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Posts from the ‘Equal Energy (EQU)’ Category

Week 146: Some thoughts on agility

Portfolio Performance

week-145-yoyperformanceweek-145-Performance

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

Recent Developments

Four weeks ago I wrote:

I think an important pillar of my strategy to take advantage of the concentration that I can have.  I don’t have anyone pressuring me to be diversified or questioning my risk level or anyone to answer to if something goes wrong.  So I don’t hesitate to have a large percentage of my portfolio tied to the names I think will perform the best.

With that said, the names that I am currently of the heaviest weight are, of course, Pacific Ethanol, which remains my largest position by far

Today Pacific Ethanol represents a 2% position for me. Read more

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Week 91: Consolidating

Portfolio Performance

week-91-Performance

Consolidation

Patience is a difficult virtue. I’ve had 3 weeks of pretty so-so performance, some stocks going up and some stocks going down and overall not much of anything happening. With the market going up seemingly every day its hard to not let that play on your mind.

But you have to have a balance of patience and impatience to do well in stocks. You need to have a healthy level of impatience so that you don’t hold onto positions for too long, but tempered with an equal dose of patience because, as I read some time ago from a cagey market veteran, you will make 80% of your gains for a year in 2-3 weeks, and figuring out which weeks those are is nearly impossible.

In the last few weeks I think I demonstrated a little bit both; witness impatience in my selling of gold stocks and of my position in Tricon Capital and patience as I held on to falling positions in MBIA, Impac Mortgage and watched YRC Worldwide and Yellow Media correct substantially from their highs. Read more

Week 70: A stock pickers Market

Portfolio Performance

(Note that I am now posting my portfolio composition and list of trades at the end of the post)

Update

I didn’t get around to writing an update last week because I was busy with other research that could not wait.  So its been 3 weeks since I updated my portfolio and transactions and quite a bit has happened over that time.

Over time my portfolio has slowly morphed into a vehicle for playing the housing recovery. I had large moves to the upside in a number of my housing related positions, with the most pronounced being of course Impac Mortgage (IMH), but also from Radian Group (RDN), MGIC (MTG) and a number of my regional banks with strong mortgage banking operations.  Its been a good 3 weeks.

In this post I want to talk about some of the changes I’ve made over the last 3 weeks.  To summarize:

  1. I sold out of all my gold stocks other then Atna Resources (ATN)
  2. I made a brief foray into, and then out of, US E&P’s
  3. I am out of JC Penney (JCP)… for now
  4. I am into Avenex Energy (AVF) and a homebuilder (HOV)

I will address each of these in order, followed by a brief discussion of what to expect from Nam Tai, which reports earning on Monday and of which I want to be clear of my expectations and actions.  But first I want to talk generally for a moment.

Twitter

I’m finding that I am using twitter quite a bit to post what I am doing on a more regular basis.  Whenever I find a relevant article, or if I start to buy a new stock, I try to put a post up on twitter.  I have also found a number of folks on there that have been useful to follow.  Its a useful tool, and has the advantage over the traditional message board format in that you follow a person rather than a subject.  So you aren’t wading through garbage to find nuggets.  You can follow me @LSigurd. Read more

Very Pleased with Equal Energy sale of Lochend

On Friday Equal Energy announced the following:

Equal has sold its Lochend Cardium assets for cash consideration of $62 million, effective October 1st 2012.  The assets sold include current production of approximately 525 boe/d (93% light oil) based on the most recent 30 day average, related infrastructure and undeveloped land.

The sales price equates to $118,000 per flowing barrel.  At the end of 2011 proven and probable reserves at Lochend were 1,621 mbbl of crude oil, 2.6 Bcf of natural gas, and 64.8 mbbl of NGL.  Using those numbers, the disposition went for $29/boe of P&P.  However successful drilling has been done at Lochend since that time so their will undoubtedly be higher reserves attributed to the area when the year end reserve report is completed, so take that number with a grain of salt.

