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Lionel Yeo

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  • What Is Happening With Penn West? [View article]
    You need not worry tennvol.

    The oil and gas that is projected is done by independent petroleum auditors and evaluators and updated every year. What happens is that the engineering, flow rates and data is auditor by an independent consulting firm and models are applied. In the instances that outside the engineering costs are moving around too much or the risk is uncertain, they will engage a specialist commercial firm like my firm to look at the numbers closely.

    We associate the amount through the normal distribution or slightly adjusted version and give you the proven and probable / possible. We also risk adjust the oil. So when they say reserves are certified at 625 million barrels, it means that the probability of 625 million or above is 90% certain based on price X.

    The numbers from time to time will move around, especially if the company has a lack of proof or engages a poor quality firm.
    Sep 16, 2014. 10:11 AM | 3 Likes Like |Link to Comment
  • Gold: Short And Waiting For The Washout [View article]
    it's below the technical point. But since it broke though got to be careful of possible bear trap. Downside is limited. It's just not worth being short.
    Sep 16, 2014. 09:01 AM | 5 Likes Like |Link to Comment
  • What Is Happening With Penn West? [View article]
    "The last reported net oil reserves of the company stood at 534 million barrels"

    I'm not sure what net oil reserves means? The 2P Barrels of Oil Equivalent (mmboe) is 625 million.

    "Developing these assets will result in substantial costs"
    The PV 10 valuation already includes capex costs factored into the undeveloped properties.

    The PV 10 also takes into decommissioning liabilities and reinstatement costs. It is built on a full life cycle pricing. Do note that since the liability is far into the future, sometimes 15 years, at 10% discount, it has a smaller Present Value effect.

    PWE was not really drilling poorly. They were drilling poor prospects meaning they were drilling in wells with poor payouts and high gas content and expensive.
    Sep 16, 2014. 08:58 AM | 7 Likes Like |Link to Comment
  • Forest Oil: Special Situation, Micro Cap, Agency Conflict, Liquidation Scenario - The Value Dream [View article]

    When I look through the entire energy sector, I see a massive sell down across both small and medium energy players, with no separation between gas or liquids. I previously commented on KWK that the fear was an amazing amount of NG produced at a warm winter thereby blowing up storage. That's where we live in a world with free energy.

    You must view KWK as a very cheap option on natural gas that lasts more than 3 years. It has hedges till 2015, so I wouldn't be too concerned about short term price depression. At any point of time within the period if NG rises above $7. We'll have a multi-bagger.

    The likelihood of bankruptcy is about the same as it was in Apr this year. No real change in anything. They're still sitting on 1.6 TCF of gas. At 90cents its a cheaper option. Just buy for a 3 year option.
    Sep 16, 2014. 08:43 AM | Likes Like |Link to Comment
  • Keystone pipeline debate goes to Nebraska high court [View news story]
    This is the US being stupid shooting itself in the foot.

    There's no environmental concern. Whatever a pipeline does, it a small faction of the oil that is already being produced. All it does is shift to the rails.
    Sep 16, 2014. 02:56 AM | 2 Likes Like |Link to Comment
  • Why Quicksilver Is A Buy [View article]
    Definitely a lot of panic. It's definitely very scary down here. A few things to note. The whole energy complex has been hit very hard. We're seeing some canadian oil companies down 35-45% even though they are oil based.

    I revisited my notes and the hedges are still on. As well as the price being higher than the $2.00 it was back in 2012. We need to be looking at $6.00 for everything to look good.

    I think the main fear again is that production is ballooning and with a warm winter will depress NG prices below $2.00. The bad case bear is that production is really still 4bcf/day higher than 2013. I'm very amazed at the production amounts and the fact they are still producing while losing money.

    Do note though that we are still below the 5 year average storage and given the higher usage of NG demand is still very strong. The hedges will handle the fundamental side for 2014 - 2015. After which you're exposed to the full upswing of a NG rally. Long term fundamentally prices will have to go up, so buy NG as a real asset in the ground.

