Tag Oil :Interview With CEO Update

New Zealand 2007

New Zealand 2007 (Photo credit: Szymon Stoma)

 (received from Cannacord  August 31 )

 

Tag CEO Garth Johnson

DP: Production numbers are currently a lot less than some people had expected. Some of that has to do with wells not being on stream. But if you could give us an update on production numbers and what you foresee for the future…

GJ:

We were actually quite close to meeting what analysts had projected for Q1 2013 production. We had some delays bringing Sidewinder compression online and this was combined with the need to get the planned artificial lift installation project completed for our Cheal-B5 and B7 wells. In the oil business, sometimes these things do take a little bit longer than anticipated, however if these projects had been completed when first thought we likely would have met or exceeded analyst production estimates in Q1. We have made some personnel changes on the ground recently to oversee these projects and I feel we have upgraded significantly in that regard. Over the past few days, we have produced anywhere from 1500 boepd to 2300 boepd including some flaring that is occurring at Cheal

DP: The reason many people are involved in TAG Oil is still the potential for the shale play. You have found an interesting ally in Apache who works everywhere around the world from Argentina to the United States to wherever, but they don’t expect to start that until next year. Any details about how soon next year?

GJ: We expect to be drilling in Q1 of the 2013 calendar year and we can’t wait. Some investors have asked “Why the delays?” but when you have an exploration play contained within our JV permits with Apache that is comprised of the most prospective lands in the East Coast Basin, a few months “delay” is not significant and the majority of our shareholders have been very supportive and encouraging. A large amount of work is ongoing to prepare for the JV’s activities in 2013 and I feel great about the results I am seeing from those efforts. I feel the work we have done as a JV in recent months will benefit us and all stakeholders for many once we prove the concept of the play in 2013.

DP: Any other items we should know about New Zealand…we know there are environmentalists that are everywhere these days, asking hard questions, but some people joke that the dairy farms create more of a mess than oil and gas ever would…

GJ: Environmentalists are everywhere and that is good as it helps get people engaged in the discussion, to ask questions and to get involved to make sure companies operate to best industry practices. The most vocal opponents of industry in New Zealand are a small group that are not willing to accept the available information related to our industry in order to have a balanced discussion nor are they readily willing to accept that we can’t just turn off the oil and gas taps tomorrow. We are all fully dependent on hydrocarbons in our society and that is not going to change overnight.

DP: It’s a different world out there these days with Europe looking like it’s falling apart, a weaker Chinese economy, etc. What do you see for oil prices in New Zealand over the next while?

GJ:

We are still enjoying Brent prices over $110 per barrel which is great as we have more oil production coming soon that will have the added benefit of being produced essentially with brand new, efficient infrastructure at Cheal and Sidewinder. We are all confident that oil prices will remain over $100 per barrel being so close to the Chinese economy, even if it’s looking a little weaker.

DP: If you could suggest one stock to watch or be nibbling at these days (other than your own) what would it be?

GJ: In our last interview I believe I picked Africa Oil when it was in or around the $2.00 range that now trades around $9.00 so this time it will have to be Coronado Resources as we wouldn’t have invested in the company if we didn’t think it would have some great growth potential.

Google – Selling Motorola Mobility

English: Motorola MILESTONE smartphone display...

English: Motorola MILESTONE smartphone displaying Wikipedia home page (Photo credit: Wikipedia)

Google (GOOG : NASDAQ : US$682.64)

August 31

Narrowing their focus ? According to Bloomberg, Google is planning to sell of the Motorola Mobility business unit that manufactures set-top boxes and other home-networking gear. Sources close to the matter say the company has hired Barclays to negotiate the sale and it could fetch as much as $2 billion.

The move would allow Motorola to become more focused on designing smartphones to compete with the iPhone and run on Google’s Android software. It was originally reported earlier this month that Google was looking to sell the unit, which Motorola tried to sell three years ago for more than $4 billion.

Google  agreed to purchase Motorola last year after losing out on an auction for Nortel Networks’ patent portfolio. The Motorola purchase landed Google more than 17,000 patents, a key asset as the intellectual war property heats up. Google CEO Larry Page and Apple (AAPLCEO Tim Cook have discussed patent disputes between the two according to sources close to the matter.

