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Stan Holland

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  • Penn West Exploration Is Trading Well Below Intrinsic Value [View article]

    Thank you for your question. My opinion has not changed, I have not sold any shares, and I still believe that Penn West has great assets. As I indicated in the article, there is no obvious short term catalyst here and I view Penn West as a long term play on oil. One quarter does not make a trend, but results from the first quarter does seem to indicate that they have their capital efficiencies addressed. Their assets are undervalued by the the market, and over time I expect Penn West to harvest the value from these assets and/or sell assets to someone who can harvest the value.

    Jun 8 08:32 AM | 1 Like Like |Link to Comment
  • HRT Participacoes Has An Asymmetric Risk/Reward Profile - Part 3 [View article]
    In the above calculations I used 590 million basic shares outstanding (HRTPY), but in the event of a large discovery I should have included the following dilution:

    21,668,550 HRTP3 warrants outstanding - R$7.364 average strike (12/31/12)
    5,648,150 total HRTP3 options (12/31/12)

    The warrants and total options need to be doubled for purposes of counting HRTPY shares for a grand total of 645 million diluted HRTPY shares.
    Mar 13 09:35 PM | 2 Likes Like |Link to Comment
  • HRT Participacoes Has An Asymmetric Risk/Reward Profile - Part 3 [View article]
    Shareholders received an update this week. Looks like the assumption that I used above that if a successful oil discovery is made at either Murombe or Moosehead then there is a 40% chance of getting at least the Pmean value was a bit too optimistic. For the Moosehead prospect, the P50 value is only half of the Pmean value.

    For the Wingat prospect, the HRT unrisked P10 value was 2x the DeGoyler & MacNoughton unrisked P10 value. Therefore, it seems prudent to assume that the HRT unrisked P10 numbers that I used in the article for Murombe and Moosehead are also 2x too high.

    Recalculating using 50% chance of P50 instead of 40% chance of Pmean; 1/2 of the P10 values; and 79% working interest in Moosehead; I come up with the following conclusion:

    at least a 21% chance of an oil discovery
    at least an 11% chance of at least $14 of intrinsic value per share
    at least a 2% chance of at least $25 of intrinsic value per share
    at least a 1% chance of at least $50 of intrinsic value per share

    Based on an 11% chance of 13 to 1 odds, the Kelly Formula says the optimal bet size is 4%. A half-Kelly bet size of 2% seems appropriate. Don't bet anything that you are not willing to lose!

    If there is another Namibian farm-down then this all changes.
    Mar 10 03:16 PM | 2 Likes Like |Link to Comment
  • Bakken: The Downspacing Bounty And Birth Of 'Array Fracking' [View article]
    Another great article Richard!

    Does "Array Fracking" mean that multiple wells get fracked simultaneously? Like a large 3D zipper frac? If yes, how many at once?
    Mar 9 07:52 PM | 2 Likes Like |Link to Comment
  • Publicly Available Lessons Regarding Pyramid Schemes: What Should We Think About Herbalife? [View article]
    Thank you for your excellent article!
    In the Test-Aankoop Belgium Decision it was found that Herbalife is a pyramid scheme. Herbalife could not provide the percentage of retail sales to the public when pressed by the court. If Herbalife were to find itself in a U.S. court, how could they avoid a similar decision if they can not provide the percentage of retail sales to the public?
    Mar 4 06:58 PM | 5 Likes Like |Link to Comment
  • HRT Participacoes Has An Asymmetric Risk/Reward Profile - Part 3 [View article]
    Correction: HRT's ownership percentage in the Moosehead prospect is approxiamtely 80% (not the 86% that I stated in the article).

    HRT's working interest in their Namibian blocks before the 14% Galp farm-down can be seen on slide 17 in the link below:

    The Moosehead prospect is approxinmately 1/2 in the 2713A block and 1/2 in the 2813A block.
    Feb 20 06:46 PM | Likes Like |Link to Comment
  • Herbalife: Shattering The Personal Consumption Myth [View article]
    Noquiche - Check out slide 43 from Herbalife's January 10, 2013 Investor Day Presentation
    Feb 17 07:56 AM | 1 Like Like |Link to Comment
  • Is Poseidon Concepts A Falling Knife Worth Trying To Catch? [View article]
    Chapter 8 of Thorton O'Glove's "Quality of Earnings", which the author regards as the most important chapter, states "... time after time accounts receivable and inventories analysis can be a terrific barometer for forecasting negative earnings surprises, usually well before Wall Street analysts come to the party."
    Dec 29 10:53 AM | 3 Likes Like |Link to Comment
  • HRT Participacoes Has An Asymmetric Risk/Reward Profile [View article]
    I have made a rather embarrassing mistake in my article.

