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Nawar Alsaadi

 
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  • $60: Not A Reasonable Price For Oil [View article]
    Excellent article, it captures very well the underlying dynamics of the oil market. I believe prices will start to adjust meaningfully higher in 2H-2015 due to the factors you describe above. Traders are too focused on the short term (next few months), but oil companies produce their oil for decades, thus what matters is the long term price. The long term price can't trade below the marginal cost of production for an extended period of time. Having spent years studying the oil market, I can comfortably state that to supply the world with an adequate amount of crude, we need prices in the $75 to $85 range or an average of $80. This range is lower than the previous average of $90 to $110 due to improved shale productivity of late, I believe this new range will hold until shale oil production tops out in the latter part of the decade.

    Regards,
    Nawar
    Dec 17, 2014. 10:20 PM | 1 Like Like |Link to Comment
  • Saudi Arabia: Do The Math [View article]
    Over the last many weeks and months, we have heard multiple times the assertion that Saudi Arabia is repeating the 1985/1986 orchestrated price collapse to gain/maintain market share, and thus by implication, Saudi Arabia is ready to scarify substantial revenues to gain market share.

    On the surface, the logic presented above by the media (either by purpose or omission) appears sold but it omits a crucial difference (among several differences) : In 1986, Saudi Arabia did indeed cause a sharp price collapse as it changed its swing policy, but it also substantially increased its exports from 2.3m barrels in 1985 to 3.9m barrels in 1986 or a 70% increase in production as prices declined from an average of $26.5 in 1985 to $14.65 in 1986 or a 55% decline, thus their maneuver was largely revenue neutral. Between 1985 and 1986 Saudi Arabia’s revenues declined by only 6.5% or roughly $1.4B less revenues per year, this was a much smaller drop in revenues than for the rest of OPEC and the rest of the world (except for Kuwait and UAE which followed the same Saudi strategy).

    Today, the situation is very different. Saudi Arabia is taking a real hard price cut of about $40 per barrel (from the Brent average the last 4 years) without a corresponding increase in production. Thus, they are losing over 40% of their revenues or close to $100 billion per year due to their decision not to swing produce.

    Those who believe that Saudi Arabia will maintain this strategy for more than few months are sorely mistaken, if prices don’t adjust higher in early 2015, Saudi Arabia will likely adjust course regardless of whether they have achieved their political goals (even in 1986 they adjusted their production lower in the latter part of the year). The price Saudi Arabia is paying today to maintain its current strategy is too costly in comparison to a slight adjustment in production over the next couple of years. If anything, this price swoon will convince all participants to adhere to their quotas and may even get Russia to pitch in as well, and we will hear once more that the death of OPEC was greatly exaggerated.

    Regards,
    Nawar
    Dec 8, 2014. 12:25 AM | 4 Likes Like |Link to Comment
  • Oil Markets: Sentiment And Lame Thinking Are Currently In The Driver's Seat [View article]
    Excellent article Value Digger, I share your outlook on oil as well. I would strongly advice reading this article as well in regards to the significant risks of $150B in cancelled oil capex in 2015 and a subsequent supply crunch later in the decade. At current prices up to 12.2m barrels in new supply are at risk between today and 2025:

    http://bit.ly/12EquNo

    Regards,
    Nawar
    Dec 5, 2014. 12:03 AM | 2 Likes Like |Link to Comment
  • How To Profit From Keystone XL's Indefinite Delay [View article]
    I just saw this post as I was quite busy with my book tour. The only thing I can say to you Chris: It is truly pathetic to see the level you stooped to in your personal attacks.

    Regards,
    Nawar
    Aug 6, 2014. 12:42 PM | 2 Likes Like |Link to Comment
  • TransCanada eyes shipping crude by rail amid Keystone XL delays, CEO says [View news story]
    Canexus is still one of the best ways to get exposure to the Canadian bitumen by rail trade:

    http://seekingalpha.co...

    I wouldn't be surprised if TransCanada or Enbridge makes an offer for their NATO terminal or at least partner with them on the project.

    Regards,
    Nawar
    May 22, 2014. 11:17 AM | Likes Like |Link to Comment
  • How To Profit From Keystone XL's Indefinite Delay [View article]
    By the way, where do you see the stock down 50c?. The stock is showing green on my side. It looks like the market cares about fundamentals after-all.

