Chesapeake Granite Wash Trust - The Good, Bad, And Ugly News In Q1 Results [View article]
"The changes to previous estimates were primarily as a result of higher than expected pressure depletion within certain areas of the Granite Wash AMI. To mitigate this issue we are evaluating the benefits of drilling only three wells per section rather than four wells. Preliminary results while early have been encouraging."
My pessimistic view, given CHK's history of over-promise and under-deliver, is there isn't the gas CHK initially said there was, so CHK is going to drill fewer wells. Left unsaid was whether they are going to run longer laterals with 3 instead of 4 wells.
As Alan pointed out earlier, long laterals are not in CHK's interest.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
I will make one final post on this subject.
USEG has had multiple major partners back out; all have had substantial resources and expertise (AMAX, later owned by Phelps-Dodge; Climax, now owned by FCX). I won't count Kobex which never had a chance. Thompson pulled out when moly was $17 viewing it as uneconomical after spending 3 years on the mine. Moly is now around $10-$11.
The editor of the opinion piece (granted he is a staunch opponent) probably has forgotten more details about Mt. Emmons that you know since he has been around the project since 1970 or so.
USEG has current assets of $28.7 million shown in their 2012 Q3 of so; I'm sure people are falling all over themselves to loan $200 million per year for 5 years before any meaningful amount of moly will be produced. Without a partner with really deep pockets, USEG lacks resources to even think about proceeding.
Water rights give you the use of water; it does not give the right to pollute.
Mark Larsen is desperately trying to get this liability off his hands--USEG is spending a couple million per year for continuing water treatment to correct contaimination caused by their failed Keystone operation in the same area. Latest word is Larsen has made overtures to the Chinese.
In the end, economics will rule. Someday moly might get (and stay) at $25-$30 to make this viable. In the meantime, advances in nanotechnoloy may substantially reduce the need for moly. Currently about 75% goes to the steel industry.
Chesapeake Energy Beat And Guided Higher; It's A Buy [View article]
David, you used lots of old data. Why did you ignore recent data from the CHKR conference call? Note of the 11.5 BOE downward revision only 1.1 is due to prices, while 10.4 BOE is change due to previous estimates. From the conference call transcript:
"On March 15, CHKR filed a 10-K with the SEC providing updated year-end 2012 reserve data. Total proved reserves as of December 31, 2012 were 28.2 million BOE. During 2012 the trust recorded downward reserve revisions of 11.5 million BOE including 1.1 million BOE of downward revisions resulting from lower natural gas prices and 10.4 million BOE of downward revisions resulted from changes to previous estimates."
If a 30+% haircut to reserves is not troubling, I do not what could be! Is this an anomalous event, or the start of a general pattern? The cockroach theory of investing says where you see one bad event, there are likely to be more.
Chesapeake Energy Beat And Guided Higher; It's A Buy [View article]
Please explain why CHK will boom having hedged the vast majority of its expected 2013 production at below current market prices. Yes, CHK will take in more than last year, but once again the hedging strategy has turned into a real negative.
Please explain why CHK will boom when hundreds of thousands of acres of expiring leases cannot be sold and expire worthless.
Please explain why CHK will boom when the Granite Trust unit came up short and CHK had to make up a 10 cent per unit difference (that will come out of CHK's already anemic cash flow). Explain how this shortfall should make us comfortable that the dozens of other contracted production agreements are being met. (My take is this is an early indication EUR has been overstated and declines are occurring faster than expected).
Dividend Bubbles Are Not So Bad (Really) [View article]
If one invests in stocks and does not track the company as an owner by diligently reading the quarterly and annual reports in addition to paying attention to externals affecting the company, one deserves to get shellacked.
Anyone paying any attention to any of the banking sector knew the problems were coming (excess leverage, no-doc loans, 125% LTV, etc.). GM was on my bankruptcy watch in 1998. EK completely ignored competition, then the digital revolution. GE became too one-sided in the finance area, borrowing short and lending long.
