Share tips thread
Discussion
ukwill said:
Fittster said:
What fundamentals are drawing you to LGO? No yield, profit, etc. Most of the normal ratios to value a company look pretty dire.
Maiden profit will be 2015. 1st pad results have been several times what was originally anticipated. Trinity-Innis purchase soon to add to SP (another Goudron). Next pad completion and into production by year end (pad aiming at same fault). Revised CPR to come by Jan will mean significant rerate. Excellent netback price. And that's not even counting the 2015 drilling campaign, Cedros or Spain.SP will be a healthy double figure number this time next year. LGO is now a full on producer, with several thousand more bopd to come from Goudron alone. It has become my main holding over the course of this year. And I plan to hold for at least another 2yrs min.
Generally what you do is look at the EXPECTED production from POTENTIAL oil wells work out the cost of production, calculate upfront investment needed, pick a long term oil price and then run a DCF on the resulting cashflows.
That said, I think ukwill is showing a somewhat funamental misunderstanding about what is really happening here.
Two things impact these stocks - 1. the oil price as I mentioned. All costs are pretty much fixed so if say the cost of production is $60 a barrel and the oil price drops from $100 to $80 then by definition the profitability HALVES. It's even worse on the DCF since you still need to invest the upfront capex in the ground too.
2. Discoveries. If a well you thought would produce 10m barrels turns out to be more like 20m (on closer inspection) then that is obviously good news.
My over-riding sense is that E&P stock are possibly EVEN MORE of a gamble than most others.
EVEN IF YOU HEDGE THE OIL PRICE.
For example "revised CPR in Jan = rerate". Well perhaps, but that depends on what the CPR says.
In an efficient market, the probability of a good vs. bad report will be reflected in the current price.
Sure, if it's good (i.e. better than expected) then the share price will rise.
YOU CANNOT KNOW WHAT THAT CPR WILL SAY THOUGH!! Unless you have inside knowledge which is illegal obviously.
Likewise the Trinity-Inniss acquisition.
Sure if there is a risk this won't go through and then it does the stock will rise.
Again the markets will discount that risk and reflect it in the current price.
You can't KNOW that deal will go through - it's a punt.
If it is HIGHLY LIKELY that deal goes through then that should ALREADY be reflected in the price.
People buying and selling the shares know full well this big deal is coming up - so when it happens it isn't a particularly positive surprise.
Likewise "maiden profit" - so what? Everyone knows that. Sure there is execution risk - these guys typically delay the hell out of production because it is generally very difficult so if it happens on time great. YOU CAN'T BE SURE IT WILL! Unless you are on the ground doing a site visit the week before!
That said, obviously the market isn't that efficient and sometimes fear/greed/sentiment takes over hence a nice 20% bump today in the price for no obvious reason.
In the long term fundamentals will shine through but to suggest LGO is worth anything like what it was when the oil price was $100 is woefully naive.
If you are so sure that the longer term oil price will rise back to $100 then you should be betting on that rather than an E&P which has so much other esoteric risk.
walm said:
Fittster E&P plays don't use a traditional valuation methodology owing to their typical lack of profit (or even sales) at the beginning.
Generally what you do is look at the EXPECTED production from POTENTIAL oil wells work out the cost of production, calculate upfront investment needed, pick a long term oil price and then run a DCF on the resulting cashflows.
That said, I think ukwill is showing a somewhat funamental misunderstanding about what is really happening here.
Two things impact these stocks - 1. the oil price as I mentioned. All costs are pretty much fixed so if say the cost of production is $60 a barrel and the oil price drops from $100 to $80 then by definition the profitability HALVES. It's even worse on the DCF since you still need to invest the upfront capex in the ground too.
2. Discoveries. If a well you thought would produce 10m barrels turns out to be more like 20m (on closer inspection) then that is obviously good news.
My over-riding sense is that E&P stock are possibly EVEN MORE of a gamble than most others.
EVEN IF YOU HEDGE THE OIL PRICE.
For example "revised CPR in Jan = rerate". Well perhaps, but that depends on what the CPR says.
In an efficient market, the probability of a good vs. bad report will be reflected in the current price.
Sure, if it's good (i.e. better than expected) then the share price will rise.
YOU CANNOT KNOW WHAT THAT CPR WILL SAY THOUGH!! Unless you have inside knowledge which is illegal obviously.
Likewise the Trinity-Inniss acquisition.
Sure if there is a risk this won't go through and then it does the stock will rise.
Again the markets will discount that risk and reflect it in the current price.
You can't KNOW that deal will go through - it's a punt.
If it is HIGHLY LIKELY that deal goes through then that should ALREADY be reflected in the price.
People buying and selling the shares know full well this big deal is coming up - so when it happens it isn't a particularly positive surprise.
