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Lionel Yeo

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  • 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
  • My Quest To Make $1 Million In 10 Years [View article]
    Yeah Edward, was that really necessary?
    Jan 6, 2014. 11:00 AM | 17 Likes Like |Link to Comment
  • Money Dries Up For Oil And Gas, Layoffs Spread, Write-Offs Start [View article]
    This is their own stupidity to drill to this level. Another boom goes bust. We should see drill rigs drop to 1000 and stay there. Producer only when full cycle profits make sense and only spend 75% of cash flow. Not 225%.
    Jan 18, 2015. 08:33 AM | 12 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
  • Is The Money Real? [View article]
    Hi Paulo,

    I know from personal experience that this is NOT sufficient. A few years ago, I represented a medium investment firm that had interests in a company called China Milk listed in Singapore. On the books, the company had $1.5B RMB of balances. Suspecting something wrong, we pressed the company to issue a dividend. The company responded saying that foreign cash controls prevented money from leaving China. We then issued a legal letter to request for bank statements of the money. What we received was a poorly copied fax statement showing some balance amount with a different name.

    The CFO continued to support the claim that they had the money, after which we threatened legal action if an immediate cash audit was not done by a reputable accounting firm. Suspecting the CFO couldn't answer the question, the firm began selling shares. On that Friday evening the CFO resigned. We then issued an email to the independent directors, of which one of them resigned on the Monday. The company was then suspended.

    Muddy water's is correct to point out faults. Specialist auditors are required to check cash amounts. Companies with suspected cash amounts should be forced to payout dividends. My favorite line is, show me the money!
    Nov 21, 2013. 10:45 AM | 8 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
  • King Coal Takes Another Blow To The Head [View article]
    I think the biggest motivator is the price of natural gas. Coal will rally once natural gas goes back up.

    I have been watching the prices and there was a quick spike last summer during the heat wave. Also winter 2012, mar 2013 has a spike in NG which showered a lot of ng coal switching.

    most producers have a lot of plant capacity available to switch to coal when prices swing around.
    Nov 15, 2013. 02:57 PM | 7 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
  • Penn West Is Talking With Lenders As It Faces A Liquidity Crisis [View article]
    Doesn't look like a liquidity crisis. Probably a re-negotiation with the lenders. I think the Canadian lenders are quite experienced with oil cycle drops.

    The cap spending is a little high, I would have expected they drop it 60% like the dividend. Then again, oil price is moving very quickly. We were only talking about $65 oil 30 days ago, so I suppose PWE didn't want to over react to the capex.

    The bet is always going to be oil prices rebounding and the degree of return you want when it goes. I don't think this is a bankruptcy candidate.
    Jan 24, 2015. 05:19 AM | 5 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
  • Penn West: When Will The Pain Stop? [View article]
    Hi Michael,

    Sorry, what is Leaps?

    I scanned the wire for information on why PWE dropped $1.00 but I don't see anything we didn't already know. It was projected to continue to divest pboe till about 95,000 boepd.

    As Brian pointed out, all the companies mentioned were down 50% or more before turning around. I recalled purchasing PGH around $4.00 when people were saying their thermal oil project was pie in the sky.

    I disagree with the 3-5 year horizon. The reason being that once sentiment changes in a stock, the share price runs before the main story. Its true that PWE does not have a hot story to charge their share price. Production will be rather flattish the next 3 years. But I am more interested in flow of funds and cutting debt.

    Enerplus has production over about 89k. So stabilizing around 95k boepd would not be too much of a concern.

    The divestment of 6,700 boepd was weighted 58% towards natural gas, and had a $20 cost pboe. So this is in line with PWE's strategy.

    So really a non-issue news there. I think save for any new developments, this is a good opportunity to pickup more position. I caution against a wait-and-see attitude. I had the idea on NAT at $7.15 and within 30 days it rose above $10.50. In my years in investment, I have given up picking bottoms and now adopt the same strategy I do when I go grocery shopping. If there's a sale below my target price I buy.
    Jan 23, 2014. 08:38 AM | 5 Likes Like |Link to Comment
  • The Real Natural Gas Production Decline [View article]
    Are you sure he has been banned? That would be pretty right wing.

    I find the opinions here, whether I agree or disagree with them, a valuable source of insights completely different from mainstream. As long as a contributor does not post harmful or direct attacks, I think they should be allowed to continue.
    Feb 10, 2013. 09:31 AM | 5 Likes Like |Link to Comment
  • Chevron: A Crude Awakening Looms [View article]
    Hi DAC,

    I think that's a very shallow company analysis of chevron using historic down turns in oil. However, there's no company specific analysis which may mislead readers.

    1) The 2008 analysis also showed a high correlation with the entire S&P 500. So to argue that Oil went down Chevron went down was correct, but is a case of tail waging the dog.

    Today in 2014-15, we have the S&P at a record high while oil prices are down.

    2) There's no discussion on Chevron's production, hedges or balance sheet. There's also no coverage on the upstream vs midstream business breakdown. Integrated oils generally have a much lower correlation to oil depending on their mid stream business.

    3) Several LNG have fixed pricing on their LNG contracts. There also have a annual repricing benchmark, so the effect of lower oil prices may not even factor into Chevron.

    I agree that there's probably some more down side coming, but the article is very light on research in company specific factors.
    Jan 16, 2015. 10:03 PM | 4 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
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    No surprise here. $85 vs $65 CAD/bbl.

    would love to see asset divestment and share repurchase. I'm a long term bull on oil, may have caught a falling knife. Can't do anything about it, have the cut, its bleeding, but I now have a knife.

    I'm amazed at the differentials vs the US companies given that the basins are almost the same. I reckon if we see 45% capex cut, we'll see oil at $80-$90 bbl. Doing some bottom fishing.
    Dec 18, 2014. 12:58 AM | 4 Likes Like |Link to Comment