Seeking Alpha


Send Message
View as an RSS Feed
View shughes1116's Comments BY TICKER:
Latest  |  Highest rated
  • Calumet Specialty Products Partners LP And Anchor Drilling Fluids, The Acquisition That Will Drag Earnings Lower [View article]
    Your implication that we could see a 16,600 bpd - 33,300 bpd drop in diesel demand per month in North Dakota is misleading. Diesel/distillate demand in North Dakota attributed to the oil industry comprises ~21,000 bpd of diesel/distillate out of 59,000 bpd (numbers taken from report dated Dec. 2013). Now lets assume that the shale industry completely collapses in ND, and no one sinks any more wells for the next hundred years. If diesel demand due to shale drilling goes to 0 bpd, there is still a net deficit in diesel supply in North Dakota. Given existing production provides 20,000 bpd, and the Dakota Prairie Refinery will provide another 8,000-9,000 bpd, there will still be a net deficit that will need to be satisfied by higher cost out-of-state production, allowing the Dakota Prairie Refinery to enjoy healthy margins on diesel/distillate production.

    I also take issue with your statement "CAPEX spending for 2015 and 2016 will not see the expected EBITDA return that was initially forecast". CLMT will be spending capex in 2015 and 2016 on their MO Esters expansion, the San Antonio Solvents Expansion, and the Montana Refinery Expansion.

    While I agree that discussion and disagreement are a healthy thing, you have made a statement that is not substantiated. Please substantiate your opinion that CLMT's capex will not support the expected EBITDA returns. Please provide supporting numbers that reference the specific type of equipment they will be installing at each facility, and the pricing differentials in outputs and inputs that yield your lower estimate. When you do so, please note that while the Gulf Coast 3-2-1 crack is important, the location of their facilities means that the GC 3-2-1 Crack is not relevant to a substantial amount of their production.
    Dec 31, 2014. 03:14 PM | 1 Like Like |Link to Comment
  • CareTust Shines Like A Small-Cap Diamond In The Rough [View article]
    Brad, A substantial portion of the plunge in share price is due to the special dividend they paid recently as a result of their REIT conversion ($5.88/share).
    Dec 22, 2014. 07:46 AM | 6 Likes Like |Link to Comment
  • Tesla Motors eyes 60-second battery swap [View news story]
    You're missing an even more important issue here. Do you have any idea how much additional base load power generation would be needed to power electric vehicles that replace hydrocarbon-fueled vehicles? The widespread adoption of electric vehicles will be extraordinarily limited by the lack of growth (and at this point, the decrease) in base load power generation provided by all-weather assets (coal, natural gas, nuclear, hydro).
    Dec 19, 2014. 04:28 PM | 4 Likes Like |Link to Comment
  • Update: Calumet Specialty Products Earnings [View article]
    It is quite interesting to see the dichotomy in market prices, in light of the crude decline. Generally speaking, refiners' performance is based on the spread between crude and refined products. This spread has remained relatively constant over the previous couple of months (at least with respect to gasoline and crude; I haven't looked recently at the spread for jet fuel and diesel). To a lesser extent, American refiners also benefit from the spread between WTI and Brent. Over the last couple of months, this spread has actually increased.

    So looking at refiners performance, it is interesting to see the relative outperformance of VLO (down 10% since July), MPC (up about 3% since July), TSO (up 33% since July), ALJ (no change since July) and to a lesser extent PSX(down 18% since July), versus some of their high-yielding brethren (CVRR - down 32% since July; CLMT - down 33% since July; NTI - down 13% since July; ALDW - down 34% since July).

    Refiners tend to perform well in an environment of declining crude prices, so I expect most refiners to have pretty decent fourth quarters (likely on par with the recent third quarter results). I can only assume that we are seeing a capitulation of retail yield-seekers in the high-yield refiners, which likely make up a greater proportion of the shareholder base relative to the VLO/TSO/PSX/MPC.
    Dec 15, 2014. 05:31 PM | Likes Like |Link to Comment
  • An Appetizing REIT With 9% Icing On The Cake [View article]
    "...and interest rates may rise crushing this sector."

    "Higher interest rates will crush reits. Though when that will happen is debatable you can be sure that when it does these hedged reits will be crushed to death more than anything simply because they are hedged with cheap money."

