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Wilson Wang  

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  • NOW, Inc. - Now Is The Time To Buy [View article]
    I think that's a very fair statement. I agree that this stock will test the patience of the "long-term" investor.

    It is a cyclical industry, but the companies that have the biggest scale also has the greatest local economies of scale. That coupled with IOCs consolidating provides for tremendous tailwind once the economy recovers. I refer to the business model as counter cyclical. It reminds me a lot of Peyto, which is an O&G comp that has a counter cyclical business model because of its lean cost structure. Cyclicality provides both risk and return.
    Jul 29, 2015. 01:59 PM | 1 Like Like |Link to Comment
  • NOW, Inc. - Now Is The Time To Buy [View article]
    Very insightful comments. I think all the comments are very helpful in our investment process as well, and we welcome more inputs.

    We've added at these levels, and if it gets lower, that's fine with us. I think there's a lot of headwinds going forward with regards to the E&P sector. A lot companies will downsize exploration teams, and it's shown in the rig count numbers. Historically speaking, it has correlated quite close with rig counts. I really think DNOW is a long term investment, perhaps my title on the article is a little deceiving, but I do think the time to consider a buy is now. The sentiment is awful, and with the counter cyclical cash flow profile + m&a at dirt cheap valuation, it really helps enhance the underlying value of the business.

    Could it be bought cheaper here? Definitely, but I don't have a crystal ball, so i try and be as disciplined as i can with my buy and sell timing.
    Jul 28, 2015. 04:36 PM | 1 Like Like |Link to Comment
  • NOW, Inc. - Now Is The Time To Buy [View article]
    Agreed. MRC is hugely attractive at this valuation.
    Jul 28, 2015. 04:31 PM | Likes Like |Link to Comment
  • NOW, Inc. - Now Is The Time To Buy [View article]
    Agreed. 17% of the float is shorted, there has to be a good reason?

    We were initially short this in the 30s, the valuation didn't make sense, but covered as we really liked the business after careful analysis.

    There's a lot of scale advantages in the distribution business model especially when IOCs start to consolidate. It will be interesting, but there's definitely risk. I think the DNOW short report is publicly available on VIC, and the author had a pt of 15-20.
    Jul 28, 2015. 02:13 PM | Likes Like |Link to Comment
  • NOW, Inc. - Now Is The Time To Buy [View article]
    It currently trades around 12x forward ebitda. But we can all agree to disagree on terminal, as I'm no expert in predicting what the market will do. Even at 8x, it's still more than a double.
    Jul 28, 2015. 01:45 PM | Likes Like |Link to Comment
  • NOW, Inc. - Now Is The Time To Buy [View article]
    EBITDA for DNOW is in essence earnings due to the super low maintenance capex.

    AVT has a maintenance capex of around 100 mil give or take per year versus DNOW's 15 mil maintenance capex. This depresses the EV/EBITDA multiple quite a bit.

    I think you will note the differential there, and MRC currently trades at a depressed EV/EBITDA due to its debt load.
    Jul 28, 2015. 01:17 PM | Likes Like |Link to Comment
  • NOW, Inc. - Now Is The Time To Buy [View article]
    Yes, VIC has a great write up.

    There's a short and a long written up there.

    I don't think goodwill is appropriate in the calculation of return on invested capital. Return on invested capital is just free cash flow or EBITDA - maintenance capex in this case over fixed assets plus non cash assets. I think that's a better way of gauging the overall profitability of DNOW. The primary reason being that DNOW derives most of its return on capital in the form of redistributing its inventory. So an investor has to think of the return really generated by the spread being sold on the product over the cost of just maintaining the business. Goodwill doesn't really play a part, because acquisitions are being done on a fixed asset basis and inventory basis, hence the depressed valuation of some of the recent acquisitions.
    Jul 28, 2015. 12:58 PM | 1 Like Like |Link to Comment
  • NOW, Inc. - Now Is The Time To Buy [View article]
    Great comment.

    Upstream is separated into different categories of products, some are associated with new capex, and some are associated with just maintaining current drill operations. I agree that the overall upstream exposure is around 50%, but the ones that's directly correlated to new capex (e.g. new drilling) is roughly 25%.

    MRC is great. It's already a sizable player, and it is much cheaper on an EV/EBITDA basis.

    Both should work, but DNOW can have much more runway given the margin improvement and continued acquisition strategy.

    Thanks!
    Jul 28, 2015. 12:52 PM | 2 Likes Like |Link to Comment
  • Chesapeake Energy: If You Were Disappointed By The Recent News, Don't Be [View article]
    Todd,

    Full disclosure: we aren't short CHK. We are very long energy companies and have been down due to everything being sold off. And we are extremely bullish on natural gas.

