Robert Rapier

Robert Rapier
Contributor since: 2012
Company: Investing Daily
Oasis is just one of the more leveraged players, and they are going to react strongly to changes in oil prices. Look at what happened on the way down. I think investors are counting on more upward moves in WTI, because Oasis still won't be profitable at the current price. But speaking historically, a 10-20% upward move in WTI is probably going to translate into a 20-50% upward move in OAS.
Update us if you cover. I am curious about your strategy here. I agree with others that being short Oasis after such a deep decline was very risky. I presume you have an exit strategy. If you were counting on $20 oil to exit your position, I don't think you are going to see that. In fact, I think we are much more likely to revert to ~$60 over the next year.
This isn't their first rodeo. They have been through lots of these business cycles. I was there as an employee during some of them.
I am conducting an analysis of free cash flow (FCF) improvements of the various oil and gas companies last quarter relative to the past 12 months. Practically every oil and gas company has been FCF negative for the past year, but in Q2 COP made the biggest move by far in the direction of positive FCF. If a move of that magnitude could be pulled off again in Q3 they would turn FCF positive. Doubtful, but they are heading in the right direction.
OK, thanks. I just wanted to make sure I wasn't missing something. I have been using the Standardized Measure to compare companies since the PV-10 can be prone to some sleight of hand. Noting of course that the commodity prices today are much lower than those used in the year-end SM calculations.
"The best "apples to apples" metric would be the SEC-10. For Rosetta, it was ~$1.75 bn at year-end 2014."
I see $2.6 billion as their Standardized Measure of Discounted Future Net Cash Flows in their 10K. What is the $1.75 billion in reference to?
Michael, my article on the storage situation was published last night. I tried to make sure mine made points that were distinct from yours, but our conclusion is the same. We aren't running out of storage:
There are also 2 other factors in play. Demand has been picking up in response to low prices. Sales of SUVs and big trucks are up. This is also turnaround season for refiners; 6 months from now they will be running a million more bpd than they are now.
Second, the EIA expects the budget cuts to begin impacting production in Q3. It is going to be tight for a bit, but these things are self-correcting. No way the price collapses like some have suggested.
Yeah, I have since also seen the Zeits piece. I need to come up with my own spin on this, but that graphic is really informative. I think I still have to include it.
I am not Michael, but I have a theory. I think they just don't realize how much storage is available. So they hear things like "Storage at an 80 year high" and they think we must be nearly full. Then, others hear it and repeat it. If you look at the graph of Cushing storage, it does look ominous relative to history. But the maximum capacity isn't indicated on that graphic.
Damn it man! I am working on this same article. No kidding. I was just looking this week at all the articles that suggest we are running out of storage, and I said "I have to debunk this." So I started writing an article on this same topic yesterday that I should have up for my next column. I used that exact same EIA graphic.
The article references the pre-PSX years a couple of times. "The company used to make $15 billion in profits but has posted declining profits each year since 2011." Yes, $15 billion before PSX was spun off. To not know that, or to know it and not note it -- in either case doesn't reflect well on the article.
Also, if I was in COP's shoes and oil was trading at $100/bbl, you bet I would be plowing all I could back into the company. This is a mistake so many people make that try to analyze these companies. They are making investments that will pay off for years, and when oil prices get really high they increase their investments. When oil prices crash, they slash their investments and then they will continue to benefit from the investments they made previously.
I follow only a handful of people here who I feel like really understand this space. Casey is one of them. You aren't going to be right all the time. Nobody is. But he provides extremely valuable insights into the energy sector.
The stupidity of the EPA's comments is mind-boggling: "the incremental greenhouse gas emissions from the extraction, transport, refining and use of the 830,000 barrels per day of oils sands crude that could be transported by the proposed Project at full capacity would result in an additional 1.3 to 27.4 million metric tons of carbon dioxide equivalents (MMTC02-e) per year compared to the reference crudes. To put that in perspective, 27.4 MMTC02 per year is equivalent to the annual greenhouse gas emissions from 5.7 million passenger vehicles or 7.8 coal fired power plants."
So, not only does their letter presume that if the pipeline isn't built then 830,000 bpd simply won't be consumed (a ludicrous assumption), the EPA and environmental groups then fixate on the highest estimate in a range that spans 1.3 to 27.4 million tons of carbon dioxide per year. That's not an honest, objective assessment.
In reality, unless demand falls or cheaper sources of oil are developed, that 830,000 bpd will find its way to market via alternate routes that are more carbon-intensive than pipelines, actually increasing the carbon emissions by not building the pipeline. The only real way to avoid the emissions entirely is to reduce demand, in which case the pipeline wouldn't even be needed and we wouldn't have to worry about misguided attempts to stop it.
