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  • Offshore Drilling: Discussing The Future Of The Industry [View article]
    You are ignoring SPS costs after 5 years that would have to be taken for some operators and other costs like pensions for crews that would make it nonviable even with operating coverage.

    There is also a sense of capital investment in some markets like Gulf of Mexico, that won't be taken and rigs supply/demand would be severely disruptive, or Brazil.

    Imagine if your an oil company taking a decision to do a well, and you get bids for work and none of them are as low as you want, but you got permits and plan on doing the well. Theoretically the market should accommodate you but realistically you won't get any service unless you increase cost for the job.
    Oct 27, 2015. 03:47 AM | Likes Like |Link to Comment
  • Keryx: Analyzing The Baupost Transaction [View article]
    will continue to implode as future quarters losses increase until script traction shows break-even possibility somewhere down the line probably in six to nine months.
    Oct 18, 2015. 06:45 PM | 1 Like Like |Link to Comment
  • Reeds: Slow Quarter Reveals Premium Valuation [View article]
    Nobody realizes the actual danger this company is in, if one considers their debt and when it is due. Their next quarter(s) should be fairly bad due to actual shut down and equipment implementation, yes they probably will draw down inventory to realize cash, the problem is utilization should implode and costs go up through the process. Next year in the first half they will have a lot of pressure in relation to debt terms.
    Oct 10, 2015. 08:32 AM | 4 Likes Like |Link to Comment
  • Seadrill And Transocean In A Race For Total's Uptonia Wildcat Well In Norway [View article]
    I don't know Husky in Canada may reduce supply in HE(harsh environment) rigs as well but my sense is there are demand factors unaccounted for.

    my sense is there is a very large re-shuffle in the North Sea
    letter one is being pushed out of UK and in some sense it may allow field stake concentration for some operators increasing the likelihood of it being worth it in some cases to go on with development.
    centrica and some other actors are also setting up
    but the interesting dynamic is the asset swap between wintershal and gazprom.

    Perhaps we will see more contracts in the future due to all the reshuffles
    Oct 8, 2015. 04:42 AM | Likes Like |Link to Comment
  • Keryx: EU Approves With Broadest Possible Label [View article]
    from a different standpoint it makes sense to wait for them to let Keryx expand scripts and risk in the early phase while reducing cash and flexibility in negotiation. It makes sense from both business and negotiation perspectives.

    you are looking at end-point value. Imagine it stays where it is for the next six months until scripts get up to ~15-20 mil quarterly run rate and cash burn is ~10-15 while overall cash is 50-60 mil.

    my argument is not with your thesis but with the timeliness. I think traction takes a while to build up and for it to be recognized, you also have to look at it as a reserve of comfort for other people whom are more conservative than you are and would be willing to take risks when the risk/reward shifts more favorably in their favor. we aren't there yet.
    Sep 26, 2015. 04:55 PM | Likes Like |Link to Comment
  • Keryx: EU Approves With Broadest Possible Label [View article]
    People have to recognize that there is a sector headwind and a macro headwind, while traction is only there when the improvements are meaningful in relation to cash burn position...
    Sep 26, 2015. 04:07 PM | Likes Like |Link to Comment
  • Keryx: EU Approves With Broadest Possible Label [View article]
    list them and stages in development they are at...
    Sep 24, 2015. 09:08 PM | 6 Likes Like |Link to Comment
  • North Atlantic Drilling Could Benefit From HHI Rig Cancellation [View article]
    I think that it would be better for West Venture to get the contract rather than West Rigel. It would increase utilization and revenue faster and flexibility regarding later would increase. The depth rate difference may not make a difference depending on the prospect drilling depth required.

    Theoretically Husky could wait but if they built out the infrastructure somewhat for drilling to occur in their field discovery extensions or on the new block they could go with an existing rig.