The sale removes the last of the Canadian land assets.  All that is remaining now are royalty interests that I would imagine will sold in short order.  Together with the sale of the Mississippian interest, and the Viking land at Halkirk, Equal has reduced its debt down to a minimal amount.

Read more

Week 65: Doing the work

Portfolio Performance

The turn in housing

– Michael Burry – Scion Capital

The housing market has turned.

Being that it is a huge, lumbering tanker, it takes a long time to slow down and redirect.  The changes happen slowly enough that you can miss them if you are focused on the wrong details (price increases and to a lessor degree sales increases) and not enough on the right one’s (inventory).  All that matters is that prices are cheap, rates are low, and inventory has come down to levels that leave many cities firmly entrenched as sellers markets. Once buyers stop seeing themselves in the drivers seat, their attitude changes from one of waiting for a better buy to that of getting in before its too late.  The vicious circle is replaced by a virtuous one, and sales and price increases will follow.  Nothing lasts forever, and the US housing collapse didn’t either.

Falling inventories had to lead the housing turnaround, and that is what we are seeing now.  Nationwide in August housing inventories fell from 8.2 months of supply a year ago to 6.1 last month.

Read more

When the facts change: Getting back into Equal Energy

I have been inching my way back into a position in Equal Energy over the last week and a half.  On Thursday, with the stock dropping back to $3.40 (on the Canadian exchange) I increased my position significantly.

Of course I sold Equal at an even lower price.  I began selling in May with a third of my position at $3.35, another third at $3.20, and the rest at $2.85.

So why by back now?

Well, some of the facts have changed.

Three key events have occurred that have changed my opinion on Equal Energy

  1. I read the SeekingAlpha posts on Equal by Nawar Alsaadi
  2. Drilling of the Mississippian has begun
  3. Central banks around the world are easing

Read more

Sold out of Equal Energy

I exited my position in Equal Energy last week.  I took the hit.

I had originally bought Equal at a little over $4.  I sold out the rest of what I owned last week at $2.85.

Why take the loss?

I decided that I would rather take the loss then wait for the outcome of the strategic alternatives process.  I’m worried about the repercussions if that process does not end well.  I’ve watched a few of these processes go badly in the last couple of months.  The result to the share price wasn’t pretty.  Take a look at Second Wave and Ithaca for a couple of examples.

In the Calgary Herald today there was an article on the struggling junior resource sector in the city.

There are 17 companies currently in strategic alternatives processes that are advertising and being broadly shopped. That’s about 65,000 boe/d,” he said. “And there are 35 asset packages, giving us another 76,000 boe/d.”

With this many companies on the selling block it is a buyers market out there.  That doesn’t bode well for Equal.

A second concern is the Hunton.  The Hunton is a solid producing asset when natural gas and natural gas liquids prices are decent.  It is not as solid when prices are as weak as they are now.   70% of the NGL production from the Hunton is ethane and propane.

I have written before about my concerns with respect to ethane and propane.  NGL’s are commonly talked about in the same breath as oil.   They are all “liquids”.  Except they aren’t; ethane and propane are not oil. They do not have the same end uses as oil and therefore can have a completely different supply/demand dynamic then oil.

Moreover, Conway propane prices, of which Equal has said the Hunton NGL pricing is based, have gone from bad to worse over the past couple of weeks.  You can access the Conway weekly pricing along with other marketing hub pricing here.  Some of the price decline at Conway has been due to short term bottlenecks that will go away, but not all of it.   If you look more broadly at propane prices across the west they show a broad based decline.

I could be totally wrong about my decision.  Equal could sell assets tomorrow, or even sell the whole company, and I would lose out for having sold.

The decision is really one based on risk and reward.  The risk is that if Equal announces that they are no longer pursuing strategic alternatives the stock could drop suddenly and I could be left holding the bad.  The concomitant risk is the ever present problems in Europe.  The reward of course is that with the right sale the stock could rise to $4, or maybe more.

In the current environment I have decided to not take the risk and instead forgo that potential reward in the name of capital preservation.