Seeking Alpha
View as an RSS Feed

Lionel Yeo  

View Lionel Yeo's Comments BY TICKER:
Latest  |  Highest rated
  • Update: Penn West Petroleum - Buying When Blood Is In The Streets? [View article]
    Good luck making a case for losing money in oil and gas companies due to management misstating figures. First they have to prove that the numbers were mis-stated intentionally, then they must prove that PWE share prices fell more than the market during the period. Frankly it's close to impossible now since most of any oil company is down 65%. They've got no case on this one.
    Jan 2, 2015. 01:09 PM | 1 Like Like |Link to Comment
  • Why Saudi Arabia Doesn't Care If Oil Hits $20 [View article]
    Another article from people who are not familiar with the dynamics of world oil production hoping to drum up some viewership with sensational headers like $20 oil.

    Saudi Arabia is doing nothing. Literally nothing. If they really wanted to sink Shale they'd up production another 1m barrels. The current problem is a non-opec driven supply glut in which the only cure is to re-set prices. There's no point cutting production if everyone else is not. So the Saudi's have decided to let free market economics rebalance oil prices.
    Jan 2, 2015. 08:41 AM | 44 Likes Like |Link to Comment
  • Update: Penn West Petroleum - Buying When Blood Is In The Streets? [View article]
    That's some of my blood there on the street...

    Great metric pointers. Lack of hedging is probably the difference between BTE and PWE. It's probably worth a fortune in bankruptcy if we look across at Talisman's pricing metric.
    Jan 2, 2015. 01:41 AM | 4 Likes Like |Link to Comment
  • Continental Resources Capex Cut And What It Means [View article]
    Jury is still on on the whether shale has a recycle ratio above 1.8.
    Dec 29, 2014. 10:55 AM | 1 Like Like |Link to Comment
  • Continental Resources Capex Cut And What It Means [View article]
    "If Continental can pull of cutting capex by 41% and only removing eight percentage points of output growth, and at the same time become cash-flow neutral by mid-year, it will be a testament to just how flexible and resilient the shale players can be"

    2015's first 3Qs of production is due to 2014 capex not 2015 capex. Shale wells maintain high productions for about the first year. We'll see probably the 2nd half of 2015 where production will drop off. I reality you'll probably going to see a 25-35% drop in production with a 50% cut in capital expenditure.
    Dec 28, 2014. 10:53 PM | 1 Like Like |Link to Comment
  • Still No Reason To Buy The Dip In Natural Gas [View article]
    Again, still scratching my head on how NG production is rising while rig numbers are dropping.

    The only answer I came up with is associated gas, which while the NG rig number is at all time low, the total rig number is at a 22 year high. Could it be possible that many of the oily plays also produce lots of gas? Could drillers also be targeting liquids rich deposits with flow on gas? That could possibly explain the gas production.

    In any case, both oil and gas are now at record lows, so there's no real drilling to be done.
    Dec 27, 2014. 09:40 AM | 1 Like Like |Link to Comment
  • Is Saudi Arabia Targeting U.S. Shales? [View article]
    I highly doubt that Saudi is trying to do anything. All they did was nothing. They didn't even increase production! hello. They did nothing!!

    I agree with some of the comments that the author is light on specific numbers. IE Shale is non-capital intensive. On a minimum spend that is correct. You only need $15m to drill a well. But on a per barrel basis Shale comes in around $25 because the wells decline so fast. If oil isn't at prices where you recover your capital, you cannot recover your capital and drill another well since 70% of the production is in the first 2 years.
    Dec 26, 2014. 11:40 AM | 3 Likes Like |Link to Comment
  • How Much Does It Cost To Produce One Barrel Of Oil? (Tight Oil, Part III) [View article]
    My opinion is this:

    Producers will continue producing from existing drilled wells. the drop is available cash for capital investment and lack of access to capital markets will reduce their cap-ex budgets by 50%. If investors get tough about returns they'll put more pressure on companies to only do projects that return > 25% ROI. That will drop their cap-ex down almost 75%.

    It's really about wall street shutting off the cheap financing. When you factor in that these companies have to pay 37% tax on top of returns, it's really not worth drilling at $55.
    Dec 25, 2014. 10:25 PM | 3 Likes Like |Link to Comment
  • How Much Does It Cost To Produce One Barrel Of Oil? (Tight Oil, Part III) [View article]
    i think you need to factor a few more things.

