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Ray Merola  

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  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Got me on COP, Frac4Crude

    As a 30-year oilman, I'll always consider ConocoPhillips one of the integrated majors, despite the downstream Phillips66 spin-off. However, you are correct: COP is now an independent producer.

    Good luck with all your 2015 investments.
    Jun 12, 2015. 11:31 PM | 1 Like Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Thanks, Frac4Crude

    Who is the largest independent oil and company in North America, and measured by what metric?
    Jun 12, 2015. 07:51 PM | 2 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Thanks for the commentary, T-time

    Why not just own EOG Resources, instead of trading it?

    Let the energy cycle play out; over time oil and gas prices will rise.
    Jun 12, 2015. 06:57 PM | 5 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Jake2

    These are found immediately above your comment: time-stamped at 5.26 pm.

    I offered some comments, thanks, and a link you may find of interest.
    Jun 12, 2015. 06:01 PM | Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    TreyT

    Please see my notes to FortyAndFree below. Several comments came in at once and jumbled the response sequence.

    For clarification, I don't believe EOG plans to sit on any leases indefinitely. They simply choose to delay completing wells until crude prices improve. Historically the cycle often takes a year or so.

    Appreciate the insight on more sophisticated Delaware basin leases.

    Notably, EOG Resources obtained the best leases in the best basins in part due to "being there first." This may have afforded them lease clauses that favor the current approach.

    In any event, I have a high level of confidence the management team knows what it's doing.
    Jun 12, 2015. 05:43 PM | 3 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    You are welcome, 7point62
    Jun 12, 2015. 05:37 PM | Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    We are in violent agreement, steveorhb
    Jun 12, 2015. 05:37 PM | 1 Like Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Thank you, FortyAndFree

    My understanding is leases are highly negotiable. In addition, older leases often contain clauses that are rarely found in newer documents. My resource for making the aforementioned statement was through information found via the Texas A&M web site:

    http://bit.ly/1IAcbJm

    I noted discussion on pages 9, 10, 13 and 16. In particular, many leases appear to have 2 terms, the first is the Primary term; whereby the lessee has 3 to 5 years to commence production or simply "drilling" activities. In addition, "pooled" land can permit the lessee to hold large amounts of non-producing acreage by only drilling one well.

    However, you point is well-taken and is appreciated. My energy experience is in the mid-stream and downstream businesses. I'm not a landman, by any stretch.

    Other reasons to defer well completion include avoidance of breaking existing rig commitments, and the potential to revise downward future completion costs.

    Can you provide any links or data references to conclude general leaseholds in the Delaware basin must be maintained by producing properties?
    Jun 12, 2015. 05:26 PM | 2 Likes Like |Link to Comment
  • Buck The Traders: United Rentals On Sale Now [View article]
    MimMO

    I admit all your comments about URI price have baffled me.

    Over the past 5 years, the stock is up 682%. Over the past 3 years, the stock is up 181%. Over the past 12 months, the stock is down 17%.

    There *might* be some kind of a summer lull in the trading price between mid-June and August. That's for those who like to game the market.

    For the last 5 years, with the exception of last year only, the shares rallied hard in the fourth quarter.

    The stock first hit $80 in January 2014, blew through it, and the price has never returned to that level. I don't see the stock has ever split.

    What chart are you looking at?
    Jun 12, 2015. 04:23 PM | Likes Like |Link to Comment
  • Buck The Traders: United Rentals On Sale Now [View article]
    Trading and investing are 2 different games.

    Recommended reading is, "The Intelligent Investor" by Benjamin Graham.
    Jun 12, 2015. 02:21 PM | Likes Like |Link to Comment
  • Buck The Traders: United Rentals On Sale Now [View article]
    MimMO

    I suspect we may have different investment philosophies / horizons. Please note that I am not a trader, of either the day or swing variety. I am an investor. That's not a value judgement, just a statement.

    Short-term variations in the macro or corporate micro don't affect my investment thesis. I seek to purchase shares of well-managed companies with good balance sheets, strong franchises, that generate profits in cash, and are shareholder-friendly. I try to buy when prices are discounted (like URI in January), and sell when the shares trade above fair value.

    To answer your question, I believe United Rentals will generate business from all the places it usually does. About half that business comes from non-residential construction, and half is from industrial applications. I believe non-res construction may improve; good folks may disagree. I believe industrial production has been hurt by a strong dollar; this may be transitory, but good folks may disagree.