Oh, and about that high end estimate of the equivalent of 7.8 coal-fired power plants? There are 1,200 of those being built right now around the world. Note how much airtime that gets relative to Keystone XL. Our priorities are so out of whack.
KiOR's bankruptcy this year was one of the 5 predictions I made for 2014. I had people telling me I was wrong right up until last night. But who will invest with Khosla again? Hey, I asked that question after the Range Fuels debacle. The guy is clearly a good salesman, even though he knows nothing about biofuels.
Good article. I wrote one just before the IPO, and we warned people away because we thought the downside risk was took high then. But it's certainly worth some attention now, as are many of the higher risk energy companies.
Just to clarify, the crude oil export ban was not overturned. There was a very narrow ruling on condensate exports for two companies. This doesn't have a huge impact on Valero's bottom line, but I think the perception that broader rulings are coming has helped drive Valero's price down.
"Is BSNF not a public company (can't find the ticker), subsumed by Brk?"
Others made the point first, but maybe six months ago Cramer was saying "Avoid Devon. They can't do anything right." I do own Devon, but wonder if that Cramer endorsement isn't a sign that I should cash in my ~30% gain and start looking for another bargain.
"My question also, which railroad, which tanker car mfgrs. will get all this action?"
American Railcar Industries, Inc. (NASDAQ:ARII) as well. I put a Buy recommendations on ARII in March 2013. The 12 month return on this one is 92%.
"Zacks stock news reports that it costs 5 times more to ship rail than it does pipeline."
It is more expensive, but if the pipelines are jammed and the differentials are high, they will still ship it. That's why Bakken oil by rail went from near zero to 700,000 bpd in about 3 years.
"Wouldn't the railroad to benefit the most be BNSF?"
This is definitely true out of the Bakken. Warren Buffett also said a couple of years ago that they can gear up and transport a lot of oil out of the Athabasca as well.
"Recall, 4Q production (~400,000 gallons) arrived slightly below target"
I want to put this in perspective. This is from an article I wrote in January, and it shows how poorly management performed with respect to the guidance they issued. It shows they were totally out of touch with reality. Here's the link to the article, followed by an excerpt on the relevant bits on KiOR:
On May 9, nearly halfway through Q2 of last year, KiOR CEO Fred Cannon stated, “We expect that total fuel production during the second quarter will range between 300,000 and 500,000 gallons, keeping us on track to fall within our projected production range of 3 million to 5 million gallons for 2013.” The actual amount of product shipped for the quarter came in at only 75,000 gallons. When the actual volume was announced, the share price plummeted and investor lawsuits were filed.
In August Cannon lowered guidance: “We expect our full year production levels will be in the 1 million to 2 million gallon range.” Another statement in November was considerably weaker when he said, “We believe that our full year production levels will exceed 1 million gallons.” The actual production number for the year was reported to be 894,000 gallons — lower than even the reduced guidances and about 7 percent of the stated capacity of the plant. Investors can’t be very confident in future projections given last year’s track record.
You continue to post false information. First, in the previous article on this, you wrote: "KIOR imo great buy right now there last Q production numbers were best to date." I don't see a qualifier there. Since the last quarter was Q1, you were mistaken or sloppy with your wording.
Here, again you wrote "not some old oil just sitting around like ROB posted." I had specifically indicated that the gallons they sold were from the previous quarter's production, and here you are trying to argue they are from the R&D facilities -- even though the 10-Q says they produced 0 gallons in the first quarter. Although you have made multiple false claims, I have yet to see you acknowledge you were wrong about any of them. Still think the stock was at $9 in January 2013? A wrong claim from you, yet your misinformation led to you calling me a liar.
As far as your repetitive posts that "upgrades continue", I can't help but wonder if you either didn't read the 10-Q, or just don't understand what you read. Here is the particularly relevant bit:
"While the Company has completed some of these projects and upgrades, it has elected to suspend all optimization work and bring the Columbus facility to a safe, idle state, which the Company believes will enable it to restart the facility upon the achievement of additional research and development milestones and if it is able to raise additional working capital."
In other words, upgrades do not continue unless they can raise additional capital -- well beyond what Khosla gave them. He provided enough to keep the lights on, not enough to run the plant. The only hope they have is to reel in someone willing to write a much bigger check -- in which case they will run a bit longer (depending on the size of the check).
"YOu are a liar .47 was not the close when you wrote about the 97 percent loss"
Just to close the loop on this, I wrote that in the comments on Adam's previous article in the evening of May 23rd. On that day the share price closed at $0.52. Now, why don't you calculate the percentage loss from $16.14 -- the close on the date when I wrote that article in 2011 -- to $0.52? I will help you if you don't own a calculator: It's 96.8%, which most people would simply round to 97%. You, on the other hand, have been demonstrably wrong on several matters of fact here -- such as your assertion that KiOR traded at $9 in January 2013. Or your assertion that the last quarter was their best ever production quarter -- when in fact the plant was idle the entire quarter.
