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Omar Jama  

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  • Chesapeake Energy's Debt Is Growing Due To Inflexible Legacy Obligations [View article]
    I think CHK liquidity/bonds are fine, the main point of this article is that capex is inflexible and high, therefore free cash flow is negative

    You are absolutely correct on the cash balance. I should have reflected that in the analysis. The value creation from the asset sale was reflected in the $3 billion excess acreage in my valuation as i waited for the closing of the deal.

    Now that the deal has closed this is liquidity available to the company for debt repayment or share buybacks.

    Given the high rate of cash burn and terrible nat gas prices I dont think Icahn can pull off a leveraged recap transaction, but there may be room to start to buy shares under the $1 bil share buyback authorization (as of 10k filing none bought back yet).

    I dont think the company will want to buy back a lot of shares at this price however. Since the shares are pricing in $70 oil and $3.50-$4.00 gas price.
    Mar 29, 2015. 11:09 AM | Likes Like |Link to Comment
  • Whiting Petroleum - Balance Sheet Repaired, But Oil Needs To Recover In 2016 [View article]
    I model each play separately as a DCF. Plug in an oil price and add up all the different pieces. Same thing the wall st analysts do, and call an NAV analysis.

    The key driver to how much each play is worth is the individual oil well economics. So the IP rate and decline rate which most companies disclose. WLL has some info on their web presentation. I have haircut their numbers as they are trying to pump a little. Still their wells are competitive.

    The trick here is that they sometimes try to trick analysts into using higher numbers so you have to be careful to look at 1yr culmulative production numbers so they cant fake you out with 24 hr or even 30 day IP rates.
    Mar 28, 2015. 09:12 PM | 1 Like Like |Link to Comment
  • U.S. LNG Export Outlook To China, Impact On Cheniere Energy [View article]
    Thanks for your comments. taken together these comments improve my understanding of LNG. Given this is such a complex subject this is helpful i think.

    at first i thought it was a simple gas vs oil price arbitrage or gas vs coal (like here in the USA), but it is not. its opening up whole new markets for gas. this is a slower process. like waiting for india to build a whole lot of power plants

    Eventually the gas will flow to europe and asia if the US can produce it at $3-4/mcf (which by the way is the same as mmbtu) in massive scale, but it just seems impossible for the US LNG industry to put out 9 bcf/day within 5 yrs. maybe 3-4 bcf is possible.

    CQP is fine at the current payout in this case, but there wont be much left for LNG shares after that unless you believe the US LNG industry can export 8-9 bcf/day. I am not sure if people get that.

    the offtakers are just creating a call option on gas in the event that the spread between HH and International LNG price widens out again. but these call options were all bought when LNG prices were triple todays level. now they look to be out of the money are at the money, instead of deep in the money as they were in 2014.

    LNG shares are the same type of call option. the good news for LNG shareholders is we wont know for years... so its hard to be disappointed. I think it will be interesting to see how Australian LNG ramp up is absorbed by the market. So far not so good, but there is time.
    Mar 27, 2015. 03:14 PM | Likes Like |Link to Comment
  • Chesapeake Energy's Debt Is Growing Due To Inflexible Legacy Obligations [View article]
    I am not short CHK, in fact last time Icahn came around i bought along side him and made good money. This time Icahn is making a value purchase, not really buying for a reason (as far as i can tell). Last time it was obvious that the CEO had to be fired. this time i see no such rationale.

    what i think is going on here is that CHK aggressively sold midstream and service business by giving excellent terms to the buyer in case of midstream and spin out mgt in the form of drilling contracts, not thinking that oil and gas prices would collapse. but that is what happened so they have to suffer for 3 yrs for midstream and 1 yr for service until these deals run off.

    CHK has very good assets, but so do many others. CHK is as good as or better than most. Probably icahn thinks he can sell the company at $12 if shares collapse to $8. look at TLM, he bought at $12 rode it down to $5 and sold at $8. Nobody is perfect. E&P is a tough business. maybe he should hire me as his analyst?

    Anyway thanks to him they would be screwed now if the old CEO had been allowed to continue his crazy aggressive strategy

    From 10-K: interest expense = 604mm capitalized interest +89mm interest expense + 171mm preferred stock dividends = $864mm real life interest payments

    the guys you should be yelling at should be UBS and Goldman who got everyone in the stock without realizing that they had no flexibility in capex.
    Mar 25, 2015. 09:33 PM | 2 Likes Like |Link to Comment
  • USA LNG Export Outlook, Impact On Cheniere Energy [View article]
    James, i agree with your points on Asia representing an opportunity for US Exports. It is however very hard to anticipate just how much China will grow natural gas demand.

    Here is my best estimate... from 2010 to 2015 demand has grown from 10.4 bcf/d to 15.5 bcf/d and is projected to grow to 21 bcf/day by the EIA. Local production has grown by about 2-3 bcf/day from 2010 to 2015 as prices have risen closer to world prices.

    if we extrapolate the last 5 yrs to the next 5 yrs (ast he EIA has done) LNG demand should be growing by 2-3 bcf/day.

    This compares to supply growth of 100mtpa (13.3bcf/day world wide)

    China will be huge but cannot swallow up all the LNG before 2020, longer term they should shut more coal and switch to gas. Which they have been, driving the rapid growth we see.

