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Nawar Alsaadi  

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  • Will Canexus Cut Its Dividend? [View article]
    Chris,

    I have to say I that I disagree with your analysis. The Sodium Chlorate market is an oligopoly, and prices are not as volatile as you seem to claim. Two weeks ago, I had drinks with the M&A guy at the world 2nd largest pulp company, and he was complaining about the inelastic pricing nature of Sodium Chlorate in North America.

    Chlor-Alkali is a different story for sure, but you can’t argue with the fact that the Asian producers are running at a loss, and the Canadian dollar is a tailwind for Canexues. Also, when you look at current oil prices, you can’t but assume a considerable jump in demand for Hydrochloric acid. Not to mention, both Axiall and Olin (which are quite well covered by US analysts) are arguing for a bottoming in Chlor-Alkali prices.

    Finally, even you admit that the Brazilian business is quite stable, thus with only Chlor Alkali (20% of EBITDA) quite volatile, I would attribute a certain stability to CUS cash flows.

    Most importantly, you seem to be ignoring the elephant in the room: Keystone has just has been delayed indefinitely. This is a game changer for CUS, and will insure the NATO facility running at full capacity for several years, not to mention the potential for further expansion, possibly in collaboration with an industry player.

    I saw from your well written articles that you were quite bullish on Canexus a year or two back at the $8/$9 level. Certainly no one is calling for a move to such a level anytime soon, considering the dilution since, NATO bad’s execution and a weaker chemical pricing, but a move to the $6 to $7 range is perfectly achievable.

    As for your comments on oil stocks, I have a been a bull on Canadian energy for many years, and have owned sizable positions in the sector, but you can’t argue that the negative news on KXL and the recent negative news on Northern Gateway won’t put a damper on things, expect money to move out of the sector over the next few months as the transport bottleneck issues come back to the forefront. A partial reason for that 50% upward move you mentioned was a prevailing optimism about KXL being approved in May. Longer term though Canadian energy is the place to be, but short term the likes of Canexus and Gibson is where money is going to go.

    One final note, I know the author of this article, and he is one of the smartest analysts around, he is not relaying on banks for his work on CUS, even though he is referring to their work in his analysis. I have seen his DCF and valuation work on the company, and I would consider his DD and work quality top notch.

    Best of luck,

    Regards,
    Nawar
    Apr 19, 2014. 10:02 AM | 1 Like Like |Link to Comment
  • Keystone pipeline decision delayed again, likely until after November elections [View news story]
    This delay will have a very favorable impact on the bitumen by rail players, most specifically Canexus (TSX: CUS) and Gibson Energy (TSX:GEI), here is my write up on Canexus from earlier this month:

    http://seekingalpha.co...

    Regards,
    Nawar
    Apr 19, 2014. 01:17 AM | 2 Likes Like |Link to Comment
  • Will Canexus Cut Its Dividend? [View article]
    As expected, Keystone XL is pushed further out by at least another year (news just came out):

    http://bit.ly/1mkjHNw

    This news will insure that rail is the only available and viable way to move bitumen out of Alberta, expect Canexus to react favourably to the news on Monday, this also insures that NATO will be fully contracted when it comes into service later in the year.

    Regards,
    Nawar
    Apr 18, 2014. 04:09 PM | 1 Like Like |Link to Comment
  • Will Canexus Cut Its Dividend? [View article]
    This is an excellent article, it addresses one of the key issues weighting on the stock price, being mostly an income stock, dividend sustainability is at the core of this investment. Canadian Small Cap beautifully demonstrates why a dividend cut in 2014 is not a finality.


