Seeking Alpha

Zoltan Ban

 
View as an RSS Feed
View Zoltan Ban's Articles BY TICKER:
  • This Is Why Oil Prices Will Remain Weak For Some Time And Shale Oil Will Get Hurt
    Fri, Oct. 17 USO, OIL, SCO 20 Comments

    Summary

    • Lower demand growth, coupled with decent supply growth, is leading prices lower. Assumption of healthy global economy at $100 oil flawed.
    • Supply destruction not likely to happen, not necessarily because everyone is making money at lower prices, but because companies especially in shale need to show ramp-up in place of profits.
    • Supply destruction will only occur when investors will no longer be willing to finance unprofitable shale drilling projects and as cutbacks in exploration and deep-water drilling will affect long-term supply.
  • EOG Resources: Resilience In The Face Of Lower Oil Prices
    Wed, Oct. 15 EOG 10 Comments

    Summary

    • Oil prices should be expected to be soft for quite some time to come. That means that shale producers, will be further pressured financially.
    • EOG Resources is one of the few companies able to turn a net profit, while many companies are still spending twice as much as they earn in revenue.
    • The secret to EOG's relative success in shale is the quality of the acreage it is sitting on.
  • Sanchez Energy: Company's Prospects In The Face Of Lower Oil Prices
    Thu, Oct. 9 SN 19 Comments

    Summary

    • In the face of a seemingly sustained period of lower oil prices, shale producers seem to be particularly vulnerable, as they are already having difficulties matching costs with revenues.
    • There is a danger of a shale-related bond exodus occurring as realization sets in that operations will continue to be financed through debt for a long time to come.
    • Sanchez Energy will likely manage to at the very least cover drilling costs through revenue next year, but the Catarina project acquired from Shell will act as a drag.
  • Lower Oil Prices Could Lead To The Shale Debt Bubble Bursting
    Tue, Oct. 7 CHK, RDS.A, USO 52 Comments

    Summary

    • Shale oil and gas drillers can barely cover drilling costs from production-generated revenue. Far from covering all costs of operation.
    • The current oil price slump may benefit the economy, but could hurt one of the main pillars of economic growth, namely the main actor responsible for the global oil production increase.
    • Weak global economic performance seems to continue, which can lead to a sustained period of lower oil prices until supply destruction will occur. Shale oil is a prime candidate.
  • Tesla's Best Month Ever In The U.S.: Do Not Get Carried Away
    Thu, Oct. 2 TSLA 326 Comments

    Summary

    • Tesla had its best month of U.S. sales ever, but sales still down quarter on quarter.
    • Other major markets such as Norway showing signs of weakness.
    • Tesla needs to sell 13,000 units in Q4 to meet its 35,000 unit sales target for 2014.
  • Ebola Outbreak Threatens To Make Chocolate An Expensive Luxury
    Wed, Oct. 1 MDLZ, KRFT, HSY 4 Comments

    Summary

    • West African cocoa production makes up about 70% of total global supply.
    • Ivory Coast and Ghana which account for 60% are still unaffected by the outbreak directly, but border closure is affecting worker flow to cocoa farms.
    • If the area's production is completely disrupted, there is opportunity in the cocoa commodity as well as great risk to many companies that use it as ingredient.
  • China And The EU Becoming Direct Competitors For Russian Gas Could Hurt U.S. LNG
    Fri, Sep. 26 D, OGZPY, SO 29 Comments

    Summary

    • After signing a $400 billion gas deal earlier this year, Russia and China are already talking about another one. This time the gas will come from fields currently supplying the EU.
    • The LNG potential market will likely shift from Asia to Europe as a result of less Russian gas to the EU and more to Asia.
    • LNG producers will find it difficult to get the current price they fetch in Asia for their product from the economically fragile Europeans, leading to severe losses.
  • No Inflation Means Debt Burden Much Heavier
    Wed, Sep. 24 GLD, SPY, VGK 7 Comments