    Key to China continuing to kill coal will be price of LNG as coal is still only $6-7/MMBtu in terms of cost to produce a MWhour in China.
    Mar 24, 2015. 01:42 PM | Likes Like |Link to Comment
  • USA LNG Export Outlook, Impact On Cheniere Energy [View article]
    According to Cheniere, CMI buys LNG at 115% of HH ($3) + $3.50 liquefaction fee + $1.00 shipping = $7.95.

    This is from the Goldman jan 2015 conference presentation on page 6.

    why does CMI have to pay 115%? Because the Creole Trail pipeline owned by CQP cost of $400mm has to be amortized somehow.

    why does CMI have to pay liquefaction fee? Because the cost of the liquefaction facility of $12 billion has to be amortized.

    CMI can not just get LNG at the HH cost plus ocean shipping, that would be screwing all the bond holders who funded the project.
    Mar 23, 2015. 04:28 PM | 1 Like Like |Link to Comment
  • USA LNG Export Outlook, Impact On Cheniere Energy [View article]
    Cheniere has volume risk.

    Cheniere gets paid on a modest fee ($3/mcf) on 80% of Sabine Pass Trains 1-4 regardless of whether or not the EU contracted buyers (like BG) take the gas or not. If BG can not place the cargo profitably then they will not take the cargo, but they still have to pay Cheniere. BG and the rest of the buyers are not obligated to buy the gas.

    The negative scenario is when BG does not take their cargos... it likely means that Cheniere's Marketing arm (CMI) will not be able to sell the cargo profitably either and CMI makes no money and pays no incremental fees to CQP.

    Cheniere's business plan and equity story hinges on whether or not they can sell ALL of the capacity of their plants. The contracts only cover 80%.

    CMI's cost to land LNG in Europe is $7-8/mcf, while EU gas spot prices are right around that level. it will be interesting to see the demand response to the large scale supply Cheniere and others are bringing on line.
    Mar 23, 2015. 11:51 AM | Likes Like |Link to Comment
  • Examining Offshore Drillers: Buy, Sell Or Hold (Part 1) [View article]
    There is definitely value in offshore, but most hedge funds are short given that the near term momentum is to the downside. These stocks are a little bit cheap, but could become quite cheap near term.

    I am keeping my powder dry. Shell just announced big capex cuts and they are a major player in deepwater markets (22% of deepwater rig backlog according to Simmons research). Some of the rigs they had under contract will be sublet back into the market at a time 72 brand new rigs are being delivered in the next 2 yrs.

    Petrobras is blowing up and we should expect big capex cuts from them. Brazil represents 75 out of a world wide total of 300 floating rigs (according to Morgan Stanley research).

    Good luck.
    Feb 1, 2014. 12:48 PM | Likes Like |Link to Comment
  • CVR Energy - Time To Catch Up [View article]
    year end tax selling of CVRR and UAN, given the January rise in CVRR and UAN this seems like the reason
    Jan 14, 2014. 10:34 AM | Likes Like |Link to Comment
  • CVR Energy - Time To Catch Up [View article]
    Broker upgrades this morning in the refining sector.
    Dec 2, 2013. 09:13 AM | 1 Like Like |Link to Comment
  • CVR Energy - Time To Catch Up [View article]
    Fair point Chris.

    The simple Sum of the parts shows that at todays share prices, CVI is trading at a $2.61/shr discount to the cash and stakes in CVRR and UAN. But CVI owns the GP (control) interest in both, which should have some value given Icahn's tendency to create value.

    The point of the Valero slide is that even Valero thinks that mid con crude prices will be cheaper than LLS medium term, which means CVI should enjoy cheaper feedstock. I think the market is positioned in favor of Gulf coast refiners, with buyers of VLO and MPC and sellers of CVI. Furthermore, the impending start up of a pipeline has been hurting sentiment toward mid con refiners.

    The unwind of this positioning and the illiquidity of CVI should support a good rally in the shares from here. This coupled with the strong dividend yield and low valuation creates attractive risk reward in CVI here.
    Nov 29, 2013. 11:55 AM | 1 Like Like |Link to Comment
  • Forest Oil: A Tale Of 2 Halves [View article]
    Looking to reestablish long position in FST, but for now $5 looks like a possibility, holding off.
    Oct 7, 2013. 12:48 PM | Likes Like |Link to Comment
  • Forest Oil: A Tale Of 2 Halves [View article]
    FST is running a rig in E Tx, a rig in the EF, and a rig or two in the Panhandle, all of these are oil focused. The NGL rich granite wash is not being drilled at present, neither is the haynesville gas play.
    Apr 13, 2013. 11:11 AM | Likes Like |Link to Comment
  • Lone Pine Resources: Time Is On My Side [View article]
    Thoughts on the conf call:

    The tone of the new CEO was very good, he expressed confidence in the future of the company, and importantly, signaled that further deleveraging and value creating transactions were likely in the coming weeks and months.

    So despite the lackluster oil production in the quarter (the result of dropping to only one drilling rig this winter), the stock rallied from down a few cents to finish solidly higher on strong volume.

    Stay long here, $3 could be here sooner than you imagine.
    Mar 15, 2013. 06:25 PM | 2 Likes Like |Link to Comment
  • Petrobras Higher By 13% - Shorts Getting Squeezed [View article]
    short interest is minimal in PBR, the rally today is due to hope that fuel prices will be closer to market prices.

    If Brazil was serious they would not only have raised Diesel prices (industrial fuel) they would have also raised gasoline prices (consumer fuel).

    How many times have investors been tricked into believing that the fuel subsidies are drawing to a close, only to be disapointed.
    Mar 6, 2013. 02:38 PM | Likes Like |Link to Comment
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