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Richard Zeits  

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  • Whiting Petroleum: With Oil At $50, Is It The Right Time To Pursue A Sale? [View article]
    Rawenergy,

    Thank you for sharing the link. Indeed, very useful color from Reuters.

    I don't think, however, that WSJ (or Reuters, for that matter) would have published articles if what they were referring to was simply another "pitch idea" by another investment banker. I would be very surprised if staff at either of these two leading financial media powerhouses did not know the difference between a IB pitch and an "authorized approaching select parties."
    Mar 13, 2015. 11:24 AM | 1 Like Like |Link to Comment
  • SM Energy: The Strong Balance Sheet Is An Asset [View article]
    Another thought, of course, is on the macro side. Even a highly efficient and capable operator depends strongly on the price of oil.
    Mar 12, 2015. 01:22 PM | 1 Like Like |Link to Comment
  • SM Energy: The Strong Balance Sheet Is An Asset [View article]
    Joshua,

    I think discounts and premia are observable metrics (relative to a defined group of stocks), however interpreting discounts and premia is often (and inevitably) conjecture.

    Personally, I think that the non-op component of the portfolio is run by a qualified operator, Anadarko. APC's comments regarding their drilling returns have been quite encouraging. For me personally, this should not be a big concern. If anything, it should be an additional insight for SM into various technical aspects of the play.

    I will try to discuss more on this topic in my next note.
    Mar 12, 2015. 01:08 PM | Likes Like |Link to Comment
  • Rosetta Resources: Playing Defense [View article]
    LongRoser,

    I don't think it can. But may I ask you in turn - can Saudi Arabia?
    Mar 11, 2015. 07:22 AM | 4 Likes Like |Link to Comment
  • Whiting Petroleum: With Oil At $50, Is It The Right Time To Pursue A Sale? [View article]
    User 28129073,

    Several considerations. I am paying attention to (and put in the spotlight) the assumption used by WLL. Second, the current Brent/WTI spread is very wide, which makes the Brent/Bakken differential very wide and, arguably, unsustainable in an environment where growth is slowing down (and a decline is possible).

    But at the end of the day every reader should use the assumptions to his or her own liking. That's why I provided a sensitivity table.
    Mar 10, 2015. 03:42 PM | 2 Likes Like |Link to Comment
  • Whiting Petroleum: With Oil At $50, Is It The Right Time To Pursue A Sale? [View article]
    Jnnick,

    I think your observation is very keen. The majors carry very heavy political risk that many investors may have gotten used to be comfortable with. But political risk is in the "black swan" category. Look at what happened to Youkos, for example. Or Exxon's assets in Venezuela.

    The biggest issue that I see is that the majors a yet to provide the answer to the new challenge that North American independents have presented them with in terms of the business model and operating efficiency benchmarks.
    Mar 10, 2015. 01:32 PM | 1 Like Like |Link to Comment
  • Rosetta Resources: Playing Defense [View article]
    Beabaggage,

    You are making a great observation - a ton of equity and bond issuance that has occurred in the past month is an indication that oil and gas operators are not counting on a quick recovery and are effectively hedging about even more painful downside.

    I would just add that the US oil production, while flexible and quick to respond to the price signal, is just a tiny portion of the global supply. US producers are not the price setters.
    Mar 10, 2015. 01:07 PM | 1 Like Like |Link to Comment
  • Rosetta Resources: Playing Defense [View article]
    Since this note was published, Rosetta completed an equity offering. The proceeds will be used in part to repay balances outstanding under the company's credit facility.

    The financing is a prudent, liquidity-enhancing move, with the equity dilution offset by the benefit of greater financial flexibility and safety.

    While Rosetta will preserve the availability under its credit facility, it will be able to avoid the constraints and risks associated with the maintenance covenants by having nothing drawn under it.