Everybody talks about the next black swan. It is not the swan that is the problem. It is a casual investing attitude, especially by the institutions, coupled with MBA management of companies where the spreadsheet tells all, and operational excellence is something most companies relegate to the back rooms rather than the executive floor. Once operating companies were run by people who knew the business. Now too many operating companies are run as financial institutions by glorified bookkeepers.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
HVI..since you give the impression this mine will happen, here's the view of the local newspaper. It gives some of the history you seem to have ignored, or downplayed.
Top shareholder Southeastern Asset Management wields its influence at Chesapeake (CHK), placing Thomas Ryan, CEO of Service Corp. International (SCI), on the energy company's board. Director Louis Simpson is resigning after serving since 2011. Ryan will stand for election at the June 14 board meeting. [View news story]
I wish I knew. Lou Simpson probably wanted to retire, he is 75 after all. I would have expected the slot to be filled with a retired exec with an industry background.
Maybe he is an Icahn rubber stamp. I really don't know.
Top shareholder Southeastern Asset Management wields its influence at Chesapeake (CHK), placing Thomas Ryan, CEO of Service Corp. International (SCI), on the energy company's board. Director Louis Simpson is resigning after serving since 2011. Ryan will stand for election at the June 14 board meeting. [View news story]
Are you kidding me?
"Mr. Ryan has been Chief Executive Officer of Service Corporation International (NYSE:SCI) since 2005 and has served as President of SCI since 2002. SCI is North America's leading provider of deathcare products and services.."
Chesapeake Energy: As Operating Performance Improves, Debt Remains A Worry [View article]
Did you miss the the conference call or not read the transcript? The company is being run to try to keep afloat.
"In 2013, we have put in place downside protection on approximately 78% of our projected natural gas production at an average price of $3.72 per Mcf. On the oil side, we have downside protection on roughly 88% of our expected volumes at an average price of $95.43 per barrel."
They are either going to sell a lot of gas well below market, or lose their @$$ on the hedges. Oil is an open question.
In short, where do you get upside even if prices boom? And if they don't meet production targets you do understand they either have to buy back the hedges, or buy product on the open market to satisfy delivery requirements.
I don't think much of the current senior management at CHK. Of course, they see things on the inside books the rest of us don't.
Chesapeake Energy: As Operating Performance Improves, Debt Remains A Worry [View article]
The major problem with CHK is credibility. How can the investment community regain trust with the CHK BS continually flowing? CHK said last year debt was going to be reduced to under 10, but today we are told it actually went up 1.3 during the last Q.
They act like one of the failed dot-bombs from years ago and say earnings are .30--if you ignore all the "bad" stuff. Would they have had us ignore "one-time" stuff if they had made $94 million on hedging instead of losing $94 million on hedges? Oh, and ignore $83 million in retirement and other employee termination benefits? That's $33 million above the reported $50 million it cost to get rid of AM. Would you like to tell us exactly which rat-hole(s) cost $33 million? That's not chicken feed when your GAAP number is $15 million!
I had hoped with AM gone that a new era would be ushered in at CHK. I realize that it will take some time to clean up the complicated mess that is CHK, but it appears a steady stream of kool-aid is still what investors can expect from public pronouncements.
As one of the investors who bought CHK back in the late 90's when it appeared CHK would fail (but sold when AM made me nervous with continued stock and debt issues), I think CHK could have great value. However,the board needs to hire a hard-nosed CEO to come in, clean house, and make this an operating company. It is too large to be run as a wild-catter.
If Icahn and company are serious about CHK the new CEO needs to be in-house NOW. It is months since it became obvious AM would be out the door, and yet Heidrick & Struggles still hasn't a candidate. I thought Dunham was supposed to know the business--he should already have a short list of candidates. This caretaker tripartate office of the Chairman is not going to get done what what needs to be done.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
Section 7.0 says "Economic viability for the Project was demonstrated by the financial data included in Mt. Emmons Mining Company's patent application dated December 23, 1992.... The application was approved on April 21, 2004" and says nothing else about the economic assumptions.
Since then environmental requirements have gotten a lot tougher. And this part of the document does not say who granted the "approval".
If I took a project to a board with 20 year old economic assumptions I'd be laughed out of the room (and then fired). Surely there must be something a little more recent. I guess it is considered proprietary information and therefore nothing investors or the general public should know.
My guess is infrastructure building costs have at least tripled since 1992 and $11-$12 moly cannot support this project. Maybe if moly goes back to $25-$30--but it never seems to stay up for long.