I won't hold my breath for an apology for your repeated failure to get the most basic information correct -- and then calling me a liar as a result of your failings. Good luck, man. Because you are definitely going to need some luck.
"not some old oil just sitting around like ROB posted ."
You are intentionally posting false/misleading information. Just above that section in the 10Q is this: "Our product revenue was $102,000 for the three months ended March 31, 2014 compared to $68,000 for the same period in 2013. Product revenue was primarily generated by cellulosic gasoline, diesel, and fuel oil shipments from products we produced prior to idling our Columbus facility."
Then they have a table showing 0 gallons produced in 2014. So they sold $102,000 of previously produced fuel, on which they lost $23.5 million. It's one thing to troll, but it's another to post false information to try to manipulate a stock. You might not manage to remain anonymous for long.
"Robert, you should know better than to feed trolls"
Going to stop. He isn't just trolling; he is posting false information which I am sure is a violation of Seeking Alpha's guidelines. There are several instances above.
"YOu are a liar .47 was not the close when you wrote about the 97 percent loss"
Get a new calculator. You have already been wrong about the stock trading at $9 in January 2013, and you are wrong about this. I would ask you to look at the date I said that and the price (this isn't the first time the price has been $0.47), but it's clear you aren't actually interested in a factual discussion.
Yes, I am sure you know all about how snake oil men work. Since you are anonymous and I am not, one of us will definitely slink away, but with have a bruised brokerage account. You would be daft to think "KiOR is looking better than ever", but you are just trying to get some suckers to buy your shares. For 3 years I have said "KiOR is overvalued." I didn't mentioned bankruptcy 3 years ago; I only spelled out their challenges. Was I right? $16.14 when I wrote that article. It's publicly available. Was I right?
As the poster below notes, I am just feeding a troll. You are posting false information in an attempt to manipulate the stock. Time to stop.
"stock was 9 dollors jan 2013 hmmm explain that snake oil man"
This is funny, incidentally, because the share price traded between $5.45 and $7.60 in January 2013. It never traded at $9 in January 2013. Not that it matters, because my article is from October 2011. It must be great to be an anonymous poster who can just make things up, eh? Snake oil indeed.
"any which way you slice it its sure shows your either incompetent or just out right liar."
Or, perhaps you aren't reading for comprehension. From my link above, I wrote an article on October 17, 2011 arguing the KiOR was grossly overvalued and that in no way was it deserving of its market cap. The closing share price that day was $16.14. The close today was $0.47, a loss of 97 percent from the day I wrote that article. My comments are documented, as I said, nearly 3 years ago, and I have written several updates. And time has proven that my thesis was clearly correct. I have no idea what you are babbling about, but you are obviously very confused.
As far as insiders, Stuart Peterson was one of the biggest shareholders and has been dumping shares for months. In fact, insider sales are a huge red flag; 72 sells and 8 buys in the past year:
Feel free to apologize for calling me a liar for YOUR mistake.
"By the way Mr Gates and Mr Kholsa have lost nothing until they sell shares"
Khosla already lost a lot of money in Range Fuels, and Gates lost a lot of money in Pacific Ethanol (something like 50% of his position when the shares were sold). So once more, there is no reason to think these guys have any special insights into biofuels, and more than a fair bit of evidence that they don't. So invest alongside them in this arena at your peril.
"I would never give any indication of my buying or selling or at what price"
Then you needn't try to convince anyone that you have been right about anything to do with the company. Until you put your predictions out there, or publicly say "I bought X today at this price" then your comments have zero credibility.
As far as the bankruptcy, I predict bankruptcy for them by year end, but also have said that it's entirely possible that Khosla will keep writing checks to keep them afloat because his credibility is on the line after his high profile Range Fuels failure (which I also predicted a year before it happened). But the Columbia Dispatch interviewed me in March and asked if I agreed with the sentiments that KiOR would be declaring bankruptcy on April 1, and I said "No, I think they will get the $25 million from Khosla, which should be enough to keep people employed until August -- but it won't be enough to run the plant." Sure enough, that's exactly what happened. That's not from some anonymous trader on the Internet making claims that can't be verified. My predictions are out there, publicly available, and have so far all proven true with respect to KiOR (as they were with Range Fuels before).
If you have invested in KiOR based on the investments of Khosla and Bill Gates, you are already down a lot of money. When I wrote this article Gates' position was already down 72%, and the stock has declined from there. This is why I don't pay any attention to what software/computer guys do with their money in biofuels. They both have a track record of losing money in this field:
PS. I also predicted in that article that Khosla would provide the additional funding when others were saying it was lights out on April 1. So my very public, documented predictions about KiOR have been pretty much entirely accurate.