Likewise "maiden profit" - so what? Everyone knows that. Sure there is execution risk - these guys typically delay the hell out of production because it is generally very difficult so if it happens on time great. YOU CAN'T BE SURE IT WILL! Unless you are on the ground doing a site visit the week before!
That said, obviously the market isn't that efficient and sometimes fear/greed/sentiment takes over hence a nice 20% bump today in the price for no obvious reason.
In the long term fundamentals will shine through but to suggest LGO is worth anything like what it was when the oil price was $100 is woefully naive.
If you are so sure that the longer term oil price will rise back to $100 then you should be betting on that rather than an E&P which has so much other esoteric risk.
Hi Walm Generally what you do is look at the EXPECTED production from POTENTIAL oil wells work out the cost of production, calculate upfront investment needed, pick a long term oil price and then run a DCF on the resulting cashflows.
That said, I think ukwill is showing a somewhat funamental misunderstanding about what is really happening here.
Two things impact these stocks - 1. the oil price as I mentioned. All costs are pretty much fixed so if say the cost of production is $60 a barrel and the oil price drops from $100 to $80 then by definition the profitability HALVES. It's even worse on the DCF since you still need to invest the upfront capex in the ground too.
2. Discoveries. If a well you thought would produce 10m barrels turns out to be more like 20m (on closer inspection) then that is obviously good news.
My over-riding sense is that E&P stock are possibly EVEN MORE of a gamble than most others.
EVEN IF YOU HEDGE THE OIL PRICE.
For example "revised CPR in Jan = rerate". Well perhaps, but that depends on what the CPR says.
In an efficient market, the probability of a good vs. bad report will be reflected in the current price.
Sure, if it's good (i.e. better than expected) then the share price will rise.
YOU CANNOT KNOW WHAT THAT CPR WILL SAY THOUGH!! Unless you have inside knowledge which is illegal obviously.
Likewise the Trinity-Inniss acquisition.
Sure if there is a risk this won't go through and then it does the stock will rise.
Again the markets will discount that risk and reflect it in the current price.
You can't KNOW that deal will go through - it's a punt.
If it is HIGHLY LIKELY that deal goes through then that should ALREADY be reflected in the price.
People buying and selling the shares know full well this big deal is coming up - so when it happens it isn't a particularly positive surprise.
Likewise "maiden profit" - so what? Everyone knows that. Sure there is execution risk - these guys typically delay the hell out of production because it is generally very difficult so if it happens on time great. YOU CAN'T BE SURE IT WILL! Unless you are on the ground doing a site visit the week before!
That said, obviously the market isn't that efficient and sometimes fear/greed/sentiment takes over hence a nice 20% bump today in the price for no obvious reason.
In the long term fundamentals will shine through but to suggest LGO is worth anything like what it was when the oil price was $100 is woefully naive.
If you are so sure that the longer term oil price will rise back to $100 then you should be betting on that rather than an E&P which has so much other esoteric risk.
Having been in LGO since sub 1p, I'll take the substantial profit I've already made as a clear sign of my obvious misunderstanding of what is really happening here!
Having listened to Neil Ritson present on several occasions, and knowing what is still to come, I'll continue enjoying my ignorance! I guess we'll see this time next year whether my SP prediction becomes reality or is in fact, a mere pipedream.
Naturally, no PI can be 100% certain about what will happen - that's a given. However, we can all do our own research and make our own decisions. I'm happy with mine so far.
LGO is now a producer, and this time next year it will be producing a whole lot more than it currently is.
ukwill said:
Having been in LGO since sub 1p, I'll take the substantial profit I've already made as a clear sign of my obvious misunderstanding of what is really happening here!
I don't mean to pick on you and I am very happy for you to be in substantial profit - that's great.Hoewever, when I make any profit in a trade, I take a long hard look at where I was right and where I was wrong and where I was simply lucky or unlucky.
From literally everything you have written it just sounds like you got lucky. Again, no offence.
(Frankly there is no question I would rather be lucky than smart in investing.)
What was wrong with your analysis and research on Mosman that has meant it halved since you called the bottom in July?
Listening to the CEO and knowing they are about to double production sounds like very much obvious well known facts about the company.
Have you done a full SOTP showing how the market might be over-estimating the execution risk on that production?That's research than can give you an edge, IMO (no H
).Having said all that - my own view is that these guys have been far too beaten up and this could be a great entry point simply because oil down here doesn't make sense given only TEMPORARY excess supply from OPEC and the DESPERATE need for central banks to re-ignite inflation from here.
Futures are green, I'd forgotten what that colour looks like. Excitement is over the Fed and if they should consider delaying end of QE, it's just mad.