Meanwhile the FCX facility at Climax restarted limited operations a year ago after having been shut for quite a while due to low moly prices.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
HiddenValue, I do not to come across as just plain negative, however I would say anyone thinking about investing in USEG for this project after reading your article better do a lot more research.
Having water rights does not give you permission to contaminate the water.
Anyone thinking about buying USEG due to the USFS approval should be aware this is not just a go blast a hole in the mountain and get rich! I would dearly love to see the economic assessment of this plan.
That area is loaded with heavy metals. Any detection of an increase in heavy metal content in coal creek and the project gets shut down--not by the toothless USFS (the 1872 mining act gives priority to mining of Federal Land), but by the water board or the EPA.
You do know that the proposed mine is where the failed Keystone project (which required superfund cleanup which continues) created heavy metal concentrations in Elk Creek which flows into Coal Creek.
A sysnopsis of the plan (link below). Since companies with far more resources than USEG determined this to not be economically feasible, I invite you to read the synopsis of the amount of infrastructure USEG proposes and then decide if this makes sense economically. I know highway 135 quite well and it will not be a simple matter to make this an all weather highway. Who will pay for this major upgrade? The very steep narrow sections where it drops down into the North Fork of the Gunnison valley will require no small bit of rerouting.
What do I think? If USEG goes ahead with this and moly does not go to $40-$50 per pound USEG will be history. Companies with far deeper pockets looked at this and decided the project was not economically feasible because moly can drop to $5 more easily than it can stay at a price to make this venture economically viable.. Thompson dropped out for good reason.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
HiddenValue: I don't know how much you know about the area, but this link might give you some reasons to believe the community will ever let another mine in the area. You were aware USEG is already paying $2 million per year to clean up the Keystone mine fiasco?
The above should make all aware it is not only local groups virulently opposed to the project.
Just a little research would show CB (and Gunnison County) has fought this project tooth and nail (as they did the Keystone mine which proved to be an economic disaster). The bad taste (pun intended) left by the Keystone project means not only will the project have to get by the locals, but also the Colorado water board.
Then there are the economic problems which means moly will have to go for much more than $11 for this project to be viable. BTW, Mt Emmons lies on a snow belt: 500 inches on an avalanche prone mountain is normal. You either shutdown for 6 months or risk setting off avalances blasting.
The narrow gauge railroads were pulled out of this area in the mid 1950's. The nearest railhead is about 95 miles away and requires crossing two passes if the west route is chosen. An east route to rail is unlikely since the UP shut down the Tennessee Pass route when they took over the SP.
There may be reasons to buy USEG--the Mt. Emmons project (and the existing environmental liabilities) are reasons NOT to buy.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
You must be familiar with the CB area, as I am. Anyone that thinks this is a done deal has no idea of the opposition that will be mounted in the Crested Butte community. There is a reason that deposit has never been developed. AMAX spent a fortune trying to change the community attitude thirty years ago. If anything, the anti-development forces might be even more entrenched now.
Chesapeake Granite Wash Trust - The Good, Bad, And Ugly News In Q1 Results [View article]
My pessimistic view, given CHK's history of over-promise and under-deliver, is there isn't the gas CHK initially said there was, so CHK is going to drill fewer wells. Left unsaid was whether they are going to run longer laterals with 3 instead of 4 wells.
As Alan pointed out earlier, long laterals are not in CHK's interest.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
USEG has had multiple major partners back out; all have had substantial resources and expertise (AMAX, later owned by Phelps-Dodge; Climax, now owned by FCX). I won't count Kobex which never had a chance. Thompson pulled out when moly was $17 viewing it as uneconomical after spending 3 years on the mine. Moly is now around $10-$11.
The editor of the opinion piece (granted he is a staunch opponent) probably has forgotten more details about Mt. Emmons that you know since he has been around the project since 1970 or so.
USEG has current assets of $28.7 million shown in their 2012 Q3 of so; I'm sure people are falling all over themselves to loan $200 million per year for 5 years before any meaningful amount of moly will be produced. Without a partner with really deep pockets, USEG lacks resources to even think about proceeding.
Water rights give you the use of water; it does not give the right to pollute.
