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  • Cloud Peak Energy: Any Newcastle Rebound Should Significantly Improve Its Outlook [View article]
    Thanks for the article. Good analysis.
    Apr 1, 2015. 08:20 PM | Likes Like |Link to Comment
  • Cloud Peak Energy: Falling Oil Prices Are A Boon To Production Costs And Railway Availability [View article]
    Per CLD 10K they only get 60-75% of Newcastle prices overseas....
    Mar 27, 2015. 02:12 PM | Likes Like |Link to Comment
  • Cloud Peak Energy - Lower Production Costs Offset Mixed Pricing Outlook [View article]
    J,

    The break even point for CLD on these export tons is probably around $80 and the pricing tends to be tied to Newcastle which has been in the low to mid 60's. Management has Newcastle hedges for this year, but it likely won't fully offset the losses from the export side. They bought their excess port capacity in 2014 knowing 2015 would be tough but believe Newcastle prices will rebound to a more economic level of around $100 in the future. If they are wrong obviously it makes things tough longer term. FYI they currently export almost all their coal to S.Korea, as they can compete with Australian/Indonesian shippers pretty well over there and have good relationships.

    I believe their covenants are very loose, but don't remember exactly. They just loosened them more a few months ago too. My last article on them called for management to buyback shares, but these guys are really conservative....I'm guessing they want to see Newcastle rebound so they can hedge a bit more before doing a buyback. I'd love to see at least a small buyback here ($20 million)....
    Mar 26, 2015. 12:48 PM | 1 Like Like |Link to Comment
  • Kraft +11.8%; company reportedly in buyout talks [View news story]
    Still expensive....
    Mar 24, 2015. 10:18 PM | Likes Like |Link to Comment
  • BNSF oil train derails in northern Illinois [View news story]
    He said he would vote "yes" on Keystone.
    Mar 5, 2015. 06:53 PM | 4 Likes Like |Link to Comment
  • Boardwalk Pipeline Has Significant Rate Case Risk [View article]
    Hi Jay,

    Thanks for your feedback.

    The "yes" or "no" scenarios were to simply show the range of outcomes possible. It is true that these cases are usually settled (and we mentioned that possibility in the intro). However, as outlined in the article we believe this case is far from "usual". The Gulf South customers have a unusually strong defense and are unlikely to agree to a material rate increase without a hearing or further litigation.

    As shown in the article D/EBITDA and thus distribution and fair value have a high sensitivity to an $88 million swing in revenue. Even with an analyst assuming a "middle of the road" settlement, this amount is still material given the revenue flows straight to the bottom line. We don't believe the analysts, or most of the market fully grasps the strength of the protest and how important the outcome is to the value of the units.
    Mar 2, 2015. 06:56 PM | Likes Like |Link to Comment
  • Boardwalk Pipeline Has Significant Rate Case Risk [View article]
    El Luchador,

    Given the time frame (8 years in the future) it is hard to say if its sustainable. For simplicity our DDM model does assume $1.40 is sustainable in 2023 and grows 1.5% per year terminally under a rate case loss.

    You've outlined a major weakness of the DDM model (we know it's not perfect), in that it ignores potential stock appreciation. DDM works best for a company that maintains a stable payout ratio and distributions. Obviously its not perfect here as we model in a large increase down the road.

    Investors may want to figure in a "stock appreciation" figure that estimates that amount of appreciation to normalize the distribution yield. Just a reminder that the figure needs to be discounted for the number of years it will take to achieve (rate case loss = 8 years under our model) and assume a normalized interest rate environment. So assuming an 7% yield on BWP (or whatever you feel is normal) the stock would currently appreciate $3.50 from current levels by 2023. That figure can be discounted 8 years at your estimated discount rate. Add that to your DDM calculation for a rough estimate.

    Thanks for the comment.
    Feb 28, 2015. 01:05 PM | 1 Like Like |Link to Comment
  • Transocean Smashes Estimates Once Again [View article]
    I think your analogy only tells half of the story. The house is producing 15k until the lease runs out. Also, there have just been 8 murders in the neighborhood and your tenants might up and leave in the middle of the night.
    Feb 26, 2015. 08:47 AM | 10 Likes Like |Link to Comment
  • Transocean beats by $0.18, beats on revenue [View news story]
    They are still real economic losses
    Feb 26, 2015. 12:48 AM | Likes Like |Link to Comment
  • Buybacks, Buffett, And Cloud Peak Energy [View article]
    Do they have cash flow issues? There are other refinance options than a bank. The current 8.5% market debt trades at a significant premium which tells me they could likely refinance at a lower rate once those bonds are callable. Will that be the case a when those bonds can be called? I have no crystal ball so I can't say.

    I 100% agree this isn't a company Buffett would consider. It's more of a Benjamin Graham "margin of safety" type of play. I believe that assets are significantly undervalued and the return on coal will normalize. IN this scenario I believe the stock could return 60-100% over the next 3 years. This isn't one you hold forever though.

    I'll check out Foresight. Thanks for the comment.
    Feb 23, 2015. 09:21 AM | Likes Like |Link to Comment
  • Cloud Peak Energy - Lower Production Costs Offset Mixed Pricing Outlook [View article]
    Thanks for the update. Good stuff.
    Feb 21, 2015. 11:48 AM | Likes Like |Link to Comment
  • Buybacks, Buffett, And Cloud Peak Energy [View article]
    They have $169 million in cash currently on the balance sheet. Even if I assume 2016-2018 is as bad as 2014-2015 they still should be cash flow positive those years. They will be slightly cash flow negative in 2015 though. Those bonds can be called at par at the end of 2017 which would save them a ton in interest (currently 8.5%). I would expect them to call those bonds as soon as economical.

    They have tons of room to refinance by moving it to their $500 million undrawn revolving credit facility (LIBOR + 2%). They also have another $50 million available through their AR receivables.

    Liquidity isn't an issue here. They should be easily able to pay most/all of those off with cash and refinance the rest.
    Feb 18, 2015. 08:18 PM | Likes Like |Link to Comment
  • Buybacks, Buffett, And Cloud Peak Energy [View article]
    Pretty good quarter. A couple thoughts -

    1. CLD may be slightly cash flow negative in 2015. This assumes midpoint guidance on EBITDA. Obviously the last payment on the LBA is the big reason for this, but I expected them to be slightly cash flow positive this year.

    2. Unbelievably good Q4 cost numbers. Cost per ton of $9.32 vs. $10.04 last year. With the increase in stripping ratios this was amazing.

    3. One analyst did a great job proding management at a buyback via capital allocation questions. Management was very tight lipped, but seemed open to it, saying they would have to take that to the board but was focused on the balance sheet first and foremost. Collin and his team are unbelievably conservative, so we'll see.
    Feb 17, 2015. 06:35 PM | Likes Like |Link to Comment
  • Diamond Offshore Will Have Its Day In The Sun [View article]
    Jacob,

    Are you interested in PACD at these levels as a buyout/recovery candidate?
    Feb 12, 2015. 10:30 AM | Likes Like |Link to Comment
  • Diamond Offshore Will Have Its Day In The Sun [View article]
    That's a good point. I love DO, but actually think the equity might be a bit overpriced at these levels and $50 oil. They could definitely do a cash and stock deal with the equity sitting at the low 30's and not completely screw current shareholders. Time will tell.
    Feb 11, 2015. 11:36 AM | Likes Like |Link to Comment
COMMENTS STATS
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