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Posts from the ‘Bellatrix Exploration (BXE)’ Category

Betting some more on BXE

My portfolio had a tough week and has had a weak September.  As it goes when I show weakness, I am quick to clean house and start anew.  This week I jettisoned a number of names (including Sherritt, Mart, Straight Path Communications and Aercap), made a number of positions much smaller (including Overstock, IDT, Transat, Sanderson Farms, and Supercom) and raised a bunch of cash.  When the dust settled I had 10 positions remaining of significant size.

One of those positions is Bellatrix, of which, in the midst of oil and gas carnage everywhere, I bucked the trend and added to this week.  This after I had mentioned in a tweet a couple weeks ago that a recent add would be the last one.

Well I lied.  With the stock dropping to the mid-$6’s I decided to revisit the whole idea, and after doing so, I added fairly aggressively.  I do not make this decision lightly; as I have written before, once I have a full position I rarely add to it if it starts losing money.  There’s just too much chance that I am wrong.  At the time of the tweet Bellatrix was a 4% position for me.  Its now the largest position in my portfolio at 12%.  My average cost base is down to around $7.17.

Why was I willing to add so significantly?  Because the work I did helped reassure me that my original idea is most likely correct; that the company is suffering from a short to medium term processing bottleneck that should be alleviated by the commissioning of their own plant in mid-2015.

Most of my work focused around a production/decline model that would help give me a better idea of how production should trend under various drilling scenarios and capacity constraints.

My model is simplified, but not too simplified. I think that oil and gas models are some of the most difficult to make.  The inputs require estimates of decline rates, which changes over the life of each of the wells in the field, drilling schedules, which are impacted by weather, rig and processing availability, and in the case of the Western Sedimentary Basin, by spring break-up.  There are so many difficult to determine parts that I think it is better that one not try to confuse precision with accuracy.

Read more

Week 163: Knowing when you are not at an advantage

Portfolio Performance

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week-163-Performance

See the end of the post for the current make up of my portfolio and the last four weeks of trades.

Recent Developments

Note that this update is as of Friday, August 15th.  I have been a few days delinquent in getting it out.

I have strayed from my bread my butter of late, away from the tiny micro-caps that pass everyone else by and into the world of still small but not so obscure caps.  These are stocks like Air Canada, AerCap and Bellatrix among others, still far from being large caps, but big enough to receive the attention of analysts and funds.

I am not so sure of my own advantage with these stocks. I may be overstepping my own abilities to think that I can see something here the market is not.  I am under no misconceptions about my research. There is simply no way that I, as an individual investor with a couple of hours of free time every day, can match the depth and scope of the research that the institutions have. Read more

Week 155: Still Cautious

 Portfolio Performance

week-155-yoyperformance

week-155-Performance

See the end of the post for the current make up of my portfolio and the last four weeks of trades.

Recent Developments

In my last update I stated that I had about a 20% cash position and wanted to increase that position heading into the summer.  We are now one month further along and my cash position stands at something less than 5%.

Nevertheless I do remain somewhat uneasy about what happens to the market post QE.   As I wrote about in my last update:

Twice the quantitative easing policies of the Federal Reserve have ended and twice the market has gone into a tailspin.

I came across what I thought was a very good interview of Richard Duncan on the website Valuewalk.  I read his first book, The Dollar Crisis, a number of years ago and I still pull the book out every year or so to go through the concepts another time.  I have followed Duncan ever since.  The video rather long, but in my opinion Duncan describes what current drives the market right now and summarizes why I am uneasy.

 

I view a number of the stocks I own right now as shorter term trades with (hopefully) immediate catalysts.  I have been reducing positions that I would consider likely to have a lower bottom in an event of a correction.  And I have been buying gold stocks.  So even though I have added a few positions and reduced my overall cash position, I feel like I am continuing to reduce risk.   I tweeted the following about my purchases of gold shares: Read more

Taking advantage of the disappointment with Bellatrix

This is a company I should have owned 12 months ago when I was looking around the Canadian oil and gas universe but instead pissed around trying to buy the cheapest thing.  When investing in an oil and gas company buying the cheapest thing is simply not the way to make money.  I’ve been investing in the sector for 10 years now; every time I walk away and return I have to learn that lesson again.  Hopefully that will end now.

Bellatrix Exploration (BXE) is simply a company with lots of land in very prospective areas and a history of being able to grow production on a consistent basis. The stock is on sale because of a bungled private placement and I think that presents an opportunity.

Background about the company

Bellatrix owns one of the largest positions in the Cardium (in Alberta) in the industry.

 

land_holdings

 

They’ve proven they can develop that land in an efficient manner.  The company has grown its production the last 4 years and expects another strong year of growth in 2014 (note though that the 2014 production number is being buoyed by the acquisition of Angle Energy, which closed late last year). Read more

Comparing the Oil and Gas Juniors

Earnings season should be upon us shortly for the Oil and Gas junior companies.  To prepare for the onslaught of earnings reports over the next month, I have updated and published below my junior comparison spreadsheet. I’ve added a few new companies to the list of those I follow, with those being Pinecrest and Galleon (now Guide Exploration).

A few things jumped out at me after having reviewe the spreadsheet:

  • We’ve had a big move in Equal Energy from $4 to $6, but even with that move the stock is trading very cheaply on pretty much any metric
  • Skywest really looks cheap compared to its peers.  I used to own Skywest, but I sold it when it looked like they were headed for a cash crunch.  I think it is worth looking at again at these levels.
  • Arcan trades at a premium to its peers.  Just something I like to point out to be aware of.  I believe that it should trade at a premium, but its worth remembering because it suggests that any production hiccup will be severely punished
  • Reliable Energy is starting to look interesting again.  They had some interesting drill results in their last update and are reaching that critical production level (1,000bbl/d) where they will begin to generate the cash flow needed to ramp their production up on a consistent basis