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Wednesday, October 31, 2012

Should We Buy Cobalt In Advance of 2013 Drilling?

My latest Seeking Alpha article:


The business model of an offshore exploration company is to go out into the middle of the ocean and drill a well that costs over $100 million, with a success rate that is likely somewhere around 1-in-5. The prospect sizes are enormous, so if they hit oil chances are it is going to be a monster find. However, if they don't hit oil, you have just flushed $100 million down the toilet.
The business model of an exploration company obviously does not fit well with my investing style, which is based on Buffett. Exploration success equals a big win for investors, while exploration failure equals a big loss (all of the cash invested in the well). It is hard to invest in these companies and believe you are following Buffett's rule No. 1.

Tuesday, October 30, 2012

Petrobank - Spin-out Presentation

PBG Corporate Presentation - October NEW-Web

Interview With OakTree's Howard Marks

It all started in 1995 when Mr. Marks and five partners left investment firm TCW Group Inc. in a dispute to found Oaktree, a firm that forged a reputation as specialists in the distressed-debt and high-yield bond markets. Los-Angeles-based Oaktree today has more than 650 employees and is the one of the largest distressed-debt investors. It raised almost $11 billion back in 2008 for the largest distressed-debt fund in the world, according to data provider Preqin. Oaktree's 17 funds in that category have averaged annual gains of 17.5% for the 23-year period ended June 30, net of fees.

Link to entire article: http://www.pionline.com/article/20121029/FACETOFACE/310299994/howard-marks-established-oaktree-as-a-leader-in-distressed-debt

Charlie Rose Speaks to Jeremy Grantham

So what will you do next year with all that money you manage? 
I am going to be careful, particularly for the first half of next year. Great brands of blue chips are not so bad in the U.S. Emerging countries are about fair price. Beaten-down European stocks, particularly the so-called value stocks, are probably a little cheap, although risky. And resource stocks, once they reflect the weak economy—and we’ll get another whack-down—will be a wonderful long-term purchase. Farmland and forests, which should be the backbone of any long-term, serious portfolio. … It will also be a good time to buy in.

http://www.businessweek.com/articles/2012-10-25/charlie-rose-talks-to-jeremy-grantham

Plains Exploration - Value Destruction in the Haynesville

My latest Seeking Alpha article:


Plains weighed the decision to purchase this Haynesville property against the opportunity to repurchase shares that management believed were attractively valued. Plains was very proud of its disciplined approach in the past and its avoidance of chasing the latest hot play. And after deciding to go forward with this acquisition Plains funded it by borrowing money.
As it turns out it was a decision to make a major purchase of natural gas assets at the very top of the market for the hot new Haynesville play.

Monday, October 29, 2012

Petrobank Announces Distribution of Petrobakken to Shareholders

PBG_2012!10!30 (PBN Distribution)

Haynesville Shale Production About to Start Dropping?

My latest Seeking Alpha article:

From a peak of 180 in 2010, the number of wells active in the Haynesville hasn't dropped, it has plummeted. As of the most recent update, the Haynesville rig count stands at just over 20, as producers such as Chesapeake Energy (CHK) have finally stopped drilling.

Thursday, October 25, 2012

An "Off The Radar" Way To Play West Coast LNG

My latest Seeking Alpha article:

Horn River will also be a key source of feedstock for the LNG terminals, but since it lacks the infrastructure that surrounds the Montney it is clearly a second choice.

What you may not know is that there may also be a very significant third play that will be key to the LNG export game.
That play is the Liard Basin which Apache unveiled in June of this year calling it the most prolific natural gas reservoir on the continent.

Wednesday, October 24, 2012

Buffett Still Adding To Huge Wells Fargo Position

Metrics on The Tourmaline Oil Montney Acquisition

My latest Seeking Alpha article takes a quick look at Tourmaline's latest Montney acquisition:


Those acquisitions are likely to involve many of the currently independent Montney shale players operating in Northwestern Canada.
Last week the Canadian government put a stop to the Petronas acquisition of Montney producer Progress Energy (PRQNF.PK). But that hasn't cooled off the consolidation wave happening in the Montney as just two days later Tourmaline Oil (TRMLF.PK) announced that it had acquired private oil company Huron Oil.
Tourmaline will pay $258 million for 5,500 boe of current production, 46.2 million boe of 2P reserves and 108 sections of land in Northeastern British Columbia that will add to Tourmaline's Montney position.
The metrics on that deal look like this:

Tuesday, October 23, 2012

Exxon Mobil Is Getting More Unconventional..

My most recent Seeking Alpha article:


I like share repurchases, but unlike Buffett who picks his spots to deploy his cash, Exxon Mobil is much more methodical in its approach. When the company has excess cash, it buys back stock. That seems to be Exxon's default use for excess cash. There doesn't seem to be any consideration given to the actual price being paid for that stock.
When the stock price of Exxon went down in 2009 and 2010, the company actually bought considerably less of it. Why? Because the company didn't let the cash build up during high commodity prices of 2006, 2007 and 2008 and instead spent almost $100 billion buying Exxon shares. Does it make sense to maximize share repurchases when the stock price is high? Of course not, but that is what Exxon has been doing.