    Sep 15, 2014. 01:18 AM | 1 Like Like |Link to Comment
  • Forest Oil: Special Situation, Micro Cap, Agency Conflict, Liquidation Scenario - The Value Dream [View article]
    Hi guys, I'm an oil and gas consultant and a CAIA.

    First. FST tanked along with the rest of the NG plays when NG dropped from $6 to $4. It had some bad drills in Texas with some of the wells under-performing. Truth was that the liquids weren't doing that well then so they decided to go with their known gas. Unfortunately gas dropped as well.

    The merger is a great move by Sarbina to get hold of acreage really really cheap. If I could convince my Asian based clients, I would ask them to take over FST. I suspect the hedgies know the same and are buying the debt to get the company. In terms of operations, they're not in too bad shape due to hedges and pretty oily production. And $800 debt isn't really a bid problem. (compared to other companies).

    There isn't really too much to it folks. Their production cost is about $6 per mmbtu. NG is $4 today. It's a loaded option with 2-3 years on it. If Sarbine gets it, you get a reduced strike price and dilution but a longer option life.

    I'd prefer to take my chances without Sarbine getting hold of the company.

    Sep 12, 2014. 01:18 PM | Likes Like |Link to Comment
  • Update: Penn West Receives Additional Waiver Of Defaults [View article]
    No new information as of yet.

    Commodities have taken a slip over the last few weeks due to stronger US dollar and overall lack of inflation(???).

    I'm fairly confused in the market behaviour but remain focused on the fundamentals.
    Sep 11, 2014. 09:30 AM | Likes Like |Link to Comment
  • Gold: More Hawkish Fed Minutes Could Create Headwinds [View article]
    I much prefer gold miners. We know the all in cost is about $1200 so $1300 is where it is as the bottom.
    Aug 27, 2014. 11:04 PM | Likes Like |Link to Comment
  • Penn West: The Chickens Have Come Home To Roost [View article]
    apparently they're as valuable as the PV-10 is...

    After all the PV-10 is the full estimation of the cash flow including capital investment to access the 626m barrels of 2P reserves discounted by 10%.
    Aug 27, 2014. 01:05 PM | 1 Like Like |Link to Comment
  • Penn West says reserves not impacted by accounting under review [View news story]
    That's nice news to hear. I have experience in reserve certification and oil and gas valuations.

    For reserves not to be affected, that means that basically the operating cost on an 'all in' basis is still well captured. These means that the direct operating costs + capex (depreciation) is about the same.

    With all the takeovers, I wouldn't be surprised with an inversion of a US company making a takeover of PWE. with 626m barrels I'd rather buy out PWE than drill for oil.

    Good luck to the lawyers trying to make a case once PWE rises to $9.50.
    Aug 27, 2014. 11:08 AM | 2 Likes Like |Link to Comment
  • Gold: More Hawkish Fed Minutes Could Create Headwinds [View article]
    Don't bother about interest rates. The inverse correlation with interest rates and the POG is quite weak. You need to look at Real Inflation. IE inflation less interest rates. It doesn't matter if interest rates are 5% if inflation is 8%.

    Anyone who says inflation is dead is a fool, because if they're not invested in inflation hedged assets like commodities and stocks/real estate they're getting poorer.
    Aug 26, 2014. 11:42 AM | Likes Like |Link to Comment
  • Gold: More Hawkish Fed Minutes Could Create Headwinds [View article]
    it's all about real inflation rate. Which is inflation - interest rates. We have inflation being a little low and interest rates at 0. However, I think with the markets at record high, its only a matter of time before they start going up.
    Aug 26, 2014. 11:29 AM | 1 Like Like |Link to Comment
  • Update: Penn West Receives Additional Waiver Of Defaults [View article]
    Nothing unexpected. Brian already pointed out that they will get the waiver.
    Aug 26, 2014. 11:14 AM | Likes Like |Link to Comment
  • No Reason To Remain Bearish On Gold [View article]
    Share you sentiments. I wrote a piece on gold mining stocks and the GDX

    No harm holding some shiny stuff.
    Aug 22, 2014. 11:18 AM | 1 Like Like |Link to Comment