    My intentions are simple, I want to be able to understand Chesapeake. Its asset base is of high quality. I've studied Antero and Range Resources extensively and due to similar acreages, I understand the value Chesapeake has.

    Reading through your comments, you don't give any light on the needed capex just to MAINTAIN current production levels. E&P companies aren't like other businesses where you put in capex, you are done. The formations CHK is in have high first year decline rates which puts additional burden on the base decline rates. My encounter so far with good plays have been that the U.S. shale plays experiences a much faster decline rates than some of the Canadian players. So really, your comment with regards to operating cash flow being over 1 billion is great, but it doesn't take into context the capex needed to be spent year after year just to stay flat.

    Do you have a model built out for CHK? If so, would you be willing to share it?

    I would love to take a look at it.
    Jul 24, 2015. 11:08 PM | 1 Like Like |Link to Comment
  • Chesapeake Energy: If You Were Disappointed By The Recent News, Don't Be [View article]
    Greatly appreciate the comment.

    Any insights as to maybe decreasing costs substantially for CHK to weather the storm. Darren Gee, CEO of Peyto, alluded to drilling costs declining along with oil prices during my one on one meeting with him. He also alluded to the amount of cost associated with the disposition of water fluids.

    Many O&G comps we looked at have expressed interests in cutting capex to stay afloat, but also has the asset base that can support productions (e.g. Lower base decline rates.)

    Thanks again for your insights.
    Jul 24, 2015. 11:42 AM | 1 Like Like |Link to Comment
  • Chesapeake Energy: If You Were Disappointed By The Recent News, Don't Be [View article]
    I share the same concerns as you.

    Raw Energy,

    Someone informed me that CHK needs to spend $3.2 billion a year to keep productions flat. We calculate current run rate cash flow at around $1 - $2 billion assuming aggressive assumptions.

    Even if we imply that CHK earns 2 bil in cash flow, the depletion rate will be greater than cash flow. The cash pile can last at least 3 years.

    Are the assumptions correct? Just trying to get a sense of what's going on.
    Jul 24, 2015. 10:51 AM | Likes Like |Link to Comment
  • Chesapeake Energy: If You Were Disappointed By The Recent News, Don't Be [View article]
    We don't follow the company.

    To clarify my statement, I didn't imply a dilution will incur. But in order to keep productions flat, company will need to spend x. Assuming commodity prices stay low for 3 years, what's the probability of a capital raise?

    I think it's obviously clear from the article that CHK is undervalued. But just trying to get a sense of the cash flow and the current capex modeled out going forward. No models presented, so just trying to get a clearer picture.
    Jul 24, 2015. 10:08 AM | 1 Like Like |Link to Comment
  • Chesapeake Energy: If You Were Disappointed By The Recent News, Don't Be [View article]
    Hi Todd,

    Thanks for the article.

    i have a few questions in mind.

    What's the current capex required to keep production volumes flat going forward?

    How will the balance sheet look with the capex guided?

    Will it be able to LIVE off of its cash flows?

    Are there plans to cut costs?

    How much does water disposal cost in terms of BOE for CHK for the different plays it has?

    What are the company's plans going forward with liquidity concerns?

    The stock is obviously trading as if additional dilutions will occur. A lot of E&P names are, and I believe the key really is to talk to management and understand that the risk of dilution or a restructuring isn't on the table. Asset values are great, and your assumptions are great at the present moment given a strategic acquirer is willing to take on a behemoth like CHK.

    Remember, capex is always needed year over year just to keep productions flat. So a lot of junior O&G comps will file for bankruptcy before next year. The golden eggs are found when the a company's balance sheet is not that great, but just good enough to outlast this downturn, and the company has an amazing asset base. Cost is key, and so is the management's ability to reduce cost.

    Thank you,
    Jul 23, 2015. 10:31 PM | 1 Like Like |Link to Comment
  • SunEdison Semiconductor - My Best Idea For The Rest Of 2015 [View article]
    Great article bud. Keep up the good work!
    Jul 8, 2015. 06:48 AM | Likes Like |Link to Comment
  • Bellatrix Exploration Trades At Significant Discount To NAV [View article]
    Well, Orange just bought more and so did the insiders.

    I'll help you put into perspective the liquidity of the situation.

    The time it takes my fund to build a position in this is more than 2 weeks. I can't possibly imagine some hot shot hedge fund trying to dump more than a 2 million + position. It would take weeks given that the liquidity dries up the moment orders are being placed.

    So whose on the other side? I don't know and I don't care. But whoever it is selling this to us, I applaud them and wish they did it in larger chunks.
    Apr 18, 2015. 11:56 PM | 3 Likes Like |Link to Comment
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