    For United Rentals, tThe rig count does not move the needle much. Management indicated the total at-risk business generated via upstream oil and gas is less than 6%. Applying a 9% net margin yields about $0.30 EPS at risk on an $8.50 base. As noted on the conference call, 2015 rental rates were guided +3%. Of course, I plan to listen to guidance updates upon the 2Q conference call.

    Having listened to the investor conference call whereby the CEO talked about the May numbers, and then following up with I.R., I am not as concerned as many traders with his remarks. My investment view is contingent more upon the overall trajectory of the North American economy than brief comments about one month of sales.

    From a technical perspective, I see a chart whereby the stock ran in 2012 and 2013; broke down in 2014 on oil-patch fears; then rebounded nicely in 2015 performance metrics until CEO Kneeland's May remarks.

    For me, the long-term investment thesis is intact: the North American economy is not entering crisis and decline, but limping a bit due to fears about the Fed, and a generally moribund global economy. I believe the Fed will not be the one to crush U.S. business, especially in 2016. United Rentals is a well-run business with positive growth strategies.

    I will rethink the position at such time data points come in conclusively otherwise.
    Jun 12, 2015. 12:41 PM | 1 Like Like |Link to Comment
  • Buck The Traders: United Rentals On Sale Now [View article]
    Thank you, MimMO

    I am not a fan of EBITDA or EBITDA multiples, regardless of Street trends. I prefer operating earnings, operating cash flow, and free cash flow.

    If North American non-res construction improves, I am not convinced 2015 is "lost."
    Jun 12, 2015. 10:09 AM | Likes Like |Link to Comment
  • Buck The Traders: United Rentals On Sale Now [View article]
    NOTE TO READERS: 6/12/15 Hedge fund Jana Partners has taken a 6% stake in United Rentals, saying it believes shares could hit $140. Following the news, URI climbed 1.1% in after-hours trading.

    S&P 500 IQ reported:

    Following cautionary remarks last week at an industry conference, the shares are down almost 15%. We think this sell-off overly discounts the risks related to a soft month of May cited by URI. We think that nonresidential construction is still likely to improve as we move through '15....We trim our '15 and '16 EPS estimates to $7.80 and $9.12 from $8.29 and $9.60, and trim our 12-month target price by $5 to $137, 15X our '16 estimate in line with URI's historic range.

    Commentary:

    I believe 2Q earnings and guidance will be instructive, setting a tone. I plan to focus upon utilization rates (which were up 1Q 2015 LQ, but down vs FY 2014), non-res construction outlook (recommend listening to Nucor Corp for some clear-speak about that), and net FCF. After speaking with URI Investor Relations SVP last week, and discussing what management was trying to convey in their remarks, I came away agreeing with S&P IQ the sell-off appears overdone.

    For those without FAST graphs, historic 15-year trimmed average P/E is 14x, and P/CF is 5.3x. The EPS and OCF growth rates during this period approximate URI's go-forward 2 or 3-year growth rates.

    Management should provide updated guidance in July.
    Jun 12, 2015. 08:06 AM | Likes Like |Link to Comment
  • Buck The Traders: United Rentals On Sale Now [View article]
    Danny1929

    I suspect we are in at a good price point.

    Markets correct without warning, and its always a possibility. I don't try to divine short-term market moves, preferring to find undervalued securities and hold these until they reach or exceed fair value. My holding period tends to be a minimum of 18 months, but often many years.

    Currently, URI trades ~12x operating earnings, and 5x cash flow; yet EPS and cash has been and is projected to grow at double-digits. I plan to watch the balance sheet closely, better if it were stronger. There's no long-term debt coming due until 2020, and liquidity is good.
    Jun 11, 2015. 10:32 AM | 1 Like Like |Link to Comment
  • Examining Union Pacific After The Double-Digit Decline [View article]
    Thank you for a good, concise article about Union Pacific Corporation.

    The rails are a great wide-moat business, and part of an investment thesis is a bullish, long-term view of the U.S. economy. Cyclical highs and lows are part of the game.

    I'd like to see shares fall below $97.50; I'd top up at that level. In general, I like the shares under $100 on a P/E valuation.
    Jun 11, 2015. 09:39 AM | 5 Likes Like |Link to Comment
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