    Summary

    • Last few months of data out of the EU and the US show that inflation trends are on a decelerating path.
    • Low growth combined with low inflation makes for much lower nominal economic growth, which leads to a trend of increasing debt loads, at lower interest.
    • Once the factors that led to the current stock rally, such as low inflation and stock buybacks, dissipate, it will be very hard to start another one.
  • Shell's New Direction
    Thu, Sep. 18 RDS.A, RDS.B 1 Comment

    Summary

    • Shell is in the middle of consolidating and divesting from less promising or unprofitable projects..
    • New emphasis seems to be on the pursuit of value added through downstream projects. Company has been in the midst of probing and exploring potential opportunities..
    • With little chance of Shell being able to increase upstream production given the overall downward trend faced by global oil & gas majors, pursuit of downstream good idea..
  • The Russia-EU Economic Confrontation: Round 2
    Fri, Sep. 12 F, BA, RSX 28 Comments

    Summary

    • EU to impose new sanctions on Russia today. Russia will likely retaliate as it did the last time the EU imposed sanctions.
    • Russia is also enforcing its gas embargo on Ukraine. It cut down on exports to Poland, Slovakia and Germany in order to prevent reverse flows into Ukraine.
    • The EU and Russia could both slide into economic contraction this year as a result of the economic confrontation, which seems to have no end in sight.
  • Looking Ahead To The Next Recession
    Tue, Sep. 9 EU, GOVT, PLW 51 Comments

    Summary

    • The beginning of the next recession will find the economies of the U.S. and the EU still fighting the effects of the 2008 crisis.
    • Because of already low interest rates, low inflation as well as high debt loads, government's ability to fight the next recession will be impaired.
    • A further problem is the lack of wage gains and lack of jobs for the middle class. It might trigger a cultural shift among the Western consumers.
    • In the face of such an economic environment, it is important to start identifying the products and services that are vulnerable, or resilient in the face of this adversity.
  • Morgan Stanley Betting On EU Energy Supply Disruption
    Fri, Sep. 5 Comment!

    Summary

    • Morgan Stanley bought 77% of all stored diesel traded on the EU market in July and August.
    • Meanwhile the turf war between the West and Russia over Ukraine continues, fueled in large part by months of Kiev's refusal to talk to the rebels directly.
    • As winter approaches, some positive signs of peace, but may be too late to also tackle the other more important but less reported crisis, namely the gas dispute.
  • Tesla's China Bet
    Wed, Sep. 3 TSLA 224 Comments

    Summary

    • Tesla is betting on success in China this decade, hoping it will become by far its best market. It just announced a deal with China's Unicom to build 400 charging stations.
    • China's demographic includes fewer millionaires compared to the US, as well as a very thin strata of high-earning professionals, therefore smaller potential market for luxury cars.
    • China's EV market has some potential but competition is already starting to intensify, while Tesla is years away from having a factory there.
  • Abaxis And The Point Of Care Trend
    Fri, Aug. 22 ABAX 3 Comments

    Summary

    • Point of care diagnostic technology will likely play an increasing role in the health industry as it will become more de-centralized.
    • Piccolo by Abaxis is a point of care system which already has the capacity to self calibrate and provide dozens of tests from one single sample.
    • This technology should be viewed as a great platform for evolution in the diagnostics field, able to accommodate long-term changes in the health care system.
  • Ukraine Crisis: The Beginning Of The EU-Russia Economic War
    Wed, Aug. 13 BA, BP, GM 30 Comments

    Summary

    • Tough EU economic sanctions led to Russian retaliation in the form of a ban on EU agricultural products.
    • This shift in Russian policy puts us firmly in a new era of tit for tat measures, which will be particularly painful for the already struggling EU economy.
    • Worst-case scenario is a severe global economic downturn, triggered by retaliation by Russia in case that its back is to the wall. It would involve using the oil weapon.
  • Tesla Will Become The Victim Of Its Own Success
    Fri, Aug. 8 TSLA 500 Comments

    Summary

    • Tesla is currently priced as if it is selling hundreds of thousands of vehicles per year, while in fact sales will be only 35,000 units for 2014.
    • To justify current stock price, it will need to achieve its 2020 goal of selling at least 500,000 units per year.
    • Increasing competition as well as likely loss of Federal EV subsidy long before many competitors, are great impediments to coming close to such a high sales volume.
  • Exxon Q2 Results: Continuation Of Almost Decade-Old Oil Production Slide Confirmed
    Tue, Aug. 5 XOM 12 Comments