    Apr 18, 2014. 11:11 AM | 3 Likes Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    Philip, I am not against a transaction for the full company or for NATO, but a partnership is also a sensible option. There is plenty of upside in NATO, the site can accommodate up to 14 storage salt storage caverns (including the two already built) with an EBITDA ranging from $3m to $10m per cavern, this could potentially generate $91m in EBITDA for a development cost of $210m to $230m (at the mid range cost of development). The site also has more room to accommodate additional unit trains should the industry require increased rail access. Considering the latest setbacks for Northern Gateway over the last 24 hours:

    Kitimat residents say no to Northern Gateway pipeline - See more at: http://bit.ly/1lWPrbo

    Four Dene clans officially reject Northern Gateway pipeline
    http://bit.ly/1lWPsvL

    It will take a long time for enough pipeline capacity to be built in any direction: west, east or south. Rail is the only game in town.

    As if they were to fully divest NATO, NATO has been valued at $400m to $700m, if fully divested CUS will have zero debt and excess cash, certainly the company will be in a position to further consolidate its core market or expand further into more specialized derivative products.

    Regards,
    Nawar
    Apr 13, 2014. 10:20 AM | 2 Likes Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    Delprice, there are many potential bidders for NATO: Kinder Morgan, Keyra, or Gibson Energy among others. Even Enbridge could be interested since their Northern Gateway pipeline commences at Bruderheim, what would be of key interest to them is the massive storage potential at the terminal. CUS has two almost fully developed salt caverns, and they have room to add 12 additional caverns of the same size (This is 11m+ barrels in potential storage). Bruderheim could develop into a Hardisty style hub. Based on my talks with the CFO, already several investment bankers have approached the company about potential deals/partnerships for NATO. I have been told, the company will be evaluating such options once the construction phase and ramp up are completed.

    Regards,
    Nawar
    Apr 11, 2014. 08:21 PM | 1 Like Like |Link to Comment
  • Tronox - Time To Focus On The Future [View article]
    hoyt, I saw it, but unfortunately my settlement precludes me from commenting on it until June 19th.

    Regards,
    Nawar
    Apr 11, 2014. 02:51 PM | Likes Like |Link to Comment
  • Tronox - Time To Focus On The Future [View article]
    Thank you for the informative article. I believe Tronox signed an exclusive distribution deal with ERCO Worldwide last year to distribute their Chlor-Alkali and Sodium Cholorate, could you comment a bit about that partnership and its potential implications going forward?. Thanks, Nawar.
    Apr 11, 2014. 01:34 PM | Likes Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    Good to see Canexus holding well in such a down day. I guess people do come to their senses once in a while and pick a stock that is making money in the chemical business for over 50 years vs. momo stocks measuring their income by the number of eye balls!

    Regards,
    Nawar
    Apr 10, 2014. 03:17 PM | 1 Like Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    Thank you del. I don't believe they detailed that, but from my experience with major projects in Alberta the cost overruns are often related to labour, material and harsh weather conditions. They have opted to shut down the unit train operation for 60-90 days starting in June, and use that time to finish the project, I believe that was the right call.

    By the way, the company just put a new presentation out this morning in case you haven't seen it:

    http://bit.ly/1gQpzIX

    Regards,
    Nawar
    Apr 10, 2014. 01:39 PM | 1 Like Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    John,

    Yes, hyrdochloric acid is being used in the unconventional plays (some plays more than others, Swan Hills the formation most adjacent to Canexues facility requires a lot of acid).

    Here is a summery of what goes into the fracking process, from Frac Focus:

    1. An acid stage, consisting of several thousand gallons of water mixed with a dilute acid such as hydrochloric or muriatic acid: This serves to clear cement debris in the wellbore and provide an open conduit for other frac fluids by dissolving carbonate minerals and opening fractures near the wellbore.

    2. A pad stage, consisting of approximately 100,000 gallons of slickwater without proppant material: The slickwater pad stage fills the wellbore with the slickwater solution (described below), opens the formation and helps to facilitate the flow and placement of proppant material.

    3. A prop sequence stage, which may consist of several substages of water combined with proppant material (consisting of a fine mesh sand or ceramic material, intended to keep open, or “prop” the fractures created and/or enhanced during the fracturing operation after the pressure is reduced): This stage may collectively use several hundred thousand gallons of water. Proppant material may vary from a finer particle size to a coarser particle size throughout this sequence.