Hedge Fund Legend Julian Robertson - It Is Time To Invest

Another Montney Acquisition - Tourmaline Buys Huron


Calgary, Alberta - Tourmaline Oil Corp. (TSX - TOU) ("Tourmaline" or the "Company") is pleased to announce the acquisition of  Huron Energy Corporation ("Huron"),  a  private oil and gas producer with operations in NE British Columbia, in an all share transaction.

The acquisition provides a significant expansion to Tourmaline's asset base in the prolific liquid rich Montney play area in NEBC.  The Company's land base in NEBC will more than double to 186  sections from 78 sections and result in a significant increase in Tourmaline's future horizontal Montney drilling inventory.

Valued at approximately $258 million, the acquisition will also add approximately 5,500  BOE/d of current
production, primarily in the Groundbirch, Sunrise and Tupper areas, and 46.2 mmboe of 2P reserves (as
independently evaluated in a report by GLJ Petroleum Consultants Ltd. as at August 31, 2012).  Huron's extensive infrastructure in NEBC is very complementary to Tourmaline's plant and pipeline network in the greater SunriseDawson area, which Tourmaline believes to be the optimum Montney play area in the entire NEBC Montney trend.

Link: http://www.tourmalineoil.com/assets/TOU-Press-Release-re-Huron-Oct-23-2012.pdf

Thursday, October 18, 2012

Profiting From the Race For West Coast LNG Supplies

First Progress was acquired, now Celtic.

My most recent Seeking Alpha article looks at who is likely next:


Folks, there is a race going on north of the border. The race is for natural gas resources that are needed to feed liquid natural gas [LNG] export facilities that are going to be built off the West Coast of Canada.
The first shot fired in this race to secure natural gas assets in Northern British Columbia and Alberta occurred when Petronas agreed to acquireCanadian producer Progress Energy for $4.7 billion. That offer was a 77% premium to Progress's prior day closing share price. Petronas is involved in building an LNG terminal that will be located in Price Rupert British Columbia, so securing a source of natural gas to supply that terminal was obviously important.
Progress Energy held 820,000 acres of prime Montney shale gas land, which is located in an ideal location for pipeline transport to the West Coast.

Wednesday, October 17, 2012

Romney and Obama Get Heated Discussing Energy Policy

With analysis from Wilbur Ross:

Natural Gas Investor Wilbur Ross Discusses Obama/Romney Battle over Drilling for Oil and Natural Gas

Also:

Seth Klarman - A Big Winner in the Government Suit Against JPMorgan

Penn West to Raise $1.3 Billion Through Asset Sales


ASSET DISPOSITIONS
Penn West has agreements in principle to dispose of approximately $1.3 billion of its non-core properties, with combined production of approximately 12,000 barrels of oil equivalent per day.  Penn West plans to use the proceeds of the dispositions to repay a portion of advances under its credit facilities.  Subject to customary regulatory and other closing conditions, the Company anticipates these dispositions will close prior to December 31, 2012.

Exxon To Purchase Celtic Exploration

Another one down.  Who is next?


CALGARY, October 17, 2012 – Exxon Mobil Corporation (“ExxonMobil”) (NYSE: XOM) and Celtic
Exploration Ltd. (“Celtic”) (TSX: CLT) today announced that Canadian affiliates of ExxonMobil,
including Exxon Mobil Canada Ltd. (“ExxonMobil Canada”), and Celtic have entered into an
agreement for the purchase by a subsidiary of ExxonMobil Canada of all of Celtic’s outstanding
common shares at a cash price of C$24.50 per share. Additionally, Celtic shareholders will
receive 0.5 of a share of a new company, 1705972 Alberta Ltd. (“Spinco”), for each Celtic
common share.
Including the amount to be paid for Celtic’s outstanding convertible debentures and including
Celtic’s bank debt and working capital obligations, the transaction is valued at approximately
C$3.1 billion (excluding the estimated value of Spinco shares). The transaction is to be
completed by way of an arrangement under the Business Corporations Act (Alberta).
Highlights
 
• Cash price is C$24.50 per Celtic share
• Celtic shareholders also receive 0.5 of a share of a new company to be led by Celtic’s
current management team
• Transaction has received the unanimous approval of Celtic’s Board of Directors
Based on the cash consideration (not including the value of Spinco shares), the transaction price
represents a premium of 35% over Celtic’s closing share price on the Toronto Stock Exchange of
C$18.12 on October 16, 2012, and 34% over Celtic’s 30-trading day volume weighted average
trading price of C$18.28 per share ending on October 16, 2012.

Link: http://www.celticex.com/download/press/pr_17oct2012.pdf