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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (48044)	5/19/2012 12:02:45 PM
From: Ditchdigger	Respond to of 79138

re: HES, thanks for the post Paul. I don't typically use stops but did on HES and got stopped out(small loss). Ditto on half my DOW shares(small gain). Any opinions out there on LYB? NG feed stocks have been dropping like a rock, one would think this would benefit the chemical and fertilizer producers (don't know why parts of this post are in bold lettering) tia ditch

To: Paul Senior who wrote (48044)	5/19/2012 12:24:22 PM
From: E_K_S	Read Replies (1) \| Respond to of 79138

Re: Hess Corporation (HES) Paul - When they calculate Tangible Book Value (TBV) and/or BV are the BOEPD reserve estimates used in the calculation? Therefore, with their Bakken property production reduced, I would think that the TBV and/or BV would be reduced a bit too. In this case it would be quite small but I just was not sure how the TBV is derived (especially for Integrated Oil Companies) and how the reserve estimates are factored into this number. I recall several years ago where Royal Dutch had announced on a Monday that their estimated reserves were 30% too high and with one news release adjustment over $1B in "perceived" value disappeared "poof". The stock sold off but not by 30%. It still made me sell my position as I was suspect on all their other reserve estimates. The stock traded flat for several months but eventually traded at similar PE's to it's peers. I know that these calculations are not an exact science especially with well depletion estimates that vary significantly from type of well and geographic region. I wonder what the average age of their Bakken wells are and if they may be seeing larger depletion amounts vs their estimates. This may be the case with many if not all of the older production wells in that region. Maybe many of the other E&P companies may experience the same accelerated depletion rates as their wells age and this has yet to be priced into the market for those companies that operate in that geographic region (ie Bakken Shale area). That may be another reason to go with a larger well diversified (across several geographical regions)company rather than a a specific E&P play. EKS

To: Paul Senior who wrote (48044)	5/19/2012 3:15:26 PM
From: Spekulatius	Read Replies (4) \| Respond to of 79138

re HES - the Credit Suisse Report dated 4/26 (available in Etrade) and the April earnings transcripts in Sekingalpha provide some color. There seems to be a consensus that based on a Sum of parts, HES is worth 80-90$/share. You can throw just about any value metric at HES (EV/EBITDA, EV Cash flow, Tangible book, EV/ BOE, PE) and HES looks cheap. The problem is managements track record which basically boil down to a high finding cost for reserves. Last year for example, they spent almost 50$/brl to find reserves. HES claims that some expenses (like the Bakken acreage, infrastructure spending in Bakken etc.) are prepaid expenses for 2P reserves. The proof lies in the pudding and if HES management is correct finding costs for proved reserves should fall, as spending flattens and becomes more efficient. Right now, management record card looks bad, because they essentially spent all their cash flow, pay very little dividend and show little proved reserve growth. But we know from some comparisons with competitors data (discussed earlier in this thread) that HES got their acreage in Bakken very cheap and has at least some very high flow rates. I also think that the money spent on rail loading infrastructure (to move the oil) and pipelines will be worth the expense. Shuttinfg down the money loosing refinery (while a hit too book value) is a win win too, so at some point (2013,2014?) management should be able to unlock value. Incidentally, reading through the report (and some others), CVX (which I don't own) looks pretty good on almost all metrics, including upstream PV10/ EV. CVX is also a company that has become better over time from a laggard to almost being on the same level than XOM and probably better on some counts. So, I think I'll do some work on CVX and maybe start a position in that name rather than adding to TOT or COP.