    Summary

    • Exxon-Mobil oil production continues its almost decade old decline, which is confirmed by the latest quarterly statement.
    • Strategy to defend stock value, includes stock buybacks and generous dividends.
    • It doesn't look like there are many opportunities out there for Exxon-Mobil to reverse its production decline, calling into question its ability to defend company's value in the long-term.
  • Bakken Oil Production Per Well Declined 11% From 2012 High
    Tue, Jul. 29 USO, OIL, UCO 25 Comments

    Summary

    • Bakken average production per well declined from 2012 high of 142 b/d to 126 b/d this year.
    • Main reason for this decline is the end of the exponential growth in total number of wells year on year.
    • As a result of this trend, yearly production gains from the Bakken will be smaller with every year that passes.
  • BHP Billiton: Winner Of Australia's Carbon Tax Repeal
    Wed, Jul. 23 BHP 5 Comments

    Summary

    • BHP stands to gain about $77 million per year from the repeal of the Australian carbon tax worth about a total of $7 billion.
    • It is not a significant sum, given the size of company.
    • The impact on the company depends very much on what it decides to do with the money.
  • Crisis In Ukraine: Path To Peace Or Disastrous Economic Confrontation...
    Sat, Jul. 19 BP, XOM 57 Comments

    Summary

    • Before the Malaysian flight tragedy, I argued that a mutually destructive economic confrontation between the West and Russia is not likely to happen. This is a game changer.
    • The effects of such a confrontation (it is going to spiral out of control) can lead to global economic chaos for the rest of the decade and perhaps beyond.
    • Given past months of rhetoric on this issue, it is now hard for the West to formulate a responsible policy in this situation, therefore Russian capitulation only way out.
  • 5 Reasons To Be Cautious On Expectations Of A Continued Market Rally
    Thu, Jul. 17 RSX, VGK, SPY 10 Comments

    Summary

    • Geopolitical threats such as the ones in Iraq and Ukraine can derail the current stock rally. Main threat comes in the form of disruptions to energy flows.
    • US and Canadian oil production increase since 2008 accounts for all global liquid fuel production increase. Increasing signs of slowdown in US fields reason to worry about global growth.
    • The fact that median household income is down about 10% in real terms since 2007, but stocks are up about 20% since then exposes unsustainable rally.
  • U.S. Oil Sands: Interview With American Sands Energy's Management
    Wed, May. 28 AMSE 5 Comments

    Summary

    • US oil sands commercial scale production is likely to start next year and is likely to take off.
    • American Sands Energy Corp will start production two years from now if all goes well and is likely to be the most likely candidate as a model due to water-free process.
    • Compared to Canadian oil sands extraction, there seem to be enough advantages to make US oil sands more profitable, therefore we should expect extraction to be viable.
  • Ukraine Crisis: The End-Game Is Set
    Thu, May. 22 X, BHP, RSX 52 Comments

    Summary

    • Ukraine crisis is entering the stage where all involved from outside can find no point to pushing their agenda any further, therefore, a disengagement is desired.
    • Russia's intentions were badly misunderstood, which is something we can now see more clearly. No further annexations likely. Russian assets should rebound.
    • United States and Russia relatively unaffected economically due to crisis. Main victims are the EU and Ukraine.
    • Ukraine geopolitical event will have lasting effect on the global economy, which we are already seeing in the form of the Russia-China gas deal or EU-Russia decline in trade.
  • Oil Production: An Indicator Of Future Economic Growth Prospects
    Thu, May. 15 USO, OIL, UCO 16 Comments

    Summary

    • Low global economic expansion since 2008 can be linked to liquid fuel production growth. Trend will most likely continue.
    • Global production of liquid fuels would have declined in 2013 without the US' increase of 1.2 mb/d, mainly on the back of shale oil, the effects of which will diminish.
    • Healthier growth rates may only return when current relationship between global liquid fuels growth and economic growth is broken, and growth becomes less reliant on it.
  • Oil And Gas Giants Continue To Shrink In 2014
    Wed, May. 14 BP, CVX, RDS.A 17 Comments

