Atticvs Research

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    • Mon Feb 11th 11:20 AM | Rating: 0 0
      Commented on:
      China 3C's Price Declines on Bad PR
      I was of the opinion that the main reason for the drop in CHCG share price was the failure of the company to consummate a large financing package a couple of weeks after the company announced that it was largely a one deal. The communication problems that Peter Siris mentioned have indeed existed but only as contributory issues to the weak share price.
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    • Mon Feb 4th 08:05 AM | Rating: 0 0
      Commented on:
      The Long Case for China North East Petroleum
      Hiwind, thank you for your query and comments. First, it is true that CNEH is using available cash to drill more wells. They are doing this because the extractible oil reserves are in the ground at a valuation of about $2 per barrel and they make a profit on sales of this oil of over $25, net of all costs including govt levy. Thus, their strategy use available cash to drill new wells is correct. Second, bear in mind that Chinese bank borrowings for 2007 were maxed-out by government restrictions that came along in October, but that 2008, being a new year, brings a lot more borrowing availability particularly in Q1 and Q2. This explains why CNEH did not close out local bank borrowings in Q4 2007 and why they will conclude it in early 2008. Third, it is my belief that the company added less than 26 wells in Q4 ’07, thereby preserving higher levels of cash than you suggest even using your calculations. Fourth, CNEH is a Delaware, US corporation and does not have to pay income tax for 2007 until before the end of Q1 2008 and similarly for subsequent years. As such, the company is fully up to date with tax payment obligations. Fifth, bear in mind that the speed of well drilling is totally under the control of CNEH, management is ex-PeteroChina and they maintain a close and flexible relationship with PetroChina. As such it is not really conceivable that CNEH would drill wells first (without formulating an overall drilling plan – which they have done) and afterwards notice that they did not have sufficient cash to meet its rather obvious liabilities. Sixth, the CNEH cash-flow model is highly cash-flow positive. At an oil price of $90/Bbl the company generates sufficient cash-flow from each well to enable it to multiply its overall number of operating well by 500% in less than 3 years. Please refer to the cash-flow model I explained above within the main Seeking Alpha article.

      Ref your P&L numbers: Your Q4 sales figure is about $500k too high. However, your COGS are also high; extraction costs an amortization are more closely fixed to quantities of oil produced rather than to the price per barrel of oil. Overall, Net Income will be slightly higher than you suggest.

      Comment about the age of the CFO. He may be young, if not quite as young as you portray, but in my discussions with him I certainly found him to be a totally capable executive. Besides, let’s not forget that the company does have a good overall management team.

      The bottom line for CNEH
      They have extractible oil reserves in the ground at a current valuation of about $2 per barrel which it can sell, net of all extractions costs including Govt levies, and make a profit after tax of over $25 per barrel based on an oil price of $90 per barrel. These are compelling numbers and explain in an instant why it is correct for CNEH to use available cash to drill more wells. The more the better.
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    • Thu Jan 31st 10:26 AM | Rating: 0 0
      Commented on:
      The Long Case for China North East Petroleum
      I observed that the description of the drilling payment terms provided by the company in the recent 10Q reports differred to the description provided by the company in the November & December investor presentations. I asked them to clarify, and they did.

      My overall sentiment is that it is extremely rare to come across a company with so much undiscovered potential as exists at CNEH. ICR will never have a job as easy as this one, all the information is just sitting there for them. What is particularly surprising is that it is virtually impossible for an new would-be investor to discover that the company has a total of 75m barrels of oil - this information is not stated on the company web site, the PR issued on September 4th 2007 mentioning it has now disappeared from Yahoo Finance and it was not mentioned in the 10Q reports. Yet, it is perfectly correct. A stunning situation. I look forward to ICR doing their job.
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    • Thu Nov 29th 08:16 AM | Rating: 0 0
      Commented on:
      First Solar Vulnerable to a Tellurium Shortage?
      Great discussion.

      Seems to me that there is agreement that the price of tellurium should rise substantially in the not too distant future.

      Anyone got strong ideas on how best to go long tellurium?
      View article »
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