Did The SandRidge Activist Investors Make A Big Mistake And Overvalue The Company? [View article]
Actually, isn't Slawson drilling Miss Lime wells in Logan County, Oklahoma? Only recently have people realized the Nemaha may make Kansas prospective too. Observe the METEORIC rise of Petro-River (PTRC), which has over 100,000 acres on/east of the Nemaha in Kansas, and is up 10x in the past 6 months. Full disclosure, one of my clients is invested in PTRC.
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
I meant both, actually - both production growth and high production growth rates will be challenging going forward.
The capex isn't tying directly with production growth due to calendar issues (eg spend money to drill a well in July, production comes on in January), but it is mathematically obvious - the more production, the more production declines without additional capex.
If KOG was producing 10,000 boepd, it would have ~5,000 boepd the next year without additional drilling. At 30,000 boepd, thats 10-15,000 boepd it will have to replace just to stay flat.
So growing barrels of production AND sustaining a high growth rate are both challenged going forward. My bet is KOG deals with this by doing additional acquisitions and thus still growing, albeit inorganically. Part of why its only a small short for me is because KOG has done accretive acquisitions and financings to date. This is always a risk of shorting a highly valued company, because many available deals are inherently accretive.
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
How about this - if Sundance stopped drilling in 2014, its production would likely fall by more than 50% (potentially by 70%). So Sundance will need to add at least 2,000 barrels per day of production just to keep its production flat in 2014.
And I think you meant to say 2012 exit rate in your second paragraph, not 2013. Sundance will produce significantly less on average in 2013 than its 2013 exit rate.
Also, despite thinking that Sundance is richly valued, I am not short the stock - if I were, I would have disclosed it. But now that you mention it, since it is trading at several times the valuation of Austex, perhaps I should short Sundance as a hedge against my Austex investment.
For Sale - Companies Selling Assets Into A Rising Natural Gas Price Environment [View article]
"And finally, Gasco (GSX) has not announced a sale but mentioned in its recent disclosures that the company may have a risk of being a going concern" - GSX is looking at alternatives, including asset sales
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
Thank you. I believe I'm taking a long term view, in the sense that I want to buy the lowest price resource and cash flow stream possible. I actually agree with you about PBN, it looks cheap.
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
Typical. I actually probably understated that decline rate. From announced IP rate to first year exit rate, shale well production typically declines 80-90%. Its brutal, but if you can achieve payout in the first 18-24 months, its pretty economic.
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
My short position in KOG is tiny, certainly it is not a reason to write an article. If anything, I should probably stop writing about it and hope that the stock goes up so I could short more of it at a more attractive price level. KOG's production growth is going to be quite limited past the first quarter of 2013, at least for the next few quarters, and it doesn't look like that is priced into the stock yet. Neither the article nor this comment should represent advice on trading KOG stock.The point is simply that high decline rates will make further production growth quite challenging.
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
Thank you for the comment - yes, there is limited production data directly from Austex, but Range Resources drilled over 300 vertical Miss Lime wells directly adjacent to Austex, with similar production results. Also, the Miss Lime was historically a vertical play with thousands of wells in the ground, there is a huge data set to support vertical EURs. And I believe Austex's first two vertical wells have already paid out, despite being on production for less than a year so far, which is always a very good sign. There aren't any good direct Miss Lime comps to Austex - the closest is Osage, which trades at 2-4x the valuation.
Making A Killing In Mature Oil Basins: Josh Young [View article]
Thanks! I believe the Petro-River reverse merger has not yet been finalized. Once it has been, hopefully more information will be publicly disclosed by the company.
One Of The Most Common Lies Told By Mutual Fund Salespeople [View article]
CTA performance is lagging as AUM pursuing those strategies has increased tremendously. Is it possible the market environment for those strategies has changed due to overcrowding? Also, in a market environment, one might expect the "economics of superstars" to have an affect, and for returns to be disproportionately earned by the very best traders/funds, like Renaissance, which are not open to outside investment or tracked by indices.
Get Ready For The Big One - Bakken Flooding Coming This Year? [View article]
Thanks, ironically investment banks are reporting that their institutional investor clients are starting to get more concerned about weather impacting production of Bakken producers. They are saying it is starting to get priced into TPLM, and that others may be affected.
Proved Reserves Update: Aurora And Sundance - Australian Traded With U.S. Assets [View article]
Thank you for the comment. Each of these companies have access to capital to develop their respective resource in the ground - and I actually gave Sundance credit for $160mm in cash - is that number too high? The reserves do in fact include the impact of the Texon acquisition (the Eagle Ford), as can be seen on the slide I included in the article, and those numbers were incorporated in the analysis.
Sundance is obviously doing very well, and is priced as such, at a premium to its proved reserve value. As a value investor, I am interested in buying stocks at as large a discount to intrinsic value as possible, and proved reserve value is one such metric. Thus my ownership of ATXDY.
Did The SandRidge Activist Investors Make A Big Mistake And Overvalue The Company? [View article]
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
The capex isn't tying directly with production growth due to calendar issues (eg spend money to drill a well in July, production comes on in January), but it is mathematically obvious - the more production, the more production declines without additional capex.
If KOG was producing 10,000 boepd, it would have ~5,000 boepd the next year without additional drilling. At 30,000 boepd, thats 10-15,000 boepd it will have to replace just to stay flat.
So growing barrels of production AND sustaining a high growth rate are both challenged going forward. My bet is KOG deals with this by doing additional acquisitions and thus still growing, albeit inorganically. Part of why its only a small short for me is because KOG has done accretive acquisitions and financings to date. This is always a risk of shorting a highly valued company, because many available deals are inherently accretive.
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
And I think you meant to say 2012 exit rate in your second paragraph, not 2013. Sundance will produce significantly less on average in 2013 than its 2013 exit rate.
Also, despite thinking that Sundance is richly valued, I am not short the stock - if I were, I would have disclosed it. But now that you mention it, since it is trading at several times the valuation of Austex, perhaps I should short Sundance as a hedge against my Austex investment.
Proved Reserves Update: Aurora And Sundance - Australian Traded With U.S. Assets [View article]
ATXDY still comes up as trading at less than half the value of Sundance, Kodiak and Aurora on those metrics.
For Sale - Companies Selling Assets Into A Rising Natural Gas Price Environment [View article]
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
For Sale - Companies Selling Assets Into A Rising Natural Gas Price Environment [View article]
Interestingly, Quicksilver just sold an asset today too - http://bloom.bg/ZwDmeJ
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
Making A Killing In Mature Oil Basins: Josh Young [View article]
Chesapeake Granite Wash Trust Is A Strong Buy, Part I [View article]
Great article, I enjoyed reading this article and am looking forward to your detailed valuation analysis in part 2.
One Of The Most Common Lies Told By Mutual Fund Salespeople [View article]
Get Ready For The Big One - Bakken Flooding Coming This Year? [View article]
Proved Reserves Update: Aurora And Sundance - Australian Traded With U.S. Assets [View article]
Sundance is obviously doing very well, and is priced as such, at a premium to its proved reserve value. As a value investor, I am interested in buying stocks at as large a discount to intrinsic value as possible, and proved reserve value is one such metric. Thus my ownership of ATXDY.