    Not sure they will use Nadl's rigs but it is possible.
    Sep 24, 2015. 04:08 PM | Likes Like |Link to Comment
  • Keryx: EU Approves With Broadest Possible Label [View article]
    good news.

    but I rather wait for a few months. Does give credence to your partner points in the prior article though.
    Sep 24, 2015. 11:21 AM | 2 Likes Like |Link to Comment
  • Keryx: Shorts And Longs Could Both Be Right [View article]
    I think waiting is the right thing to do now.
    The decay for the short float is your unknown. You have no idea how the distribution affects coverage. Perhaps as it was imploding the risk desks of funds started shorting at increased velocities to take out the difference between their long position and get to the bottom faster.
    Lets say short position declines to 20 over the next six months while the float expands to 110 via options etc as prices fall and volume drops. At that point they could still slowly cover it before any fundamental improvement.
    I think that the correct thing to do is wait for traction in the fundamental operations of the company. You need something scripts, research, cashflow, or otherwise to give you the benefit of the doubt. At this point in my view it is better to be a little late to it going up then a little early to it basing out.
    Sep 23, 2015. 02:21 PM | Likes Like |Link to Comment
  • Keryx: Shorts And Longs Could Both Be Right [View article]
    your probably wrong about short coverage ability

    as the company bottoms out and treads water those that want to cover will, however you should listen to Chanos a few times. It is very likely that the people whom carry a short book will not cover at the bottom assuming some sort of probability the company drops dead. Which is actually a very rational expectation.

    You also have to consider the options given to employees as the company goes down, ergo more options at lower strikes that will be materialized at any spikes expanding the float. Yes this is a very small aspect but it is meaningful because it gets added as a shock absorber on the way up. In two quarters cash will be halved and consternation regarding further ability to expand without extreme dilution or breaking even will be the focus.

    What you are ignoring is that nobody needs to do anything unless and until there is traction that is fundamental to the improvement of this company. That traction is almost a year away IF it happens at all.
    You also have no idea how that short ratio is distributed and whom is actually both long/short the company and is neutral the decline.
    Sep 23, 2015. 12:30 PM | Likes Like |Link to Comment
  • Keryx: Shorts And Longs Could Both Be Right [View article]
    I think it could fall further by year end.
    As volume drops price movements become easier and easier with lower amounts of exchange. For the next six-to-nine months it will be likely that there will be continued losses and capitalization has to stabilize at a certain level. For now it is still falling without stabilization, treading water on a level for a while.

    The problem with expectations is that when they are gone and the company is effectively left for dead, you will probably be right, Until you still have hope its' not over...

    Short position being large means nothing if there is capitulation feeding the churn while at the same time pushing the company lower reinforcing the cycle. Even when this ends and it treads water actual supply/demand exchange will only begin to end and covering seems possible.

    I agree with your thesis that by next year if iron results are good they will be set, but the problem is they will still have to meet a revenue/cash-flow benchmark every quarter that they are likely to miss for the next three... Fundamentals have to drive traction for short interest to matter.
    Sep 23, 2015. 02:32 AM | 1 Like Like |Link to Comment
  • Independence Realty Trust, Inc.: This 8% Yielder Has A Lot More Coming Its Way [View article]
    you are ignoring the historical cycles

    if interest rates go up by 1% the entire risk premium goes up for mortgages by a multiplier effect, and the underlying real estate has to yield a correspondingly higher return to make up for the risk vis a vis the higher multiplier with its' own multiplier.
    At 2% treasuries you have 4.5% mortgages and cap rates at 5-7%
    what would you get at 3% treasuries(10y) and 6% mortgages where would the cap rate required go?

    this along with risk premium vis a vis outlayed capital ergo capital being more expensive means you need more of it for riskier assets since at 6-7% you may forgo the asset class since the less risky avenue is to do something else where previously you had to go to commercial real estate.
    Sep 10, 2015. 08:51 PM | 3 Likes Like |Link to Comment
  • North Atlantic Drilling: Things Are Getting Worse Month By Month [View article]
    Your kinda wrong on the investment into Arctic if sanctions are lifted. For a very simple reason, if gathering infrastructure has been built then delaying drilling increases the price per barrel of current extraction, the plan for Prirazlomnaya and Universitetskoe implied drilling enough to increase production so that the costs for infrastructure would be brought down by volume. If you planned on hundreds of thousands of barrels and built a billion dollar gathering system and your only gathering tens of thousands of barrels even when prices are low your gathering costs would drop if you increased volume.

    Gathering infrastructure more or less was started and has been built. The field development that was going to tie into it has been delayed due to sanctions.