Both Google and Apple declined to comment

 

 

Royal Bank of Canada – Profit Jumps

Royal Bank of Canada's previous logo (the crow...

Royal Bank of Canada’s previous logo (the crown was removed). (Photo credit: Wikipedia)

August 31

Royal Bank of Canada  (RY : TSX : $54.97)

Royal Bank of Canada, the country’s largest lender by assets boosted its dividend Thursday amid a big jump in profit, the latest move from within a booming banking industry north of the border that’s been spinning off cash to  investors.

RY reported adjusted cash EPS of $1.31, up 18% over last year and solidly ahead of the consensus of $1.18. The beat was related to much better than expected trading revenue (partially offset by higher expenses – mainly performance based comp) and a lower than expected tax rate. Specifically, Q3/12 revenue beat expectations by $232 million, driven by higher than expected capital markets revenue (trading, underwriting/advisory higher than expected).

Other revenue, particularly credit fees, were also higher than expected. Operating leverage was 1.9% (very solid result) and in line with analyst estimates. The Basel 3 ratio is 8.3% proforma, meaning the company has plenty of excess capital. Alongside the large EPS beat, the bank unexpected raised quarterly dividend 5% to $0.60 from $0.57.

A Bay Street analyst notes that the stock continues to hit his key themes:commercial loan growth, strong deposit franchise, capacity to control costs in domestic retail (definitely saw that this quarter), dividend increases, excess capital.

 

 

Paladin Energy Year End Update

Paladin Energy  (PDN : TSX : $1.38)

 August 31

Paladin Energy reported year-end financial and operational results.

For the year ending June 30, 2012, the company produced a record 6.895 million pounds of U308, an increase of 21% from the previous year. The company’s Langer Heinrich mine produced 4.417 million pounds and its Kayelekera mine delivered 2.478 million pounds, with the project running at 90% nameplate capacity for the last eight months.

Average cash costs for the year came in at $39 per pound, compared to $35 per pound last year. PDN noted that both mines now, for the first time, are operating without concurrent construction expansion programmes, which will allow a strong focus on operational and cost optimisation for the coming year.

For the upcoming year the company will focus on improving its cash costs. The company has approved a cost reduction in 2011 to target reducing corporate and marketing costs by at least 15%. Tighter controls have led to a reduction of corporate overheads, including travel costs and outsourced work. Labour costs have also reduced as the high capital investment phase that the company was in has now largely been completed. The company also noted that in Labrador, the three-year moratorium on the mining, development and production of uranium ended providing access to the Michelin deposit and validating the company’s decision to acquire the Aurora uranium assets at a discounted price of US$1.90/lb U3O8. The ending of the moratorium has cleared the way for the company to re-commence work on the project with substantial long-term resource increases are expected.

 

 

Amazon ; Sold Out Of Kindle – Next Move ?

Cover of "Kindle Wireless Reading Device,...

Cover via Amazon

In a somewhat unusual press release Amazon announced that it sold out of its $200 tablet, the Kindle Fire.

 August 30

In the release, CEO Jeff Bezos says, “Kindle Fire is sold out, but we have an exciting roadmap ahead—we will continue to offer our customers the best hardware, the best prices, the best customer service, the best cross-platform interoperability, and the best content ecosystem.”

He appears to be saying Amazon will not make any more Kindle Fires, at least not the current model.

Amazon is hosting a special media event one week from today where it’s expected to announce the next wave of Kindle Fires and e-readers. If Amazon is sold out of Fires, it would follow that the next tablets will be available for sale right away.

In Amazon’s release it says it captured 22% of the tablet market in the U.S. over the last nine months. Its cheap tablet was appealing to people who didn’t want to pay $400-$500 for the iPad. But Amazon now faces competition from Google with the Nexus 7, and Apple is reportedly going to release an iPad Mini which will compete with the Kindle Fire.

Amazon will have to make the next generation of the Kindle Fire significantly better if it wants to compete with Google and Apple.