    Brad's response to your comment was far more civil than your half-witted comment deserved. I specifically take issue with your two statements, indicated above. If you do any type of quantitative analysis that looks at the previous 40 years, you will see that dividend-paying stocks (as well as distribution-paying units), inclusive of REITS and MLP's, perform reasonably well during tightening cycles. If you do some higher-level thinking, you would recognize that a tightening cycle generally results from improved economic fundamentals. These improved economic fundamentals act as a tailwind for REITS.

    Ultimately what will determine the performance of REITS going forward(and other dividend-paying stocks) is their ability to grow and raise their dividend. Those with strong balance sheets and reasonable payout ratios will more than likely continue to outperform the market, even in the face of tightening rates.
    Dec 13, 2014. 12:11 PM | 6 Likes Like |Link to Comment
  • An Appetizing REIT With 9% Icing On The Cake [View article]
    Don't forget that the former CEO of HCP is running their Healthcare operation. Although my understanding is that he is a bit arrogant and abrasive, he had a reasonable track record at HCP. And for what it's worth, I think he probably feels like he has something to prove after be forced out at HCP.
    Dec 10, 2014. 01:25 AM | Likes Like |Link to Comment
  • Bellatrix Exploration to sell minority interest in new deep-cut gas plant [View news story]
    Thanks for the clarification.
    Dec 2, 2014. 09:56 AM | Likes Like |Link to Comment
  • Bellatrix Exploration to sell minority interest in new deep-cut gas plant [View news story]
    Contribute 10% of construction costs for a 35% stake in the plant? Interesting deal...
    Dec 2, 2014. 09:29 AM | 1 Like Like |Link to Comment
  • Energy XXI: High Cost, High Leverage, Weak Energy Prices, Good Short? [View article]
    I'll be the first to admit that I capitulated on EXXI. Not because I am bearish on oil, or even bearish on EXXI in the long-term, but rather because there are too many other blue chip bargains available in the oil sector (i.e. EPD, some of the majors, some of the mid-sized independents).

    It is funny though... When we are at $100 oil, all of the crazies come out and predict $150 oil. Now we are at ~$68 oil, and the crazies come out predicting $35 oil. If folks put that into perspective when making their buy/sell decisions, there would be much less panic selling in the O&G names.
    Nov 29, 2014. 12:02 PM | Likes Like |Link to Comment
  • Offshore drillers wrecked as Seadrill suspends dividend [View news story]
    Remember that you are an equity holder and that every bond holder has seniority over you in the event that this company restructures. .Just because the dividend has been cut doesn't mean they will be able to handle their debt service along with their capex. And unlike previous downturns, most deep water high spec rigs can't be cold stacked because they are dynamically positioned, so they are constrained in their ability to reduce costs. The pain is not over, and it will not be over for some time, and the carnage is being magnified by the impact of lower oil prices.

    If you are trying to dip your toe into the carnage, I'd stick with Awilco, ESV, and maybe RIG if you are more adventurous.
    Nov 26, 2014. 04:26 PM | 2 Likes Like |Link to Comment
  • Saudi oil minister says crude price market "will stabilize itself" [View news story]
    When oil is at 100, the crazy people come out and call for oil to reach $150 per barrel. Now that oil is at $75, they say it is going to collapse to $35. These is hyperbole that is not backed up by common sense. More importantly, you can not compare oil with coal or iron ore. The supply curves ( in the absence of continued growth capex) are very different due to the continual natural decline rate observed with oil. Thus the feedback mechanism on the supply side for oil is relatively quick compared to coal and iron ore.
    Nov 26, 2014. 02:55 PM | 1 Like Like |Link to Comment
  • Update: Pengrowth Remains A Solid Pick Despite A Fall In Production [View article]
    I can't predict what will happen over the next three years. Ultimately, the success (or failure) of PGH will depend on their ability to improve crude price realizations ($55/boe in Q32014) and their ability to successfully gear up Lindbergh.