Personally day 2 of a bounce for me, I'm going to try and raise as much cash as possible into this bounce get rid of all long positions that I took buying this dip most of them probably at a small loss or if lucky at breakeven. I'm not convinced, think this is a dead cat bounce and we'll see lower lows next week. I guess if things are still going up on day 3 or 5 then all the above will be a mistake in hindsight.
Personally day 2 of a bounce for me, I'm going to try and raise as much cash as possible into this bounce get rid of all long positions that I took buying this dip most of them probably at a small loss or if lucky at breakeven. I'm not convinced, think this is a dead cat bounce and we'll see lower lows next week. I guess if things are still going up on day 3 or 5 then all the above will be a mistake in hindsight.
walm said:
I don't mean to pick on you and I am very happy for you to be in substantial profit - that's great.
Hoewever, when I make any profit in a trade, I take a long hard look at where I was right and where I was wrong and where I was simply lucky or unlucky.
From literally everything you have written it just sounds like you got lucky. Again, no offence.
(Frankly there is no question I would rather be lucky than smart in investing.)
What was wrong with your analysis and research on Mosman that has meant it halved since you called the bottom in July?
Listening to the CEO and knowing they are about to double production sounds like very much obvious well known facts about the company.
Have you done a full SOTP showing how the market might be over-estimating the execution risk on that production?That's research than can give you an edge, IMO (no H).
Having said all that - my own view is that these guys have been far too beaten up and this could be a great entry point simply because oil down here doesn't make sense given only TEMPORARY excess supply from OPEC and the DESPERATE need for central banks to re-ignite inflation from here.
I guess I got lucky after deciding that what I had read and heard from LGO looked like an interesting proposition... The original CPR was based on 60 bopd. Clearly it doesnt' require a SOTP to know that the CPR in January will be beneficial to the SP. Since the production figures for 664, PIs have known that LGO is going to blow through its own targets (it already has, and that's after 5 wells of 30...) - it's had to temporarily choke production until the LACT and 2k barrel sales tank were brought online - not a bad problem to have. Now we know that the LC is in fact capable of producing at 200+ bopd that will also be a great upside to the SP (only 1.6mmbbls have ever been extracted from the LC - a recovery factor of about 3%). As for T-I, 20 well reactivation targets, certification for 12 new wells as well as 50 sidetracks and/or replacement wells from a field that is currently producing a lot more than Goudron was prior to 664 spud. I wont go on about the additional 2k acres at Cedros... (By the way - I know all this simply because of luck).Hoewever, when I make any profit in a trade, I take a long hard look at where I was right and where I was wrong and where I was simply lucky or unlucky.
From literally everything you have written it just sounds like you got lucky. Again, no offence.
(Frankly there is no question I would rather be lucky than smart in investing.)
What was wrong with your analysis and research on Mosman that has meant it halved since you called the bottom in July?
Listening to the CEO and knowing they are about to double production sounds like very much obvious well known facts about the company.
Have you done a full SOTP showing how the market might be over-estimating the execution risk on that production?That's research than can give you an edge, IMO (no H
).Having said all that - my own view is that these guys have been far too beaten up and this could be a great entry point simply because oil down here doesn't make sense given only TEMPORARY excess supply from OPEC and the DESPERATE need for central banks to re-ignite inflation from here.
Geopolitics come and go, but Crude will never remain depressed for too long. If that were to occur, I'd suggest that I'd be more concerned with other things than my AIM shares...
MSMN - CR-2 appears to be inconclusive, appraisal work is still ongoing but as a consequence the market has moved; still awaiting to hear on that. Yep, as a consequence the SP has taken a short term battering (as has been seen), however, Mosman are not a one-trick pony. They are currently conducting EWTs at CR-1, have effectively completed the Trident acquisition, have applied for 4 additional permits in NZ and are starting to explore EP156 in Oz. Saying that, MSMN is a punt for me. It's not a producer, but it has decent prospects of being so, and with a low free float & tiny MC, there is potential for a large upside.
Lucky / Smart - call it what you like. I've put money into shares that that I carried out equal amounts of research into and ended up losing. Thems the breaks. I think LGO SP will be a healthy double figure number this time next year. If it isn't, feel free to remind me of this post whilst mocking me. Some you win...
I am making a really simple point about how markets work.
Public information is by definition - out there - and included in the current price.
The price moves when new information becomes public.
AND that information has to be different to expectations (otherwise it won't move the stock).
e.g. Apple beats earnings and guides above expectations - stock up.
Saying that a new CPR will move the price UP is either inside info or simply a punt.
If the CPR is higher than the market expects the stock with rise and VICE-VERSA.
Do you even know what most investors are expecting the CPR to say?
And I don't need to wait for next year...
