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  • Noble Corp. - Lessons Learned And Steps Forward [View article]
    It's never fun to say "I was wrong". But if misery loves company, you've got it. Not many of us thought oil would fall this hard, this quickly.

    Obviously, oil will recover to some extent, this price deck for gas and oil will not sustain sufficient investment to keep supply at 93MM bpd. But how much, and when?

    If it recovers to $80 later in '15, it's game on again for the drillers, with NE at the head of that pack. If it takes a year to creep back to, say, $60 and shows no sign of longer term strength, stay away from deep water drillers.
    Jan 24, 2015. 01:47 PM | 4 Likes Like |Link to Comment
  • Time to sell drillers as Petrobras cuts rig rates, analyst says [View news story]
    Yeah, a forward multiple of about 9. A fat and sustainable dividend. I'm not sure how that makes ESV a "sell". This is a very late call, IMO.
    Aug 19, 2014. 07:01 PM | 8 Likes Like |Link to Comment
  • Think tank says investors should weigh risks of big high-carbon projects [View news story]
    Same song Al Gore is singing..... "All That Carbon's Staying in the Ground." Which strikes me as unlikely given the slow adoption of electric cars and the tiny portion of world energy that comes from renewables.

    PBR would, of course, be vulnerable to lower oil prices. But that happening for the reasons that this think tank is suggesting is not even in the top 5 things I'd worry about as a PBR investor.
    May 8, 2014. 07:22 PM | 6 Likes Like |Link to Comment
  • Petrobras said to secure $1.8B loan for refinery [View news story]
    The math here is outrageous. The capital cost per barrel is like nothing else in the world. 20b/235k bpd.... Around 85k per barrel.

    Compare the cost per BPD capacity, with, say, the Jamnagar complex built by Reliance (said to be about 10k). Pick any brown field or green field refinery purchase or addition in the US, most would be around 15-20k.

    This is an example of how the corruption and ineptitude of PBR goes far beyond the subsidizing of Brazilian drivers at the expense of shareholders.
    Apr 8, 2014. 08:28 PM | Likes Like |Link to Comment
  • Barclays cuts targets for offshore drillers, sees potential 40% downside [View news story]
    Barclays has been waving this particular red flag for a while now, so hearing it for the 2nd time kinda loses it's impact.

    While I can see, and am concerned by, signs of over-supply and day rate weakness in the mid term, the sector has already had a painful 15% correction. It's earnings , assets and cash flow multiples are all well below the broad market and most of the sector's members pay generous dividends. Some pay very high dividends.

    So, while I can see how the sector might slip lower for a period of time, I consider a further 40% correction a laughably unlikely call. If you want good analytical work on the drillers, check Morgan Stanley, skip Barclays.
    Apr 8, 2014. 04:03 PM | 6 Likes Like |Link to Comment
  • Noble Corporation: A Solid Bargain [View article]
    While intelligent people can disagree about which valuation metric to use, when you look at EV/EBITDA (which i like because it implicitly considers the risks of debt), NE is clustered around 7 along with RIG and ESV. SDRL and PACD are closer to 12.

    On a forward PE basis, NE is actually projected cheapest at 6.7, RIG is 8.1, ESV is 7.7, SDRL is 10.4 and PACD 12.6. As I said, intelligent minds can disagree, and I guess I disagree with the words "most expensive" being appended to Noble, given it's almost perpetual status as the least respected (in terms of multiples) name in the sector.

    I have added some NE and ESV on this downward leg, the latter seems particularly interesting on any additional weakness, given it's 6% dividend.
    Feb 9, 2014. 10:58 AM | 5 Likes Like |Link to Comment
  • Noble: 5 Reasons Why This High Yielding Stock Is A Bargain And Ready To Rebound [View article]
    I agree with your assessment, but it's probably worth noting the dividend ex date is Feb 6th.
    Feb 5, 2014. 09:45 AM | 1 Like Like |Link to Comment
  • Mr. Market Discounts Petrobras 50%, Time To Buy [View article]
    You actually want lower gas sales in the domestic market, as they lose money on each imported (and re-marketed) liter. Perverse, huh?

    But what can't continue, won't continue. Change will come to Petrobras.

    Perhaps the outright losses will be stemmed if/when the long overdue, hugely over budget refinery projects come on line. Perhaps the subsides will just have to be stopped, as the market says "no more borrowing". Perhaps they'll get a better government.

    I'll leave it to nervier folk than me to "invest" in this opaque mess. I like to invest in businesses I understand, and this fails on both counts at the moment. It's not a business. And I don't understand when or how it will become one again.
    Feb 3, 2014. 06:55 PM | Likes Like |Link to Comment
  • Noble Corp. An Attractive Buy After Drop [View article]
    We are in a weak part of the cycle for drillers, in that while day rates have only declined marginally, there are probably more new rigs coming on line over the next 2 years than can be comfortably absorbed. Things are going to slacken a bit. As was said in the NE conference call the other day, the first half of 2014 will be a bit weaker, in terms of tenders, than 2013 has been.