    If sanctions are lifted it would make sense to give Nadl money for an equity stake for them to take Rigel so that the rigs could be used to accelerate the drilling needed to lower operating costs. The fixed costs of that infrastructure is already being paid the rigs and drilling is the variable cost but with it comes revenue volume. Your looking at oil prices n the Arctic from the point of view if you start something from scratch, but if money for the infrastructure has been spent not drilling to expand volume brings your prices even higher or even lower.

    Lets say the infrastructure was built to have a throughput of 150k a day but it only does 50k a day at a cost 24 dollars a barrel but at 150k that cost would drop to say 9 dollars a barrel.
    Sep 5, 2015. 04:58 PM | 1 Like Like |Link to Comment
  • Independence Realty Trust, Inc.: This 8% Yielder Has A Lot More Coming Its Way [View article]
    the overhang ... in short term liabilities. Won't be fixed until they dispose of properties in question and apply it to the IFC below. You are essentially telling me that their profile shifting from 50% debt to 70+ with restrictive debt while they sell stuff does not increase risk?...
    For the duration and until they actually pay the 120 mil back the company is a completely different risk profile than it was. Before it had more or less amortizing debt without large chunk short term overhang. After it will have two 120 and the other credit line thats ~280m 3yrs, chunks of debt in place that would require significant resources to manage. Both due with 3 years... For a company their size this is a major change.

    your taking more risk for less return...

    from the 8k below
    "Also on August 31, 2015, IRT OP received an amended and restated commitment letter (the “Interim Facility Commitment Letter”) from KeyBank NA and KeyBanc Capital Markets, pursuant to which, subject to the terms and conditions set forth therein, KeyBank NA has committed to lend to IRT OP up to $120 million through an interim term loan facility (the “Interim Facility” and, together with the Senior Facility, the “KeyBank Facilities”). KeyBanc Capital Markets will act as lead arranger for the Interim Facility.

    The Interim Facility is structured as a 364-day secured term loan facility (with a maturity extension option for an additional six months under certain circumstances) available in a single draw. IRT OP may prepay the Interim Facility, in whole or in part, at any time without fee or penalty (other than as provided in a separate fee letter among IRT OP, KeyBank NA and KeyBanc Capital Markets), except for breakage costs associated with LIBOR borrowings. The Interim Facility will be secured by pledges of certain of the equity interests of IRT OP’s current and future subsidiaries and joint ventures (on a best-available basis to the extent such equity interests can be pledged pursuant to IRT’s existing debt agreements) and a pledge of the proceeds of all equity issuances by IRT."

    "At IRT OP’s option, borrowings under the Interim Facility will bear interest at a rate equal to either (i) the LIBOR rate plus a margin of 500 basis points, or (ii) a base rate plus a margin of 400 basis points. If IRT OP elects to extend its maturity, at IRT OP’s option, the Interim Facility will bear interest at a rate equal to either (i) the LIBOR rate plus a margin of 650 basis points, or (ii) a base rate plus a margin of 550 basis points. The Interim Facility requires monthly payments of interest only. IRT OP is required to reduce the principal amount outstanding under the Interim Facility to no greater than $100.0 million within six months of closing and must apply 100% of all net proceeds from equity issuances, sales of assets, or refinancings of assets towards repaying the Interim Facility."

    If interest rates go up by 1% they are instantly impacted by a much larger amount since the libor would adjust faster than the treasuries. But the risk is not the rate but the access to refinance the overhang of funding needs if/when these come due. If you argue that they could re-mortgage the properties they get from TSRE or refinance those that would be somewhat true but it would require expenses on both ends financing wise. The rate at which they are buying TSRE 9-10% simply does not carry much impact after you take out OPEX from it.

    For REITs their debt waterfall profiles is a very very big part of risk. Paying those back as they come due is always problematic because their cash flow is not as larger as waterfall payments when they are due so they almost always refinance. The problem is when your leveraged to the hilt and anything goes against you and that chunk of debt is due in 12-18 months you have very limited choices.

    I simply feel that it isn't being compensated for via the return they are giving right now that is all.
    Sep 3, 2015. 10:43 PM | 1 Like Like |Link to Comment