Kevin Chapman

Long-term horizon, commodities, dividend growth investing, oil & gas
Kevin Chapman
Long-term horizon, commodities, dividend growth investing, oil & gas
Contributor since: 2013
I get torn when i read what amounts to a market timing article from a value investor. The article also feels more emotional than most others you write.
Seems like you might be missing the "forest" because of the volitility "trees" in the market. why not allocate a portion of your new money to reducing volatility in your portfolio while continuing your strategy of acquiring great dividend growth companies at a discount?
Respect your pov RS, just thinking critically.
Concho is not looking at the short term with these transactions, and neither was Parsley or RSP.
These operators all know they are sitting on a gold mine. Goal right now is to drive down cost an block up acreage. These guys know its hard to JOA on adjacent acreage blocks (even now) and if they dont acquire and divest to bolt on acreage, they risk losing acreage at the fringe of their blocks.
They also dont mind meeting short term lease obligations/HBP'ing acreage, then waiting for price to rise before drilling additional wells. These operators will fight tooth and nail with the oilfield service providers on pricing so that they can lower payout times on new wells being drilled. Just watch the E&P earnings calls over the next 6 weeks... many will miss, but most will tell of lower finding & development/development & completion costs.
Production will be slow to move once a rebound occurs, and when that happens these permian operators will be sitting in tall cotton.
Everyone needs to go review bear articles from 2008/09, when oil prices were this low, and then look at where the prices were for these operators in 2014-15. That's the kind of rebound to expect, you just have to be patient.
Dr Bubs,
You sound like you want a lottery ticket. In that case, go play the lottery.
This is the stock market, where you have the chance to buy shares in companies that actually make money (if you choose correctly). I would encourage you to care less about "high yield security" and more about "predictable earnings security" instead. Concern yourself with the latter, and "yield security" will follow.
You need to come to grips with the fact that you will be poor next year, and every year thereafter until SS gets fixed.
"high yield security" souds a whole lot like reaching for yield, which is the same thing as digging a hole while standing in it. Let me know how that goes.
Price follows earnings - Chuck Carnevale (http://bit.ly/1LJALHs)
CHK is frustrating (I am a current underwater shareholder and former contractor)... ask any shareholder OR employee. I can tell you from experience that they have a great land staff, which unfortunately goes to work trying to make a mountain out of a molehill in this environment.
Impressive. I for one belive(d) in the assets, but the execution has been a dumpster fire.
I get the comparison to TGT, but I still think the budget conscious shopper is going to Walmart if given the choice.
For most of the American population, low prices mean everything, and for many trump any kind of "experience" one might get from the stores boolanger mentioned. Even while Sams and Costco might have lower per unit prices, I still have to go to Walmart/Target/Albertsons to get things Costco/Sams do not have (or that they do have but that I dont need 1,000 of).
To me Walmart has 4 things that make it a stalwart: Low prices (or the perception of), variety across the consumer spectrum, usually open 24 hours, and is close (I live in DFW). You can't say those 4 things about anyone else on boolanger's list, and that's why Walmart isnt going anywhere.
LB/All - I received as a gift about $8,000 worth of PIMCO CEFs ~ 4 weeks ago from a grandmother. These are not my forte, so was wondering if you could share some of your knowledge on these funds and CEFs in general. This gift represents about 5% of my portfolio. Gift is approx 1/5 PDI, 1/4 PCI, 1/4 PCN, 1/3 PTY.
How do I value these things? I get looking at the holdings of the underlying, and understand generally about leverage some funds use. That being said, is there some sort of loose criteria you use when screening funds? Is it past performance? distribution coverage? discount to NAV? all?
Just looking for a starting point, so thought I would ask. Dont want to dump these but I am not in a habit of owning something whose value proposition (or staying power) cannot be explained in one breath. Thanks in advance.
The oracle with the Kansas City (omaha) shuffle?
http://bit.ly/1DJxGVe. Look at Part II Item 15 to see how Eaton is treating the "dividend".
What do you think about the potential sale of their acreage in andrews/gaines?
Depending on who you ask it might change, but you can bet on 70% in year 1,40% in year 2, 25% in year 3.
New drills may still be profitable at $50 oil if (a) they are drilled on HBP acreage, (b) service costs come down 30% (c) the company has decent hedges/liquidity/large portion of debt maturing in 2017+ and (d) the acreage is in the heart of the shale play. That being said, you can only name a handful of public companies who meet those criteria in the US, and those should be the ones you invest in if you want to be in the space.
Exhibit A: EOG
Love the stock and divy coverage, sold it on the pop today from a buy at $79.xx. Definitely looking to get in on the next dip.
Albert do you think this thing is pricing in a divy cut at 4.67? Wondering if buy backs would kick in at the mid to low $4.xx level myself...
Thanks for the write up. This stock pops up on my screener a lot because of rev and eps growth but I always came to the same conclusion you did... A little to pricey. Looks like I'll be a buyer Tuesday.
Thanks for the insight. Dont comment much on your stocktalks/articles/blogs but I do enjoy your POV and take in your stocktalks on a regular basis.
Personally I think people are underestimating the swiftness at which the North American E&P co can efficiently allocate capital and also force service providers to lower costs.
You are seeing costs moving down and it happen daily as E&P's are asking
(a) land service companies to cut staff
(b) rig suppliers to adjust/cancel contracts
(c) D&C service providers to lower costs by 15-20%
(d) cost/rod of gathering line construction moving lower
The cuts on costs has quickened over the past few weeks on the land services side as major projects with lead times longer than 3+ months are being cut (i.e. ALLnew prospects/ventures). You will see the field service cos (think HAL/SLB) see price cut requests by February at the latest.