Mark Larsen is desperately trying to get this liability off his hands--USEG is spending a couple million per year for continuing water treatment to correct contaimination caused by their failed Keystone operation in the same area. Latest word is Larsen has made overtures to the Chinese.
In the end, economics will rule. Someday moly might get (and stay) at $25-$30 to make this viable. In the meantime, advances in nanotechnoloy may substantially reduce the need for moly. Currently about 75% goes to the steel industry.
Chesapeake Energy Beat And Guided Higher; It's A Buy [View article]
"On March 15, CHKR filed a 10-K with the SEC providing updated year-end 2012 reserve data. Total proved reserves as of December 31, 2012 were 28.2 million BOE. During 2012 the trust recorded downward reserve revisions of 11.5 million BOE including 1.1 million BOE of downward revisions resulting from lower natural gas prices and 10.4 million BOE of downward revisions resulted from changes to previous estimates."
Read more: http://bit.ly/YD3mcs
If a 30+% haircut to reserves is not troubling, I do not what could be! Is this an anomalous event, or the start of a general pattern? The cockroach theory of investing says where you see one bad event, there are likely to be more.
Chesapeake Energy Beat And Guided Higher; It's A Buy [View article]
Please explain why CHK will boom when hundreds of thousands of acres of expiring leases cannot be sold and expire worthless.
Please explain why CHK will boom when the Granite Trust unit came up short and CHK had to make up a 10 cent per unit difference (that will come out of CHK's already anemic cash flow). Explain how this shortfall should make us comfortable that the dozens of other contracted production agreements are being met.
(My take is this is an early indication EUR has been overstated and declines are occurring faster than expected).
Dividend Bubbles Are Not So Bad (Really) [View article]
Anyone paying any attention to any of the banking sector knew the problems were coming (excess leverage, no-doc loans, 125% LTV, etc.). GM was on my bankruptcy watch in 1998. EK completely ignored competition, then the digital revolution. GE became too one-sided in the finance area, borrowing short and lending long.
Everybody talks about the next black swan. It is not the swan that is the problem. It is a casual investing attitude, especially by the institutions, coupled with MBA management of companies where the spreadsheet tells all, and operational excellence is something most companies relegate to the back rooms rather than the executive floor. Once operating companies were run by people who knew the business. Now too many operating companies are run as financial institutions by glorified bookkeepers.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
http://bit.ly/12hPlBB
Top shareholder Southeastern Asset Management wields its influence at Chesapeake (CHK), placing Thomas Ryan, CEO of Service Corp. International (SCI), on the energy company's board. Director Louis Simpson is resigning after serving since 2011. Ryan will stand for election at the June 14 board meeting. [View news story]
Maybe he is an Icahn rubber stamp. I really don't know.
Top shareholder Southeastern Asset Management wields its influence at Chesapeake (CHK), placing Thomas Ryan, CEO of Service Corp. International (SCI), on the energy company's board. Director Louis Simpson is resigning after serving since 2011. Ryan will stand for election at the June 14 board meeting. [View news story]
"Mr. Ryan has been Chief Executive Officer of Service Corporation International (NYSE:SCI) since 2005 and has served as President of SCI since 2002. SCI is North America's leading provider of deathcare products and services.."
Chesapeake Energy: As Operating Performance Improves, Debt Remains A Worry [View article]
"In 2013, we have put in place downside protection on approximately 78% of our projected natural gas production at an average price of $3.72 per Mcf. On the oil side, we have downside protection on roughly 88% of our expected volumes at an average price of $95.43 per barrel."
They are either going to sell a lot of gas well below market, or lose their @$$ on the hedges. Oil is an open question.
In short, where do you get upside even if prices boom? And if they don't meet production targets you do understand they either have to buy back the hedges, or buy product on the open market to satisfy delivery requirements.
I don't think much of the current senior management at CHK. Of course, they see things on the inside books the rest of us don't.
Chesapeake Energy: As Operating Performance Improves, Debt Remains A Worry [View article]
They act like one of the failed dot-bombs from years ago and say earnings are .30--if you ignore all the "bad" stuff. Would they have had us ignore "one-time" stuff if they had made $94 million on hedging instead of losing $94 million on hedges? Oh, and ignore $83 million in retirement and other employee termination benefits? That's $33 million above the reported $50 million it cost to get rid of AM. Would you like to tell us exactly which rat-hole(s) cost $33 million? That's not chicken feed when your GAAP number is $15 million!
