Latest Twitter Threads by @valley_llama on Thread Reader App

Oct 25, 2023 • 15 tweets • 3 min read

What's the value of a barrel of oil buried 6 kilometres deep in the middle of the ocean? $AOI

A couple of reference points: $HES
Hess Corp holds 30% of Stabroek block, Guyana.
Venus development ~9 years behind.
Otherwise similar in economic terms.

$HES EV $60B as validated by suitor $CVX.
Estimated allocation:
Midstream, 5B
Guyana, 35B
Bakken + USG + Malay/Thai &c, 20B
Total EV, 60B
Stabroek 30% x 11Bbbl EUR = 3.3Bbbl
35 / 3.3 = $12/bbl

Oct 24, 2023 • 5 tweets • 1 min read

$AOI $TTE
"TotalEnergies has launched a bid process for a contract set to be worth more than $800 million to secure a rig to carry out development drilling on its huge Venus oil discovery offshore Namibia.

"The move underpins the French supermajor’s plan to fast-track the exploitation of its multi-billion-barrel deep-water oil and gas find on the prolific Orange basin."

fast-track...flowing like a train?
multi-billion = more than 1 billion?

Sep 28, 2023 • 5 tweets • 2 min read

Pay zone intervals
Dynamic data: pressure, flow rates
Lithological data
Gas ratios
Results of the sidetrack

Total doesn't want to tell us any of this. Instead Pat is evasive, throwing shade on our prospect. Why?

They know they've hit the jackpot. They want it all. $AOI $TTE

https://twitter.com/valley_llama/status/1707322400751129007

The market is spooked by the "failure" at aggressive 20 km step-out Nara. Dry/non-commercial, not clear.

Pat already said Venus will developed. He's downplaying its scale.

$TTE is evaluating a $9bn project in Suriname
for 700 mmbbl, despite several dry and gassy wells.

Sep 15, 2023 • 18 tweets • 6 min read

Let's do a little E&P security review, shall we? First, have a look at this sorry little chart. Africa Oil shares have been lagging Brent crude in a rising market. What happened to operating leverage? The stock is moribund. $AOI $AOIFF

Here are the net oil and gas reserves of its Prime joint venture, at a conservative price deck in the mid-70s. Shall we apply a 20% discount rate for Nigeria? Let's ignore the fact that the tax rate dropped from 50% to 30% after the reserve statement, greatly boosting NPV.

Nov 7, 2022 • 5 tweets • 1 min read

To make fertiliser you need ammonia, and you need gas to make ammonia, NH3; you need natural gas. Except we're the only one in the country—and people don't understand this... They built this many years ago. We had the foresight to build it. I can't take credit for it, but it's there. We were able to make it with something called pet coke. So we don't need natural gas to make fertiliser.

May 26, 2022 • 5 tweets • 2 min read

Magical thinking from $VET executive management, who claim two recent acquisitions are 34% accretive to free cash flow per share.

By this logic, when you pay cash, any acquisition is accretive!

Yet with 1/3 of market cap, buybacks would have been 50% accretive to FCF/share!

In marketing transactions to investors, neglecting costs, either implicit (e.g., cash cost of deal and time value of delaying capital returns) or explicit (e.g., opportunity cost of buyback, etc.), is a common way of varnishing them to detract from motivating agency conflicts.

Mar 8, 2022 • 6 tweets • 1 min read

The argument for cash is:
Commodity price inflation-->
Interest rate rises-->
Credit crunch-->
50% drop in stock indices. The argument against cash is prolonged high inflation depreciating the value of fiat currency without meaningful compensation from interest payments.

Feb 27, 2022 • 4 tweets • 4 min read

TICKLING GIANTS
Gazprom: Performing As Designed
by Alex Fak and Anna Kotelnikova
May 2018
$GAZP $OGZPY

Feb 27, 2022 • 5 tweets • 1 min read

At least 3bn barrels: Venus is Sub-Saharan Africa's biggest ever oil discovery. $AOI
upstreamonline.com/exclusive/at-l… "WoodMac estimates the net present value of Venus phase one to be $3.5 billion at $50 oil price, generating an internal rate of return of 22% while breaking even at $31 per barrel. At a $70 oil price, the project’s NPV hits $6.3 billion, with IRR reaching 30%."

Feb 25, 2022 • 5 tweets • 1 min read

S&P Global on Sanctions:

"The unavailability of Black Sea oil will redirect US and WAF crude to Europe, Brazil, AG and US will get busy on the V[LCC]s," a shipbroker said, explaining the gains on the paper markets. "With large swaths of Russian exports heading to Europe, European refiners would be forced to seek supply elsewhere", Mackay said during the Teekay Tankers earnings call.

Feb 25, 2022 • 4 tweets • 1 min read

I enjoy such classic market maxims. Brent currently has a negative ($15/bbl) 1-yr calendar spread, while $XOP trades flat.

https://twitter.com/profplum99/status/1496876867327971330

Perhaps the equity market correctly assesses that the political risk premium (i.e., convenience yield) in crude is likely temporary, while slower-moving structurally bullish supply-demand elements develop concurrently.