    1) Royalty and Production Taxes; Approximately 8%- 22%.
    2) Lease holding cost.

    The average cash cost is about $8/boe for some amazing plays. But more towards $12-$15.

    3) Depreciation cost is the worst factor, because it's purely due to the decline curve. $22.50 a boe seems to be about right

    4) Then there's SGA which is about $5

    So you add it up. That's minimum $45 barrel. No exploration cost yet.
    Break even is about $65 barrel.
    Dec 24, 2014. 10:34 PM | 2 Likes Like |Link to Comment
  • Why Cheap Oil May Be Here To Stay [View article]
    One of the biggest factors that i have continued my bullish position in O&G is looking at world wide production. As the oil price has remained above $90 for 3 years, one would expect rampant production world wide. However, world wide oil production has remained fairly muted. Russia has only increased production from 8.5m to 9m in 4 years. While the Canadians have done about 300k. Everyone else has actually dropped production.

    If oil is so easy to produce, why has production decreased around the world at those prices?

    Another factor has been my disbelief that Shale oil is as economical as $50/bbl. Arthur Berman said it best that if this was indeed easy, why did we drill shale last after deep sea. I've gone through the top 3 companies in the space. EOG (bak/EF), Continental (bak), Pioneer (Permain). All of them are running above 100% of cash flow into cap ex. This was before prices collapsed. What would happen to their production growth if they ran at say 50% of Flow of Funds? At these prices they would hardly be able to reinvest the capital at rates before the collapse.

    I see the price of oil stabilizing in 1 or 2 qtrs. It's probably a great time to get into a great asset class, especially due to stupidity drilling by the US producers. We as investors can come in at low prices and scoop up their shares.
    Dec 22, 2014. 11:18 AM | 6 Likes Like |Link to Comment
  • Why Cheap Oil May Be Here To Stay [View article]
    Hi just want to point out that the Saudis are producing from what are known as Giant superfields. These are fields with more than 5Billion barrels with pressurized production, on shore with existing infrastructure.

    That's why they cost about $5/bbl.

    The average oil well around the world has about 15% of royalty, expensive rigs and poor quality basins so you're looking at operating cost around $35 ish factor in capex and royalities and it's more like $55.
    Dec 22, 2014. 12:19 AM | 9 Likes Like |Link to Comment
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    The average fracked well drops production about 65% in the first year. So imagine what impact you're NPV will look like when you're dealing with low prices in the first year. For sure wells that have been drilled and are in production will stay open. But those requiring refracks or secondary recovery, new drills will stop.

    In a way, it's quite good that PWE dropped their production from 180k to 100k and focused on shutting in uneconomical production.
    Dec 22, 2014. 12:15 AM | 1 Like Like |Link to Comment
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    I agree with that. haven't seen any oil coming in cheap elsewhere in the world.

    I'm going with River and Michael on the fundamentals. We work with clients on commercial of their project and there is NO way, they can make money at $55. the Bakkern is trading at $48/bbl. There's just no way.
    Dec 21, 2014. 11:09 AM | 1 Like Like |Link to Comment
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    The cash cost of PWE is $32.60
    of which 20.74 is operating cost
    10.7 is royality
    1.2 is other

    of the 20.74 about $4 is finance cost. So it's about $16. They'll probably drop the cost to $12 in a few years. But it's only $4 we're talking about.
    Dec 19, 2014. 06:38 AM | 2 Likes Like |Link to Comment
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    Just finished looking at costs across the sector. We're talking about $5/bbl between PWE ($15) vs Enerplus ($10).

    Nothing really significant. I think when the smoke clears you'll find shale costing about $90 given the questionable way they account for the decline curves and the different type of land leases that have been signed. Royalties for PWE and most of the candians are around 18%, while in the US it's only 6%, can't really understand why.

    heavy tax rate of 37% in the US might be the reason why companies prefer to borrow and drill. Easiest way is to let everything come out in the wash.
    Dec 18, 2014. 10:44 AM | 3 Likes Like |Link to Comment
COMMENTS STATS
397 Comments
474 Likes