXe3Be
Chesapeake was built to be a natural gas juggernaut in a modest or high priced natural gas world. Unfortunately, the world changed on Aubrey. http://bit.ly/OXe3Be
"...GLL has lost about 75%. This means investors who shorted GLL would have quadrupled their investment."
1) Not true! A short has a max gain of 100%.
2) Retail investors may not short levered ETF's. The investment banks keep the natural vig for themselves. :)
http://bit.ly/OXe3Be
Steve,
Horizontal tight oil and gas drilling is the opposite of vertical drill conventional drilling. In vertical drilling costs continually rise. With horizontal drilling costs are continually falling on new technology adoption the steep learning curve. Costs are in the midst of a big leg down on pad drilling!
As for the the Marcellus condemning natty prices: It can't do it alone, but is definitely the motherload play.
Fantastic essay! http://bit.ly/OXe3Be
"With such a ridiculous payout ratio (459%), you can tell that ECA will either finance its dividend or cut it again in the near future." Neither; think GAAP distortions. Perhaps an ECA essay ought focus on it's assets and the NG market. What a wall of shame article! My site: http://bit.ly/OXe3Be
With the real possibility refining has become a structrurally positive, though volatile business, it's suddenly a great business for the supermajors. http://bit.ly/OXe3Be
Loews continues to take advantage of the conglomerate discount by buying in and retiring shares quarter after quarter. But the shares are not always trading at a discount; shares tend to move from overvalued to undervalued in half decade increments. Meanwhile, an extremely patience and conservative management continues to compound intrinsic value. http://bit.ly/OXe3Be
As the precious metal bull matures, silver's relative strength will strengthen. Meanwhile, industrial demand for via solar panels shall explode this decade...http://bit.ly/OXe3Be
"Breathtaking" is misleading. There is no chance CHK organically grows oil production to surpass NG production by the end of the decade, given current production and the asset base. http://bit.ly/OXe3Be
Monitizing the Federal deficit...giving boozed to a drunk...is now considered adult behavoir??? http://bit.ly/OXe3Be
Perhaps the growth rate decline will be pushed out year or two by the collapse in drill times...as the learning curve has been climbed and pad drilling kicks into high gear.
The hard core goldbug community seems to have lost its edge. Worldwide gold fundamentals are ridiculously bullish (today the US FED looks to up money printing to $1 trillion a year), yet the commentators discuss suppression and manipulation. If it's true, it'll only be icing on the cake. But keep your eye on the ball...the fundamentals: http://bit.ly/OXe3Be