    4. A flushing stage, consisting of a volume of fresh water sufficient to flush the excess proppant from the wellbore.

    • A dilute acid solution, as described in the first stage, used during the initial fracturing sequence. This cleans out cement and debris around the perforations to facilitate the subsequent slickwater solutions employed in fracturing the formation.

    • A biocide or disinfectant, used to prevent the growth of bacteria in the well that may interfere with the fracturingoperation: Biocides typically consist of bromine-based solutions or glutaraldehyde.

    • A scale inhibitor, such as ethylene glycol, used to control the precipitation of certain carbonate and sulfate minerals

    • Iron control/stabilizing agents such as citric acid or hydrochloric acid, used to inhibit precipitation of iron compounds by keeping them in a soluble form

    • Friction reducing agents, also described above, such as potassium chloride or polyacrylamide-based compounds, used to reduce tubular friction and subsequently reduce the pressure needed to pump fluid into the wellbore: The additives may reduce tubular friction by 50 to 60%. These friction-reducing compounds represent the “slickwater” component of the fracing solution.

    • Corrosion inhibitors, such as N,n-dimethyl formamide, and oxygen scavengers, such as ammonium bisulfite, are used to prevent degradation of the steel well casing.

    • Gelling agents, such as guar gum, may be used in small amounts to thicken the water-based solution to help transport the proppant material.

    • Occasionally, a cross-linking agent will be used to enhance the characteristics and ability of the gelling agent to transport the proppant material. These compounds may contain boric acid or ethylene glycol. When cross-linking additives are added, a breaker solution is commonly added later in the frac stage to cause the enhanced gelling agent to break down into a simpler fluid so it can be readily removed from the wellbore without carrying back the sand/ proppant material.

    http://bit.ly/HcLOhS

    Regards,
    Nawar
    Apr 10, 2014. 10:45 AM | 1 Like Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    Galicianova. I appreciate your interest in my thoughts, but your question is quite wide ranging and beyond the scope of this article. Generally speaking, I am quite bullish on the Canadian energy space (and I have been for some time). For Canexus specifically, I believe the company offers two ways to play the sector, the first is obviously through their NATO facility, but the second is through their hydrochloric acid business; with their ability to convert 60% of their chlorine into HCI any pick up in fracking in Western Canada will translate into substantial demand for their hyrdochloric acid, which has much higher margins than chlorine. Canexus would be a great way to get exposure to the quite volatile Canadian energy sector, while retaining the relative stability of the chemical operation.

    Regards,
    Nawar
    Apr 9, 2014. 02:51 PM | 1 Like Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    River, thank you for your comment. I am glad to see you at Canexus. I am certainly very excited about the opportunity at current levels and looking forward for a substantial rise over the next few months.

    Regards,
    Nawar
    Apr 8, 2014. 09:06 PM | 1 Like Like |Link to Comment
  • Canexus Corporation Positioned For A 30% Rebound [View article]
    Galicianova, the dividend is 55c a share or a yield of 11.5% at current levels.

    Regards,
    Nawar
    Apr 8, 2014. 05:38 PM | 1 Like Like |Link to Comment
  • Peyto Exploration: A Winning Stock For Growing Oil Sands Diluent Demand [View article]
    Peyto is certainly as good as it comes in Canada in regards to management quality and performance. In regards to the growth in diluent demand, I believe the growth of bitumen by rail could slow condensate demand to some extent, since rail does not require as much diluent, not to mention a growing trend to transport raw bitumen by rail which doesn't require any diluent (I discuss the matter in my article on Canexus: http://seekingalpha.co...). I would welcome your thoughts on the matter and on how this may impact Peyto?

    Regards,
    Nawar
    Apr 8, 2014. 03:49 PM | 1 Like Like |Link to Comment
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