    Crude Realizations: The beauty with many of the Canadian producers, PGH included, is that their crude realizations are so low relative to the more common crude benchmarks. This is primarily because of transportation issues. As the transportation issue resolves itself (and it most certainly will over the next couple of years), they will be able to realize higher crude prices, even in the face of a decline WTI/Brent price. To put this in context, a $5 increase in crude realizations results in an additional $32 million bump to quarterly operating income, or an additional bump of $128 million in operating income over the course of a year.

    Lindbergh: In general, PGH management has been pretty consistent and accurate in their estimates of Lindbergh production, and fairly accurate in their capex estimates. The most important aspect of Lindbergh is the level of maintenance capex required to maintain their level of production, which should be less than their traditional oil production.

    So the question you need to ask yourself is whether PGH can continue to make positive progress on crude realizations and Lindbergh while remaining within the bounds of their credit covenants (i.e. leverage). At $4/share, I think the reward outweighs the risk, although it is certainly not a risk-free investment given their current leverage and time frame until completion of Lindbergh.
    Nov 23, 2014. 04:04 PM | 1 Like Like |Link to Comment
  • Update: Pengrowth Remains A Solid Pick Despite A Fall In Production [View article]
    Wow, you are really obtuse. Yet again you have missed the point of my post. And somehow you have interpreted my comments as suggesting I have a position in PGH.

    As I stated in my original post, I suggest you educate yourself about the proper use of financial terms such as net profit, operational cash flow, and free cash flow. After your most recent comment, I also suggest that you enhance your understanding of the oil market, particularly as it relates to PGH's reliance on the spot price of WCS crude rather than WTI crude.

    Thanks for playing, better luck next time.
    Nov 20, 2014. 04:24 PM | 1 Like Like |Link to Comment
  • Update: Pengrowth Remains A Solid Pick Despite A Fall In Production [View article]
    "Where do I say that production netback refer to net income in the above statement? It says operational cash flow clearly, isn't it?"

    In your first sentence you stated "PGH had a netback (net profit per BOE after all expenses) of about 25$ when oil was at about 100$ (WTI)". The term "net profit" is the equivalent of "net income". Their net profit per boe must be calculated by deducting the non-cash/non-operating expenses (i.e. depreciation), as well as interest expense and tax expense. Your calculation does not reflect the deduction of depreciation or interest. Thus your calculation is incorrect.

    When WTI was $100, PGH achieved an operating netback of $23.86 per boe. As indicated in the relevant quarterly report, depreciation totaled $19.27 per boe and interest payments totaled ~4.50 per boe. Thus PGH achieved an operating profit of $4.59 per boe, a net profit of ~$0.09 per boe and operating cash flow of $23.86 per barrel.

    You can not use "net profit" and "operating cash flow" interchangeably. These terms are not equivalent.

    Your second problem is assuming that a $25 decline in WTI translates into a $25 decline in West Canadian Select Crude, which then translates into a $25 decline in the company's operating cash flow per barrel. Your assumption is incorrect and indicates that you did not check the pricing of WCS before posting your comment. First, movements in WTI do not occur on a 1:1 basis with WCS (or Bow River crude, or LLS crude, or Bakken crude, or Permian crude, etc). Today's spot price of WCS is $66 per barrel. When the spot price of WTI was $100, the spot price of WCS was $78. So a $25 dollar decline in WTI occurred concurrently with a $12 decline in WCS crude. Secondly, as the price of crude comes down, the rate of royalties paid by PGH per BOE also declines, exhibiting a positive impact on the company's operating cash flow per BOE.

    Your third problem is implying that cash flow from operations is the same as free cash flow. PGH actually generates a substantial amount of cash flow from operations (129 million in Q3), which is in excess of their dividend payment ($63.5 million in Q3) and interest payment ($30 million in Q3). If they fired up Lindbergh and then halted any further capex, they would generate a fair amount of free cash flow in excess of their dividend payment and interest payment.

    I suggest that you review the terminology used on income statements and cash flow statements so as to not confuse folks who read articles and comments on this website.
    Nov 19, 2014. 06:07 PM | 6 Likes Like |Link to Comment
  • Transocean slides as fleet update shows more rigs idled [View news story]
    Negativity due to some rates decreasing and many rigs transitioning from multiyear contracts to single well contracts. Market hates uncertainty related to future earnings.
    Nov 19, 2014. 03:56 PM | Likes Like |Link to Comment