Wednesday, February 27, 2013

40 Higher Earning Hedge Fund Managers of 2012

But in northern New JerseyDavid Tepper had another extremely strong year. The founder and head of Appaloosa Management guided his flagship hedge fund to net returns of nearly 30%. Tepper personally made an estimated $2.2 billion in 2012, topping Forbes’ list of the 40 highest-earning hedge fund managers and traders.
It has been four years now since Tepper, 55, started aggressively buying shares in U.S. banks like Bank of America that were reeling from the credit crisis, successfully betting that the U.S. economy and financial sector would not crumble. His 2009 trade became legendary, but while other hedge fund managers who did spectacularly well during the credit crisis have faded, Tepper, a former Goldman Sachs bond trader, has continued to deftly trade financial markets. In 2012 he continued to make a good case for being one of the greatest hedge fund managers ever.

Monday, February 25, 2013

Chesapeake's Mississippi Lime JV Disappoints

Our latest for Seeking Alpha:

Chesapeake has sold 425,000 acres to Sinopec for $1.02 billion. That is $2,352 per acre which is less than one third the value that Chesapeake had suggested the property is worth just a few months ago.

But it is even worse than that, because this acreage also carries with it a significant amount of production and booked reserves. Sinopec's half of the acreage will bring with it 17,000 boe/day of production and 70 million barrels of proved reserves. Chesapeake's presentations historically have pointed to the valuation of non-producing land that had not had much capital invested in it.
In other words, I would have expected Chesapeake's Mississippi Lime acreage to garner $7,000 to $8,000 per acre without any production.

Chesapeake Announces Miss Lime JV

OKLAHOMA CITY--(BUSINESS WIRE)--Feb. 25, 2013-- Chesapeake Energy Corporation (NYSE:CHK) and Sinopec International Petroleum Exploration and Production Corporation (Sinopec) today announced the execution of an agreement which provides for Sinopec to purchase a 50% undivided interest in 850,000 of Chesapeake’s net oil and natural gas leasehold acres in the Mississippi Lime play in northern Oklahoma (425,000 acres net to Sinopec). The total consideration for the transaction will be $1.02 billion in cash, of which approximately 93% will be received upon closing. Payment of the remaining proceeds will be subject to certain customary title contingencies. Production from these assets (including Mississippi Lime and other formations), net to Chesapeake’s interest and prior to Sinopec’s purchase, averaged approximately 34 thousand barrels of oil equivalent per day in the 2012 fourth quarter and, as of December 31, 2012, there was approximately 140 million barrels of oil equivalent of net proved reserves associated with the assets. All future exploration and development costs in the joint venture will be shared proportionately between the parties with no drilling carries involved. As the operator of the project, Chesapeake will conduct all leasing, drilling, completion, operations and marketing activities for the joint venture. The transaction is anticipated to be completed in the 2013 second quarter.
Steven C. Dixon, Chesapeake’s Chief Operating Officer, said, “We are excited to announce the execution of our Mississippi Lime joint venture with Sinopec, which moves us further along in achieving our asset sales goals and secures an excellent partner to share the capital costs required to actively develop this very large, liquids-rich resource play.”

EOG February 2013 Presentation

Southern Leg of Keystone XL Hits Halfway Mark

700,000 barrels a day to be moved out of Cushing by the end of the year

Tuesday, February 19, 2013

Undervalued Mississippi Lime Player - Austex Oil Limited

Buffett Brand Has More Beans Than Heinz

Alice Schroeder in the FT:

By now the “Buffett deal” has become familiar: an investment by Berkshire Hathaway that includes high-yield preferred stock and very little risk. Berkshire’s purchase last week of Heinz fits the classic pattern. Before yawning, “he’s pulled off another one”, let us pause to consider some new shading that Heinz brings to the portrait of Warren Buffett as dealmaker and capitalist. Also worth noting are subtle signals that suggest where the US economy is heading. Mr Buffett has a history of being right about such things, so let us pay attention.

Through the deal, Berkshire and its partner 3G Capital, the Brazilian private equity firm, will each take half of Heinz in exchange for $4bn of equity. For another $8bn, Berkshire acquires redeemable preferred stock yielding 9 per cent and warrants (options that give investors the right to buy shares at an agreed price at some point in the future). The $72.50 per share cash transaction includes $12bn of new and assumed debt, valuing Heinz at $28bn.

Thursday, February 14, 2013

Poseidon Concepts Disaster

Holy ...............2/3rds of revenue should not have been recorded?  How is that possible?