We already have the example from Mosman.
I can only assume you were expecting a positive update from them on Sept-30th but CR-2 disappointed and the stock was down -18% in a day.
Are you equally confident about the CPR in January - because if so it's a punt.
NOT THAT THERE IS ANYTHING WRONG WITH THAT!!
I just think there is a strong tendency for investors to think they have done some great analysis and research and it pays off with a rising price which is actually nothing to do with their work.
It is something I struggle with every day because all you have is your own time and you have to put it to good use.
IMHO, getting an "edge" on E&P is incredibly tough.
Perhaps you might buy a basket of the highest discount to NAV guys but beyond that, I still think it's gambling.
Public information is by definition - out there - and included in the current price.
The price moves when new information becomes public.
AND that information has to be different to expectations (otherwise it won't move the stock).
e.g. Apple beats earnings and guides above expectations - stock up.
Saying that a new CPR will move the price UP is either inside info or simply a punt.
If the CPR is higher than the market expects the stock with rise and VICE-VERSA.
Do you even know what most investors are expecting the CPR to say?
And I don't need to wait for next year...
We already have the example from Mosman.
I can only assume you were expecting a positive update from them on Sept-30th but CR-2 disappointed and the stock was down -18% in a day.
Are you equally confident about the CPR in January - because if so it's a punt.
NOT THAT THERE IS ANYTHING WRONG WITH THAT!!
I just think there is a strong tendency for investors to think they have done some great analysis and research and it pays off with a rising price which is actually nothing to do with their work.
It is something I struggle with every day because all you have is your own time and you have to put it to good use.
IMHO, getting an "edge" on E&P is incredibly tough.
Perhaps you might buy a basket of the highest discount to NAV guys but beyond that, I still think it's gambling.
For some odd reason you seem keen to repeat yourself. I'm happy with my investments, and my reasons for investing in the shares I have chosen to. Hope I can keep on being lucky.
I do appreciate your explanation of how the markets work though Thank god I'm no longer working for a Hedge Fund - I'd have had to give 30 days notice of my position changes, which would have meant my top-up yesterday just wouldn't have happened.
Best of luck with your investments Walm. (Not that luck comes into it of course!).
I do appreciate your explanation of how the markets work though
Thank god I'm no longer working for a Hedge Fund - I'd have had to give 30 days notice of my position changes, which would have meant my top-up yesterday just wouldn't have happened.Best of luck with your investments Walm. (Not that luck comes into it of course!).
twinturboz said:
Futures are green, I'd forgotten what that colour looks like. Excitement is over the Fed and if they should consider delaying end of QE, it's just mad.
Personally day 2 of a bounce for me, I'm going to try and raise as much cash as possible into this bounce get rid of all long positions that I took buying this dip most of them probably at a small loss or if lucky at breakeven. I'm not convinced, think this is a dead cat bounce and we'll see lower lows next week. I guess if things are still going up on day 3 or 5 then all the above will be a mistake in hindsight.
I echo what he says.Personally day 2 of a bounce for me, I'm going to try and raise as much cash as possible into this bounce get rid of all long positions that I took buying this dip most of them probably at a small loss or if lucky at breakeven. I'm not convinced, think this is a dead cat bounce and we'll see lower lows next week. I guess if things are still going up on day 3 or 5 then all the above will be a mistake in hindsight.
Premarkets are looking good but there might be further yet to go. There have been some good earnings releases last night which might be giving a false sense of hope
twinturboz said:
walm said:
e.g. Apple beats earnings and guides above expectations - stock up.
When does that ever happen! Happens to every other company but Apple not that I'm bitter I think the key with Apple is the second part.
Their guidance is renowned as a total joke and is pretty much always well below consensus.
walm said:
Ha!
I think the key with Apple is the second part.
Their guidance is renowned as a total joke and is pretty much always well below consensus.
Actually they stopped that a few quarters back, but your right used to be the case they would always sandbag and no surprise end up beating every time. Lets hope Monday goes to plan a beat and an upward revision to the next quarters guidance.I think the key with Apple is the second part.
Their guidance is renowned as a total joke and is pretty much always well below consensus.
This morning has gone kind of well, managed to get out of a long positions in Iwm,Upro, at a small profit, Spy at a few K loss offset by gains made in Google by managing to snap some up late last night. Next step is to take initial short positions while leaving room to add to them on Monday or Tuesday if this bounce continues till then. Expecting to take out 1820 on S&P 500 next week sometime.
Iwm and Rut are pretty good to watch right now they led us into this downturn by topping before the major indices did. They seem to be leading indicators for now and both of them are lagging today.
Edited by twinturboz on Friday 17th October 16:35
Gassing Station | Finance | Top of Page | What's New | My Stuff