    Having said that, a 20% correction seems excessive, considering the amount of work in NE's backlog and the minor trimming to EPS estimates being made.

    This is an old story, the drillers tend to swoon at the slightest sign of cynical trouble. And they always crawl back. This nearly certain recovery is not hurt by the fact that NE is pretty cheap at the moment in terms of historic PEs, DCF valuations, EV/EBITDA, etc...

    Reader might pull a 5 year chart of NE and see how many sharp correction there have been. Lots. And more than a few times the stock price found it's footing in the lower 30s. The past is no guarantee of the future, but my experience (and money) say this is just another over-reaction.
    Jan 24, 2014. 07:55 PM | 7 Likes Like |Link to Comment
  • Mr. Market Discounts Petrobras 50%, Time To Buy [View article]
    "Smart" is not an adjective I'd apply to myself for much of what I did with with PBR between 2010 and 2013. Selling was the only good decision, and a tardy one.

    I was reasonably smart and lucky back around 2000, when I figured out that the market was way too afraid of Lula as president. That was a brilliant opportunity, one that led to a 700% total return in PBR.

    Maybe when there's a new, pro-business administration, that chance will come again. I'll wait, but good luck to you in the mean time.
    Jan 23, 2014. 03:42 PM | 1 Like Like |Link to Comment
  • Mr. Market Discounts Petrobras 50%, Time To Buy [View article]
    This is not a normal stock, it is a minority interest in an enterprise that is, and will always be, controlled by the Brazilian government. Minority holders are miserable, with good reason.

    The majority owner, on the other hand, is happy. Fuel prices have been subsidized for years and that makes their voters happy. Refining projects can be stupendously over cost and it does't matter, because all the work in kept in country. Dividends canceled?, well, that may be a problem for the minority owners, but the government is getting paid in multiple other ways, so it's of little import to them. It's a bottomless slush fund, an endless subsidy, a jobs program, a way to steer money to a historically noncompetitive ship-building industry.....

    Sure, PBR is awash in reserves, although most of those barrels would be categorized as very expensive marginal production. Sure, the stock is at half of book value, and that would mean a lot if the company was private. But it's not. It's an arm of the state. A state that's pretty happy with the deal it's getting.

    I sold the last of my PBR 50% ago, after having given back a big share of the huge profits I made in this company in the balmy days when Lula kept his hands (mostly) out of the cookie jar. I clung to the vision of huge reserves, the low valuations, etc.. until I belatedly realized that the majority owner had distinctly different interests than mine. I'll not look at PBR again until there's a new government that respects shareholders.
    Jan 22, 2014. 09:50 PM | 10 Likes Like |Link to Comment
  • Petroleo Brasileiro: Buy When Others Are Fearful [View article]
    This is not a company so much as a branch of the Brazilian government, which roundly abuses shareholders (to the tune of billions) by subsidizing fuel prices, local shipbuilding and perhaps the most over-budget refinery projects in world history. There are some damned good reasons why the stock is so cheap.
    Dec 26, 2013. 02:38 AM | 6 Likes Like |Link to Comment
  • Petrobras: Retail Fuel Price Hikes Fail To Impress [View article]
    The weird thing is this, shareholders were terrified when Lula was elected a dozen years ago. His political past was leftist to a degree than from an American perspective we'd short-hand it and call him a communist. But he surprised everybody by keeping his hands off the golden goose, PBR was arguably the best state-owned oil company in the early 2000s, and it was a rocking good place for share holders to be. That good run ended in about 2007, with the discovery of the pre-salt oil, which made Lula lose all perspective on Petrobras as a business. Dilma has been horrible from the get go.
    Dec 3, 2013. 12:49 PM | 1 Like Like |Link to Comment
  • Petrobras: Retail Fuel Price Hikes Fail To Impress [View article]
    That chart is outstanding, a visual indictment of how the government has been abusing shareholders.
    Dec 2, 2013. 02:15 PM | 2 Likes Like |Link to Comment
  • Petrobras would consider re-opening refinery partnership with PdVSA [View news story]
    Recent "green field" refineries in the US (such as Hyperion) have come in closer to $20-25,000 per daily barrel capacity.

    By comparison, this refinery, originally slated for 235k barrels a day, started at a reasonable estimate of around $4B, and now is over $17B, with estimates running as high as 20. Although the final figures aren't in, it appears that the project will cost more than comparable projects by a factor of between 3 and 4 times.
    Sep 26, 2013. 10:11 AM | Likes Like |Link to Comment