Special Committee Review and Assessment
As previously announced on December 27, 2012, the Company established the Special Committee to, among other things, review and address various issues arising from the Company's write-off of certain of the Company's accounts receivable and the evolving business plan of the Company. In order to assist the Special Committee in its review, the Special Committee retained the services of Norton Rose Canada LLP as its legal counsel, who in turn has retained Ernst & Young Inc. Based on the recommendation of the Special Committee and the interim report of its advisors, the Board of Directors has determined, on a preliminary basis, that primarily related to long term take-or-pay arrangements:
  • approximately $95 million to $106 million (subject to detailed quantification by the Company) of the Company's $148.1 million in revenue for the 9 months ended September 30, 2012 should not have been recorded as revenue in the Company's financial statements; and
  • as a result of recording the foregoing revenues, approximately $94 million to $102 million (subject to detailed quantification by the Company) of the Company's $125.5 million accounts receivable as at September 30, 2012 should not have been recorded in the Company's financial statements as accounts receivable.
As a result of the foregoing, the first, second and third quarter 2012 financial statements (the "Financial Statements") will be restated and the Company advises investors that they should no longer rely on the Financial Statements as well as the corresponding Management's Discussion & Analysis. Further, the Company advises that all previous guidance with respect to the Company's business should no longer be relied upon. The Board of Directors, the Audit Committee and the Special Committee are working with their advisors, the Company's auditors and management to more specifically quantify the extent and scope of the restatements required in the Financial Statements to ensure that revenue is recognized in accordance with the Company's accounting policies and International Financial Reporting Standards. Upon completion of these efforts, the Company will re-file the Financial Statements and accompanying Management's Discussion & Analysis.
The Special Committee (along with its advisors) will continue with its ongoing review and assessment.
Operations Update
As of February 13, 2013, Poseidon had 96 fluid tanks under rental agreements in the North American well completions market and 7 tank heaters. These rentals are primarily short-term "live-tank" rentals - a rental category in which the Company has not historically experienced material collection or revenue recognition issues. The Company is also focused on implementing plans to reduce operating costs through continued improvements to its setup and tear-down processes.

Hedge Fund Heavyweights Score Big Betting Against the Yen

Wagering against the yen has emerged as the hottest trade on Wall Street over the past three months. George Soros, who made a fortune shorting the British pound in the 1990s, has scored gains of almost $1 billion on the trade since November, according to people with knowledge of the firm's positions. Others reaping big trading profits by riding the yen down include David Einhorn's Greenlight Capital, Daniel Loeb's Third Point LLC and Kyle Bass's Hayman Capital Management LP, investors say.


Tuesday, February 12, 2013

2012 State of the Union Enhanced Slides

Emperor Oil - African Junior On The Cusp Of Strong Production Growth

Interesting article over at Beating the Index and shared with permission:

Oil and Gas exploration in East Africa comes with some risk, but offers huge potential rewards in return.  That’s particularly true for junior companies who can secure large acreage positions with world-class oil prospects.

But it can take years just to assemble the land and shoot seismic. These companies also need to have deep pockets since an exploratory well can cost in excess of $10 million. No chump change for a junior taking on a high level of risk.
The odds only favour a few; Africa Oil (TSXv-AOI) is one such junior running from $2 to $11 last year after making a huge discovery.
Emperor Oil (TSXV-EM) could be another company; it recently signed a MOU on a large block of land in Sudan’s Rawat Basin.  Unlike Africa Oil however, Emperor’s production could be up and running in less than a year with no exploration risk and for a lot less money.
The reason is that Emperor Oil’s acreage comes with 3 commercial discovery wells with 95 million barrels of recoverable oil. The reserves, assigned by an independent petroleum engineering report (NI-51-101), are limited to a small 20 sq km area where the 3 wells are located. Emperor Oil owns 42.5% working interest in a 10,000 sq km concession known as Block 7.
The company will recomplete these wells at a cost of approximately $500,000 per well – that’s a maximum of $1.5 million with zero exploration risk.
Each of these wells could flow 10K bopd based on equivalent wells in Southern Sudan. Production would initially be restricted to 2,000bopd since it will be trucked. The company’s 3 wells are 60km away from a central processing facility where the main export oil pipeline passes through towards Port Sudan on the Red Sea. The oilfield would have to be connected by pipeline to the main processing facility before pumping the wells at maximum capacity.
Emperor is working in the Rawat Basin, which is part of the greater Melut Basin to the south, a proven producing basin currently responsible for 350,000 bopd. Advisory board member Mr. George Fulford, P.Eng, a geologist and geophysicist with years of experience in Sudan, believes there are several oil fields in Emperor’s Block 7 in the Rawat Basin waiting to be discovered:
“there are several geological areas with almost identical geophysical features as those existing in the Rawat Basin Oil Field, each with similar oil bearing traps recurring every +/- 20 kilometres”.

Monday, February 4, 2013

Berkowitz Expects These Stocks To Go Up Fourfold in Five Years

Why wouldn't we listen to him?

Canadian Light Oil Over $100 Per Barrel

Don't know how long it will last, but sure makes the share price of Canadian producers seem awfully low:

Oil & Gas Prices

Ahmadinejad prepared to be Iran's first astronaut

How awesome would it be to see him shot into space on an Iranian rocket?

What CVI is Watching / Reading

Notes From The Columbia Investment Conference

Investing royalty presenting at this one, head to Market Folly for notes:

Why Berkowitz is Closing Fairholme To New Investors