    Regards,
    Nawar
    May 8, 2014. 11:36 AM | Likes Like |Link to Comment
  • How To Profit From Keystone XL's Indefinite Delay [View article]
    Chris,

    The fundamental value of the company has not changed, and Canexus continues to be an attractive investment with a potential upside in the $7+ area at some point in 2015. Worrying about the dividend level is a concern for a speculator, thus only those who speculate for a living worry about dividend levels.

    Regards,
    Nawar
    May 8, 2014. 10:24 AM | Likes Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    Lavee,

    DOT 111 regulation could effect their manifest business, however this is a small portion of their operation and different from the unit train operation. Also, we need to keep in mind, the industry has 3 years to replace or retrofit older DOT-111 rail cars, so there is no immediate impact. Finally, to my knowledge Canexus does not own the rail cars, it is their clients who own them, thus any concern is likely related to a possible disruption of service rather than a direct financial cost to the company.

    Regards,
    Nawar
    May 1, 2014. 07:24 PM | 1 Like Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    John, that's correct, I do touch on that in the article as I compare undiluted bitumen train transport economics vs. pipe. Once you remove the diluent, rail is actually cheaper than pipelines for uncommitted shippers.

    I would recommend listening to MEG Energy conference call from yesterday, MEG highlighted that once their diluent recovery unit is constructed their rail shipment costs will diminish by a third:

    http://bit.ly/1fwGaaK

    There is an extensive discussion of rail and its advantages in that call, Canexus is the company serving MEG for its bitumen by rail transport.

    Regards,
    Nawar
    May 1, 2014. 11:15 AM | 1 Like Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    Alavee,

    Canexus' unit trains transports heavy oil in coiled heated cars, virtually all of those of cars are newly built and already up to standard, the new DOT-111 regulations have the most impact on companies transporting light oil, which is not the case for Canexus.

    Regards,
    Nawar
    May 1, 2014. 09:05 AM | 1 Like Like |Link to Comment
  • If The Keystone XL Is Rejected, Canadian National Railway Will Benefit The Most [View article]
    Hi Larry,

    Interesting article, I have looked at the rails as a way to play a delay/rejection of KXL, however I came to the conclusion that the impact on smaller players such as Canexus and Gibson Energy would be more pronounced (http://seekingalpha.co...). I am curious to know your thoughts on those?.

    Regards,
    Nawar
    Apr 25, 2014. 10:28 AM | Likes Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    Jason,

    Thanks, glad the idea is of interest. As to your question, there is certainly no difference between the TSX and OTC beside the liquidity matter you have highlighted.

    Regards,
    Nawar
    Apr 21, 2014. 09:21 PM | 1 Like Like |Link to Comment
  • How To Profit From Keystone XL's Indefinite Delay [View article]
    JFF7, yes there is room to add additional unit trains, room to develop their salt caverns (two already almost fully developed + room for 12 more) and there is the prospect of rising condensate handling (as back-haul on trains transporting bitumen). It is my believe however that CUS will partner with an experienced industry partner should it decide to expand those businesses, possibly a 50/50 joint venture. It is also worth noting that NATO as is has been valued between $500m and $700m, a 50/50 venture could net them $250m to $350m, and they would still be able to capture much of the future upside.

    Regards,
    Nawar
    Apr 21, 2014. 03:37 PM | Likes Like |Link to Comment
  • How To Profit From Keystone XL's Indefinite Delay [View article]
    Prudent, here is the definition from Investopedia:

    "A provision, written into a contract, whereby one party has the obligation of either taking delivery of goods or paying a specified amount."

    http://bit.ly/1d7lFed

    Thus in the case of Canexus the bitumen producers either have to utilize the booked train capacity or pay for it throughout their 3 to 5 years contract. Those contracts are considered very low risk since the provider of the service is guaranteed to be paid regardless of the actual transported volume.

    Regards,
    Nawar



    Apr 21, 2014. 03:03 PM | Likes Like |Link to Comment
  • How To Profit From Keystone XL's Indefinite Delay [View article]
    John, you make an excellent point. I also would like to add the KXL delay could boost the Board confidence in the likelihood of NATO being fully contracted, hence increasing their confidence in future cash flows, which should reduce the impetus to adjust the dividend.

    While the some analysts have been predicting a dividend cut, it is far from being a done deal. Also, it is worth stating that a truly harmful dividend cut is when the dividend is cut due to fundamental permanent deterioration in business, but in the case of Canexus any cut will be temporary in nature as cash flows are expected to approach a record in 2015 while capex will decline by over 90%.

    Regards,
    Nawar
    Apr 21, 2014. 12:23 PM | Likes Like |Link to Comment
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