    Summary

    • After Exxon-Mobil, BP, Shell and Chevron all suffered production declines in 2013, this year is shaping up to be a repeat of last year, establishing a clear trend.
    • Causes include resource nationalism, depleting old fields, and lack of new conventional discoveries.
    • Consequences include an eventual decline in the industry's ability to undertake challenging and capital intensive risks on frontier opportunities such as deep water exploration.
  • Tesla Vs. Renault: Low Cost, Not High Cost, Is The Future.
    Tue, Apr. 29 TSLA 295 Comments

    Summary

    • Tesla's current market cap in the $26 billion range not justified by current performance, including sales volume. Current bets are based on exponential growth, which is doubtful.
    • The real story of exponential growth is in the low-cost vehicle category, as evidenced by Renault's Dacia brand performance, which offers cars for less than Tesla's current battery costs.
    • Based on past experience such as with the hybrids, EV's will not sell more than a million units per year a decade from now, therefore Tesla is overvalued.
  • Ukraine Crisis, Part 2: Mis-Priced Risks
    Wed, Apr. 23 RSX, RUSL, ERUS 63 Comments

    Summary

    • Ukraine and Western diplomats fell into a trap at the Geneva meeting, due to a self-enforced belief in the validity of own position. Geneva deal exposes and highlights illegitimacy of Kiev government.
    • Recent display of Western diplomatic incompetence may be a sign that we can expect further mishandling of the situation, including possibly unleashing a destructive economic conflict.
    • The only way out, which still offers the option of avoiding significant economic consequences, is a Western retreat from its position.
  • Ukraine Crisis, Part 1: Opportunities
    Thu, Apr. 17 AMYZF, CHK, X 29 Comments

    Summary

    • Geneva summit agreement reached to diffuse the crisis. Implementation is not guaranteed to succeed and even if it does, the path will be rough, likely economic disruptions.
    • Steel producers such as US Steel and BHP Billiton, which produces manganese, could benefit from Ukraine economic disruptions given its leading role as a producer.
    • Other likely beneficiaries might be US shale oil and gas companies given Europe's realization that it needs more energy independence.
  • Bakken Production Per Well Declining At A Rate Of 0.7% Per Month
    Wed, Apr. 16 35 Comments

    Summary

    • Bakken production per well has been in decline for 20 months now, and is down to 126 barrels per day in February, from high of 144 in June 2012.
    • Production at the field will continue to increase, but rate of increase will be significantly slower than the impressive year-on-year increase experienced in 2011-12.
    • Serious implications for US and global economy which became dependent on shale oil production gains which are responsible for large portion of global production gains in past years.
  • Chesapeake Energy's LNG Bailout - It Might Not Be Enough
    Fri, Apr. 11 CHK 30 Comments

    Summary

    • Chesapeake has been losing a lot of money over the past half decade on its shale investments.
    • The commencement of LNG exports starting next year will likely provide some favorable natural gas price gains from the point of view of producers.
    • A price increase in natural gas may not be enough to save Chesapeake and others from losing money, partly because maturing fields will cost more to produce.
  • Abbott: April's Long-Term Pick
    Wed, Apr. 9 ABT 11 Comments

    Summary

    • I chose Abbott for April as part of my long-term monthly stock pick focused on companies with resilience and ability to thrive in the face of slow economic growth.
    • It may be currently slightly overpriced, but it has many products, such as Similac, which we can expect to continue selling, even as the global economy remains slow.
    • I-STAT is an innovative diagnostics portable and wireless tool Abbott provides, which can be the foundation of future innovation which will change medical practice methods.
  • Russia Looks Attractive
    Fri, Apr. 4 RSX, OGZPY, RUSL 32 Comments

    Summary

    • Recent sell-off of Russian assets based on geopolitical concern out of step with current reality.
    • Russian companies like Gazprom likely to experience increased demand for gas exports because of new opportunities to sell in Asia.
    • There are real concerns with Russia's economic performance potential, which is what markets should focus on when evaluating value. The threat of gas shipment disruption due to the Ukraine situation still possible.