Here’s the full release:

Less than one year ago, Amazon introduced Kindle Fire—combining 15 years of innovation into a single, fully-integrated, end-to-end service for customers. Kindle Fire quickly became the most successful product launch in the history of Amazon.com, earning over 10,000 5-star customer reviews, and is the #1 best-selling product across the millions of items available on Amazon since its introduction 48 weeks ago. Today, Amazon announced that Kindle Fire is sold out, and that in just nine months, Kindle Fire has captured 22% of tablet sales in the U.S.

“We’re grateful to the millions of customers who have made Kindle Fire the most successful product launch in the history of Amazon,” said Jeff Bezos, Amazon.com Founder and CEO. “This has been a big year for digital products on Amazon—all of the top 10 sellers on Amazon.com since Kindle Fire launched just less than a year ago are digital products. Kindle Fire is sold out, but we have an exciting roadmap ahead—we will continue to offer our customers the best hardware, the best prices, the best customer service, the best cross-platform interoperability, and the best content ecosystem.”

Kindle Fire offers customers a vast selection of digital content—over 22 million movies, TV shows, apps, games, books, magazines and more—in one seamless, end-to-end experience, making it easy for customers to browse, discover and purchase. Since Kindle Fire launched last September, all of the top 10 products on Amazon—across all products—are digital products.

Pinecrest Energy Q2

August 30

Pinecrest Energy (PRY : TSX-V : $1.85)

Wet weather may have weakened Pinecrest’s Q2 but the company‘s exit guidance appears intact.

Pinecrest reported Q2/12 results which were largely in line with estimates, with production of 2,951 BOE/d slightly lower than 3,048 BOE/d estimate and CFPS .07 ,  (Bloomberg consensus had $0.08). Production was down in the quarter due to wet weather, a component of which involved the company’s propane driven pump jacks (the weather prevented these from being refilled). Prior to planned electrification in 2013/2014, the company will simply double up its onsite propane capacity to avoid a repeat.

Within the quarterly numbers were higher operating costs and G&A that was partially offset by lower royalties and transportation costs. On a go-forward basis, the lower royalties should trump the other impacts, as costs are expected to continue decreasing on a per BOE basis as production ramps.

Current production at the company is quoted at 3,050 BOE/d with 10 (9.5 net) wells drilled and in various stages of completion or tie-in;three rigs are now in the field with a fourth arriving in early September. Exit guidance of 5,000 to 5,200 BOE/d was reiterated and only minor tweaks to our model were required. The last point of interest in the release was a 4-5 times production uplift seen in two producing wells that offset the company’s joint waterflood effort at Evi. Three additional waterfloods are planned, with approval on the first imminent. Kristjansen reiterated his bullish stance on the stock noting that his current estimates include no downspacing or waterflood upside. Also, the company’s 99%+ light oil weighting and low royalty/cost structure continues to provide it with the top netbacks in the industry ($63.97 per BOE in Q2/12). 

     F orecast horizon  ; expecting 127% and 59% production per share growth in 2012 and 2013,respectively .

Exxon and Chesapeake Diverge On Shale Gas

English: To create this SVG-format logo, I too...

English: To create this SVG-format logo, I took the EPS file at Brandsoftheworld.com, ran it through pstoedit, and then did the following modifications using Inkscape and Notepad: fixed priority (center of “O” in “Exxon”), centered on a correctly sized grid, and made markup simpler and more readable. Used in Exxon. Source: http://static.seekingalpha.com/wp-content/seekingalpha/images/thumb-Exxon_01.jpg Category:Oil company logos (Photo credit: Wikipedia)

August 30

I have written before on the great articel Fortune Magazine published on Chesapeake – prior to the public debacle . It pointed out that Chesapeake had committed itself to thousands of deals requiring , not only lease payments but continued drilling to maintain the leases.

As a result Chesapeake is producing natural gas and having to  sell it at a price lower than its cost of  production. A new article by Richard Zeits says that Exxons reaction to the low natural gas price is to cut its gas drilling to the absolute minimum.  This will mean abanding leases and having to reduce its potential reserves – someting Exxon has been loath to do . Exxon has been criticized in the past as demanding too high an internal rate of return – and thus leaving aside potential .