    The move has its price, but is logical and prudent, in my opinion. Given the stock's relatively high trading multiple, based on the discussion in the note, a case can be made that the offering was sold at a reasonable price.
    Mar 10, 2015. 12:32 PM | 1 Like Like |Link to Comment
  • Whiting Petroleum: With Oil At $50, Is It The Right Time To Pursue A Sale? [View article]
    Profit Propositions,

    I don't think that $75 is the industry's problem. $50 is, however.
    Mar 10, 2015. 08:46 AM | 2 Likes Like |Link to Comment
  • Whiting Petroleum: With Oil At $50, Is It The Right Time To Pursue A Sale? [View article]
    Profit Propositions,

    Two points here:

    First, capex needs to stabilize (for a few years, perhaps) so that we can use the run rate EBITDA as representative of their sustained cash flow.

    Second, costs need to stabilize so that we know what capex is really needed to generate, let's say, 10% sustained growth.

    In reality, I have to admit, the price of oil looks cyclical and we may not have the luxury of a stable picture.
    Mar 10, 2015. 08:22 AM | 1 Like Like |Link to Comment
  • Whiting Petroleum: With Oil At $50, Is It The Right Time To Pursue A Sale? [View article]
    Scooter-Pop,

    Safety and quality are important. But each time when I take a massive slide deck by a major oil company, I see a massive amount of futuristic pictures, while having difficult time digging out metrics that would be relevant to the actual economic performance and competitiveness.
    Mar 10, 2015. 08:17 AM | 3 Likes Like |Link to Comment
  • Whiting Petroleum: With Oil At $50, Is It The Right Time To Pursue A Sale? [View article]
    Scooter-Pop,

    The concept was certainly brilliant, but the reality raises some questions. Since the acquisition of XTO, XOM's US liquids production has been stagnant (despite some additional acquisitions, such as Denbury's Bakken assets for $1.6 billon). Natural gas production has been in decline.

    XOM shows a hockey-stick future growth in the U.S. liquids, but I have difficult time understanding, why could not it grow production (and value) during the time when oil was at $110? Maybe because everything that XOM touches becomes XOM?
    Mar 10, 2015. 07:59 AM | 1 Like Like |Link to Comment
  • Whiting Petroleum: With Oil At $50, Is It The Right Time To Pursue A Sale? [View article]
    Profit Propositions,

    EBITDA can be quite useful - if we know how to use it. :)

    Of course, I understand your point. I generally agree - what matters is EBITDA less what they call "maintenance capital." But as you point out, maintenance capital can be difficult to nail down as it is a function of where one is on the decline curve.

    I would argue, therefore, that it is difficult to avoid the type curve as a measure of the cash burn and the oil price threshold that you are referring to. And then if comes down to whether you trust the type curve or prefer to use a different one.

    Based on the typecurves that Whiting is showing, I don't think I can agree with your $75 figure.
    Mar 10, 2015. 07:54 AM | 3 Likes Like |Link to Comment
  • Whiting Petroleum: With Oil At $50, Is It The Right Time To Pursue A Sale? [View article]
    Sparky58701,

    The only issue is that the "big boys" would need to adapt their institutional cultures, modus operandi and costs structure to be able to succeed in the same business where companies like WLL have demonstrated very impressive results. The "big boys," for a variety of reasons, have a very mixed track record in this area.
    Mar 9, 2015. 10:08 PM | 2 Likes Like |Link to Comment
  • BreitBurn Energy Partners: What Are The Possible Alternatives For Resolving The Leverage Challenge? [View article]
    Hhmcdon,

    I would argue they have already remained "calm" since November and, in my opinion, have survived the most difficult trough where funds were flowing out of the sector (and any financing would have been difficult to complete).

    At some point, however, waiting may become a bet on a strong recovery in the price of oil. What if the trough lasts for another 18 months? Let's not forget that the company is continuously taking cash out of the system. There may be only $80 million available to repay debt this year.
    Mar 7, 2015. 12:36 PM | 4 Likes Like |Link to Comment
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