Feb 19, 2021 • 4 tweets • 2 min read

@IchLerne2 $GOLD & $NEM trade at higher PEs for a few reasons:
1. Longer reserve life
2. Low cost mines, e.g., in Nevada, bear less risk.
3. Liquidity of larger market cap. (E.g., Soros & $BRK can only buy these.)
4. $GOLD, in particular, has very good management, since Bristow joined. @IchLerne2 Very good and important question. Royalty companies trade at a premium multiple of earnings or cash flow, partly because they are stabler with lower breakeven; i.e., no opex for royalty, low strike for streams, just G&A. So higher quality earnings.

Feb 19, 2021 • 25 tweets • 4 min read

Gold stocks.
Commodity inputs, commodity output.
Poor capital allocation.
Poor governance.
Growth capex > depletion.
Upside operating leverage dampened by resource nationalism.
LT fair multiple for an average stock: 20.
Fair multiple for a gold stock: 10.* *On mid-cycle margins.

Some mitigating factors:
Jurisdiction. First World (property rights) and pro-mining (permissible) better; i.e., lower discount. E.g., Australia, Canada, Nevada.
Valuable undeveloped properties.
Competent and upright management. (Rare.)

Jan 29, 2021 • 7 tweets • 2 min read

The "God portfolio", constructed by knowing the future and rebalancing every five years to the top decile of stocks by forward returns, returns 29.37%, beating the S&P 500 by +19.5% over 90 years, 1927-2017.

alphaarchitect.com/2016/02/02/eve… But 10 drawdowns of 20+% (max -76%) suggest that even God would get redemptions.

Furthermore, the Sharpe ratio was only 1.12.

Jan 9, 2021 • 9 tweets • 2 min read

How I read a 10-K & 10-Q

Skim the boring bits:
risk boilerplate
code of ethics
audit discussion
governance procedures
significant accounting policies
pension account details
ESG Read:
letter to shareholders (if not boring, good)
description of business
history
officer & director blurbs
related party transactions
compensation (proxy)
litigation
off-balance sheet arrangements
main accounts
md&a
all notes, especially:
segment accounts
debt
subsequent events

Jan 3, 2021 • 7 tweets • 2 min read

$BIIB

I agree. ROIC depends on accounting, which relies on assumptions that are inherently subjective.

As for the performance of the company, its valuation, and prospects...

https://twitter.com/Biohazard3737/status/1345584406388486145

Perhaps this is a question of whether their amortisation is a fair reflection of economic reality. It didn't seem overly aggressive to me. But impairments rely on key assumptions about commerciality of the pipeline, so earnings are difficult to accept at face value.

Jan 3, 2021 • 21 tweets • 4 min read

Are stocks overpriced? How much growth is required to justify a P/E of 100?

In this article, we shall explore how the one- and two-stage Gordon Growth Models, and Dividend Discount Model, relate growth rates, valuations, earnings, dividends, inflation, and return on investment. Let
E = earnings
d = dividend
P = price
r = discount rate
g = (terminal) dividend growth rate

Then
y = d/P is dividend yield
Y = E/P is earnings yield
P/E = 1/Y
p = d/E is dividend payout ratio

According to the Gordon Growth Model (GGM),

y = d/P = r - g.

Hence,

Y = y/p.

Dec 22, 2020 • 15 tweets • 3 min read

$SALT Scorpio Bulkers Ltd.
Looks like shareholders have a pretty good oppression claim here.
Let's see what these guys are up to...

Figure 1 (2 April 2020): Form 20-F provides for "change of control fees" for termination of vessel management contract with related party. 3 months' fees unless resulting from a "change of control", stipulated to include the sale of all vessels.

Dec 7, 2020 • 7 tweets • 2 min read

John Templeton on his investment methods.

Buy at the point of maximum pessimism.
Buy whatever is cheapest, globally. Usually unpopular.
Invest tax-efficiently.
Be patient.

It is a big mistake to buy company with best prospects. This is often reflected in the market price, and then some.

Beware inflation.
Modern attitudes will dictate inflation. Consumer prices will never fall. Cost of living will double every 9 years. (8% inflation rate.)

Nov 11, 2020 • 16 tweets • 3 min read

Surgeon general's warning: tanker content could be hazardous to your wealth.

$DHT
Interesting conference call.
Paraphrasing:
16/27 ships on time charter, fading the market (bearish).
Said they cannot do more TCs in a spot business (even more bearish).
Will continue to delever. Dividend has been 60% of net income, but the rule is a minimum of 60%. They could do more, but prefer to delever. 40% of net income, plus depreciation is the current rate of debt repayment, which amounts to rapid delevering.
May go to zero debt, market permitting.

Sep 29, 2020 • 23 tweets • 3 min read

Italian Keiretsu:

Scorpio Tankers Inc. contracts many of the cost centres of its business to three related parties controlled by executive officers and directors of the company:

Scorpio Services Holdings (SSM)
Scorpio Commercial Management (SCM)
Scorpio Ship Management (SSM) According to the Annual Report 20-F of Scorpio Tankers Inc., $STNG, the total of amounts paid by $STNG in 2019, to these entities, and to $STNG officers and directors, was roughly $84 million.

The listed operating company $STNG had roughly $1 billion in revenue.

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