However, the very great fiscal discipline it dispalys is sorely lacking at its competitors. The strong shift in its operating priorities, even at the cost of losing some of its valuable gas acreage, may indicate Exxon’s negative outlook on the US natural gas fundamentals both in the short and the long term.

This is even more dramatic considering the very leases Exxon may abando are in the areas others covet – - the Marcellus and Fayetteville.

In the Marcellus, Exxon has approximately 660,000 net acres under lease. Last summer, Exxon substantially expanded its acreage in the play by acquiring two privately held Pennsylvania operators, Phillips Resources and TWP, for $1.7 billion. The acquisitions added 317,000 net acres to Exxon’s existing Marcellus position which stood at 390,000 acres at the end of 2010. To date, Exxon’s Marcellus drilling program has been somewhat slow relative to other operators such as Range Resources (RRC) and Chesapeake Energy (CHK) who also have very large leaseholds in the play.

YELP – Post IPO Lockup

Image representing Yelp as depicted in CrunchBase

Image via CrunchBase

August 30

Yelp

YELP : NYSE : US$22.22

Over 50 million shares of Yelp became available for trading after their post-IPO lockup on Wednesday, and after falling by more than 30% in the past three weeks, shares rallied as bearish investors looked close their short positions. With many of 2012’s tech IPOs getting smacked down on their first free trading days ( Facebook (FB ) down 6.9% on August 16 and Groupon (GRPN)  down 8.9% on June 1), investors were unloading and shorting shares of Yelp in advance of the lockup expiration.

As of Tuesday, 29% of Yelp shares were shorted according to Markit. The end result? A short squeeze as short sellers were forced to buy back shares, pushing the price higher. As the stock climbed, more short sellers were required to buy back their positions at even higher prices helping push Yelp deep into the green and above its IPO price.

 

 

Joy Global- Less Joy At Global Expansion

Supply and Demand

Supply and Demand (Photo credit: D.H. Parks)

Joy Global

August 30

 JOY : NYSE : US$54.67

 Joy Global cut its outlook for 2012 for the second time this year as slowing growth in China and Europe and low natural gas prices in the United States continued to hamper coal demand and in turn demand for mining equipment maker’s products, such as giant shovels and draglines. A milder winter in the United States reduced demand for electricity, and low natural gas prices prompted power producers to move away from coal. Higher hydropower generation in China has also reduced coal demand.

 Looking ahead, Joy Global now expects fiscal 2012 adjusted earnings between $7.05-7.20 per share, down from $7.15-7.45 per share, previously. It also cut its 2012 revenue forecast to $5.45-5.55 billion, from $5.5-5.7 billion. Joy Global’s CEO, Mike Sutherlin, stated, “Although the U.S. market has progressed in line with our expectations, the deceleration of China demand has deteriorated international markets more quickly and severely than previously expected.”

Shares of the company have been hard hit this year, trading down ~45% since touching a 52-week high in late January.

 

 

Apple NOT In The Taiwan Chips

Apple Inc.

Apple Inc. (Photo credit: marcopako )

August 30

Apple (AAPL : NASDAQ : US$672.81)

Qualcomm (QCOM : NASDAQ : US$62.16

Taiwan Semiconductor (TSM : NYSE : US$14.37

 

Apple and Qualcomm have both been rejected in separate attempts to invest in Taiwan Semiconductor

Manufacturing Co (TSMC) as they look to secure exclusive access to smartphone chips. Both proposals, which were over $1 billion, were seeking dedicated production according to sources close to the matter. A deal with TSMC would also give Apple an alternative supplier to Samsung, who currently builds the main chip used in the iPod and iPad. Qualcomm is looking to boost its supply as shortages have began to have a negative impact on earnings. TSMC has said that it wants the flexibility to switch its production between different products and customers, which include Broadcom (BRCM) and Nvidia (NVDA) in addition to Apple.

CFO Laura Ho said TSMC wants to retain control of its plants, is not interested in selling itself and currently does not require cash for investments. She went on to say that dedicating one facility to a single product or customer could become a risk

if a product, client or technology changes. With TSMC seeming to be out of the picture, it looks like Apple will have to play nice with Samsung as a supplier for now, despite their ongoing patent disputes.

 

 

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