At the end of the day, I think the IRR curve many contributors on SA are leaning on to say plays are uneconomic will be revised to match lower total well cost. Doesnt make a play any more economic, but definitely lowers the bar.
I also think you see the mid-cap North American E&P focus on the core of the core acreage. This acreage already has sunk cost in terms of land services, gathering lines, and any surface facilities (compressors, tank batteries, heater treaters, etc). Because of this I see production staying flat through most of 2015 while costs come down for the avg E&P co.
You saw it in the Sanchez press release the other day... they are expecting cost/well to come down substantially as they ask service providers to adjust. They still expect to meet their production goals for 2015.
I think you will see the North American E&P benefit from the downturn as they are price setters on the service-side in this environment, especially if you have a rubber-band like bounce in crude between now and September.
Would enjoy your thoughts on the above.
Also saw a nugget today for a Jan 07 price bulletin from a private independent refiner with the following prices for 1 delivered barrel of crude:
Colorado DJ Basin: $44.25
North Dakota Southern (i.e. best of the Bakken API): $40.50
- Dont know about the above... the differential would make this lower
Texas EF Giddings Sweet (i.e. Gonzales/DeWitt Co): $43.25
EF West (i.e. Webb/LaSalle): $39
Nice over-the-top article title (reads like a news story for the ill-informed)...
That being said, I think this goes beyond fracking (as Halliburton won a summary judgment prior to the Aruba verdict) and addresses how urban drilling is affecting (creating a nuisance) to adjacent land-owners. You wont see a suit like this in North Dakota.
I think the interesting part of this verdict is that it includes $250,000 for loss of property value (even though market/appraised value of their land has stayed relatively constant over the last 5 years).
Another case in Tarrant Co may have more of an impact than the Parr case: http://bit.ly/1iWnmgR
That being said, litigation is nothing new in the oil patch. The sky is not falling.
So regardless of who is "right" or "wrong"... why not use a straddle to take advantage of the volatility? I don't want to go long the underlying but I also don't want to miss a move to the upside... thoughts? Ideas?
DISCLAIMER: I am a novice at options strategy.
While it seems shady I don't think it will have a material impact on the stock. The same thing happens more than you would expect (see SD and CHK). However SN is overweight the best play in the country with none of the issues the two I mentioned have.
Color me VERY underwhelmed if I am a Devon shareholder. I just shake my head at the premium paid for non-operated assets knowing, like you said, that organic value creation may exist elsewhere. PS back up the truck to PVA...
Hell of a presentation by PVA as well: http://bit.ly/1fWmjhc
I understand the argument but have trouble with the conclusion. My biggest issue with these ideas is timing... You could very well be right on the outcome, like buyandhold2012 18 months ago, and still lose out on rising stock prices of profitable and growing companies because you didn't buy at sound valuations.
Thanks for the article and the reminder of the end game.
I looked at MIG too as well as EZCH, REGI and MYGN. All seemed to be up in the pre market and having no experience trading in the pre I decided not to play.
That EPR seems to have worked to perfection so far...
out of FOR at $22.19.
Just another reason investing is about fundamentals first, management second (as far as I am concerned).
FOR had a fairly wide bid/ask (the ask in the pre was $24.11). It seems like there might have been some fills around the $24/sh mark to start the day.
I also looked at a few biopharms but based on your prior reply and my lack of knowledge about the space decided against it.
I dipped my toe in this morning on 2 based on your strategy... they also happened to be 2 I have been looking at from a longer term perspective:
FOR: Limit order before the open at $22.55 (originally at $22.15 then revised up), filled at $22.31
EPR- Limit order at before the open at $51.80, filled at $51
I am of the opinion that the cupboard is a lot more bare than it looks for this name as the company continues to divest assets which they see as non-core. They have to execute flawlessly going forward (they have not up to this point) or the market is going to continue to punish them. I think your 30-50% move is a good start, worse if they have crappy results from the EF acreage or no takers in the Permian.
I know quite a few of the LeNorman folks who will be operating and they are very excited about the deal.
Im with some of the others in not understanding what the overall thrust is from your article. I am of the opinion that the market is aware that (a) Linn will be acquiring Berry assets, (b) some of those assets are in the permian, (c) Linn also recently purchased permian assets separate from the Berry deal, (d) Berry uses EOR methods on the majority of their acreage, (e) Linn uses the same methods on a majority of their acreage, and (f) these methods can be used in the future. My english teacher from grade school always asked us if our paper answered the question "so what?". It seems like your article never answers that.
Now you could have made the case that Linn is acquiring assets with "X" amount of PDPs/PUDs, and that the use of EOR techniques will unlock additional shareholder, or maybe look at the recent Permian acquisition in detail and tell us what un-booked PUDs we are/might be getting "for free" as Linn delineates the acreage?
Basically, you took the most recent IP from Linn's website, saw they addressed the issue of EOR use on acquired Permian acreage, then told us "hey is nobody noticing this!?!" I don't know... are they?
Also, if your argument is that Linn is acquiring technological expertise from the Berry merger via Berry personnel additions, then can you tell us what Linn was lacking before the merger (talent? basin experience?) and how adding Berry personnel is unlocking shareholder value? You do know that Linn already has experience in EOR and had a ~100k acre position in the Permian prior to the 2 most recent acquisitions, right? You do realize that in M&A within the industry that it is never a given that talent stays (I could argue that talent is more apt to leave than stay, especially the ones who really know what they are doing)...
Thoughts on the news this am?
Great writeup Bret. The organic growth is impressive and this company is beginning to smell shareholder friendly. I am long a handful of shares.