I had hoped with AM gone that a new era would be ushered in at CHK. I realize that it will take some time to clean up the complicated mess that is CHK, but it appears a steady stream of kool-aid is still what investors can expect from public pronouncements.
As one of the investors who bought CHK back in the late 90's when it appeared CHK would fail (but sold when AM made me nervous with continued stock and debt issues), I think CHK could have great value. However,the board needs to hire a hard-nosed CEO to come in, clean house, and make this an operating company. It is too large to be run as a wild-catter.
If Icahn and company are serious about CHK the new CEO needs to be in-house NOW. It is months since it became obvious AM would be out the door, and yet Heidrick & Struggles still hasn't a candidate. I thought Dunham was supposed to know the business--he should already have a short list of candidates. This caretaker tripartate office of the Chairman is not going to get done what what needs to be done.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
Since then environmental requirements have gotten a lot tougher. And this part of the document does not say who granted the "approval".
If I took a project to a board with 20 year old economic assumptions I'd be laughed out of the room (and then fired). Surely there must be something a little more recent. I guess it is considered proprietary information and therefore nothing investors or the general public should know.
My guess is infrastructure building costs have at least tripled since 1992 and $11-$12 moly cannot support this project. Maybe if moly goes back to $25-$30--but it never seems to stay up for long.
Meanwhile the FCX facility at Climax restarted limited operations a year ago after having been shut for quite a while due to low moly prices.
Chesapeake Energy Loses Money On Its Recent Sale Of Marcellus Acreage [View article]
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
Having water rights does not give you permission to contaminate the water.
Anyone thinking about buying USEG due to the USFS approval should be aware this is not just a go blast a hole in the mountain and get rich! I would dearly love to see the economic assessment of this plan.
That area is loaded with heavy metals. Any detection of an increase in heavy metal content in coal creek and the project gets shut down--not by the toothless USFS (the 1872 mining act gives priority to mining of Federal Land), but by the water board or the EPA.
You do know that the proposed mine is where the failed Keystone project (which required superfund cleanup which continues) created heavy metal concentrations in Elk Creek which flows into Coal Creek.
A sysnopsis of the plan (link below). Since companies with far more resources than USEG determined this to not be economically feasible, I invite you to read the synopsis of the amount of infrastructure USEG proposes and then decide if this makes sense economically. I know highway 135 quite well and it will not be a simple matter to make this an all weather highway. Who will pay for this major upgrade? The very steep narrow sections where it drops down into the North Fork of the Gunnison valley will require no small bit of rerouting.
http://bit.ly/14Z5DE3
What do I think? If USEG goes ahead with this and moly does not go to $40-$50 per pound USEG will be history. Companies with far deeper pockets looked at this and decided the project was not economically feasible because moly can drop to $5 more easily than it can stay at a price to make this venture economically viable.. Thompson dropped out for good reason.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]
fiasco?
http://bit.ly/Y84W8g
The above should make all aware it is not only local groups virulently opposed to the project.
Just a little research would show CB (and Gunnison County) has fought this project tooth and nail (as they did the Keystone mine which proved to be an economic disaster). The bad taste (pun intended) left by the Keystone project means not only will the project have to get by the locals, but also the Colorado water board.
Then there are the economic problems which means moly will have to go for much more than $11 for this project to be viable. BTW, Mt Emmons lies on a snow belt: 500 inches on an avalanche prone mountain is normal. You either shutdown for 6 months or risk setting off avalances blasting.
The narrow gauge railroads were pulled out of this area in the mid 1950's. The nearest railhead is about 95 miles away and requires crossing two passes if the west route is chosen. An east route to rail is unlikely since the UP shut down the Tennessee Pass route when they took over the SP.
There may be reasons to buy USEG--the Mt. Emmons project (and the existing environmental liabilities) are reasons NOT to buy.
U.S. Forest Service Bumps Up The Value Of The Mt. Emmons Molybdenum Mine [View article]