    As of 26-Oct-2012 there were 295,246,950 Brazilian shares outstanding (HRTP3). However, for purposes of using HRTPY.PK I should have used 2x this number or 590,493,900 shares outstanding. Therefore, the potential payouts that I have calculated in my article are 2x too high.

    With this correction, the company stills trades at less than cash on the balance sheet and the Kelly Formula stills says that this is a favorable bet, but the optimal bet size is much smaller now.

    Thank you Josh84 for pointing out my mistake.
    Dec 22 11:30 AM | 2 Likes Like |Link to Comment
  • Fairfax Financial Holdings Limited Management Discusses Q3 2012 Results - Earnings Call Transcript [View article]

    I believe that the worst case scenario is that Fairfax owes $400 million in taxes. With a little over 20 million shares, that comes to a decrease in book value of approx $20 per share. The current share price is approximately equal to book value per share (typical for insurance companies).
    Dec 9 03:01 PM | Likes Like |Link to Comment
  • Is Whiting Petroleum Worth $15 Billion? [View article]
    Michael - It's difficult to give a satisfactory answer to your question without writing an entire article myself, but I will try. There are many, many variables at work.

    I generally like to buy at a discount to the PV10% value of the proved + probables (the most likely value of the esitmated booked reserves) and get the unbooked resource potential for free. However, that is a little oversimplistic. Oftentimes the unbooked stuff is clearly worth a lot. In the Bakken there is a lot of unbooked potential in tighter spacing, deeper Three Forks benches, improved technology/recovery, etc.

    Statoil, QEP, and Exxon clearly paid a lot for the unbooked stuff. Statoil may have paid up as a kind of tuition to learn the fracking trade. All three may have figured that they could increase the present value by accelerating their drilling campaigns (dollars in the near future are more valuable than dollars in the distant future). I will leave you with a link to article comparing the valuation metrics of the Brigham/Statoil deal to Petrobakken.

    Dec 3 07:10 PM | Likes Like |Link to Comment
  • Is Whiting Petroleum Worth $15 Billion? [View article]

    Thank you for contributing to this thread. As Whiting noted in their presentation,"Pre-tax PV10% may be considered a non-GAAP financial measure as defined by the SEC and is derived from the standardized measure of discounted future net cash flows....Pre-tax PV10% is computed on the same basis as the standardized measure of discounted future net cash flows but without deducting future income taxes."

    The SEC calculation does not assume a 10% return, but rather a 10% discount of future cash flows. The concept of discounting future cash flows to present value is explained in the following Kahn Academy video:

    Proved reserves are "reasonably certain" to be recovered. Probable reserves have a 50% chance of being recovered. Theoretically speaking, the ultimate recovery of proven + probable reserves are equally likely to be either more than or less than the estimated amount. Resource potential requires a discount. Yes, these are all still just estimates and you have to exercise some judgement, but unconventional plays are more repeatable the conventional plays. There are "no" dry holes in the Bakken.

    Dec 2 10:41 AM | Likes Like |Link to Comment
  • Is Whiting Petroleum Worth $15 Billion? [View article]

    Thank you for writing this article. As noted in Whiting's presentation, "Oil and gas reserve quantities and related discounted future net cash flows have been derived from oil and gas prices calculated using an average of the first-day-of-the-month NYMEX for each month within the 12 months ended December 31, 2011, pursuant to current SEC and FASB guidelines."

    Dec 2 10:08 AM | Likes Like |Link to Comment
  • Canadian Natural Resources Believes The WTI Discount To Brent Will Disappear In The Near Future [View article]
    Canadian Oil Sands made the same argument in their November 13th presentation - webcast link below:

    Check out the 19:00 thru 22:00 time frame for the relevant comments.
    Nov 22 04:05 AM | Likes Like |Link to Comment
  • Penn West Exploration Is Trading Well Below Intrinsic Value [View article]
    Uncle Pie,

    Penn West does have some operational challenges. In the Investor Day Presentation (link in main article) the company states that their capital efficiencies are $47,000/boe/d with a goal of reaching $35,000 - $40,000/boe/d in 2013. When asked about future growth in the 3Q2012 conference call (link for transcript below), the CEO stated "if you want to be in a growth mode, you've got to be in that 35,000 to 40,000 barrel with a cap efficiency and we're not there yet. We've done a lot of appraisal, a lot of build out. So I think there is still a progression of time while we, I would say, tighten our skill sets and demonstrate that consistency. Once we have then we would contemplate growth."

    I find it refreshing that the company is open about their challenges and has a plan to address them. I suspect the reason that the stock has performed poorly is because the market is expecting a growth company and to quote the CEO again "we're not there yet."
    I believe that the company is properly addressing their challenges and I feel comfortable that shareholder value will be realized from these price levels.
    Nov 10 09:24 AM | 1 Like Like |Link to Comment