Jack Yetiv

• Whither Oil Prices? [view article]

  I agree that (1) the marginal cost of production (which is probably $70-$80/barrell) will set the floor, unless (2) OPEC chooses a different setpoint.
  
  My guess is that OPEC will NOT want oil lower than $100, which means that oil might overshoot to maybe $90, but not much lower.
  
  OPEC can achieve whatever price it wants by cutting the proper amount of production from global supply.
  
  Jack Yetiv Sep 07 10:48 AM

• Megaprojects Predict Decline of Oil Production [view article]

  Excellent article, but fails to take into account (because it probably cannot) politically-induced manipulation of production, which may change the production curves (and probably the consumption curves) tremendously.
  
  I refer largely (but not exclusively) to OPEC. I think OPEC could serve to smooth the curve even more--until they run out of spare capacity. For example, when Khursaniyah becomes fully operational in the next few months, its production will likely be witheld from the market if oil is at $100 or less. Indeed, when OPEC meets next week, we may well learn of production cuts.
  
  The bottom line is that I strongly believe that politically-induced manipulations of oil production may exert great influence of the above analysis.
  
  In the final analysis though, it seems likely me that oil is unlikely to go south of $100 by a whole lot, and it seems further likely that oil will begin an uptrend over the next few years. I think to guess that oil will be $200 or $500 is to do something we really don't have sufficient data for, but it seems likely oil prices will continue to climb over t5he next few years.
  
  As it was in an article I posted here about 8 months ago, my prediction is for oil to be at $100 to $120 this year and maybe next, with $150 (plus or minus $20) as the new baseline sometime next year or the year after.
  
  Jack Yetiv Sep 03 10:58 AM

• Oil Price Helps Trusts Sustain Current Rate of Distribution [view article]

  The idea of selling non-core assets is to get rid of assets providing a low ROI and replace them with something that offers a better return. For example, maybe these 16,000 barrells of production represent high-cost production due to their geology or location.
  
  One speculation--PWE made the non-core asset deal a month or two months ago, when commodity prices were much higher. They may be able to replace those non-core assets with others at a lower price, and in places that "fit" their E & P activities better.
  
  Until we know the terms, it's impossible to know if this sale was stupid, brilliant or somewhere in between.
  
  Jack Aug 28 01:44 PM

• Will Global Events Keep Oil Above $100? [view article]

  I agree completely with the thesis of the article. However, I think you also need to mention that OPEC reduced production will also protect against downside from the $100-110. I posited that hypothesis in my article on SA in january, 2008, when oil was below $100, and it was reaffirmed a few days ago when Venezuela stated it might well recommend a decrease in OPEC production at the meeting next month.
  
  I do agree that oil may approach if not test $100, and nat gas may hit low $7. If they do, I am going to load up the boat (I'm already pretty loaded, though, primarily with PWE and PVX).
  
  Jack Aug 22 01:00 PM

• Incorrect Media Speculation About Those Oil Speculators [view article]

  Great article, Mr. Hamilton. Always appreciate your dispassionate, data-based analysis of the issues.
  
  Frankly, since nobody has actually defined "speculation"... it's impossible to determine whether oil prices are largely due to it. Bu thye fact of the matter is that all stocks and commodities are driven by "specualtion"... in the braod sense of the world--when I buy a stock, aren't I doing it because I am speculating that it will go up in the future?
  
  How is that different than buying oil because I think it will be higher in the future?
  
  And if I buy an investment property, am I not doing it because I think I will be able to get more for it when I sell it?
  
  Jack Aug 22 12:50 PM

• Atlas Energy: More 'Criminally Undervalued' Than Cramer Realizes [view article]

  Good article! Question to the author:
  
  How does $8 gas impact the rates of return, and the attractiveness to the investors who put up the moeny to drill the wells?
  
  Can the "guranteed return" to the investors completely eliminate any return to ATN if the gas price goes low enough?
  
  Jack Aug 22 12:31 PM

• Trina Solar: Will 2009 Be a Breakout Year? [view article]

  I believe I can answer your questions, Garry:
  
  1) Solars are not going to grow 50-100% PER YEAR--I think 2008 for many solars will be 100%+ better than 2007, but CAGR's will slow to 30-40% in 2009 to 2010.
  
  2) Yes, the future CAN really be that good. Look at MSFT's growth 20 years ago, Dell's 10 years ago, AAPL's in the past 5 years. Solar is more compelling than all of those because the product it makes--electricity--is far more essential than Ipods, and current means of producing it--coal, nat gas, even nuclear--are all fraught with problems, not the least of which is markedly increasing costs.
  
  Solar offers NONE of those problems--and will DECREASE in cost going forward--probably by at least 10-15% next year and an equal amount in 2010.
  
  In Calif, as you can tell from the Southern Calif Edison and PG & E announcements, we are essentially at grid parity. The growing recognition of that fact will boost demand tremendously.
  
  3) They all need capital--either in the form of selling shares, or borrowing money. But in 2009, these companies are going to be making tens of millions of dollars in profit per quarter--and some will hit quarterly earnings of $100 million before the end of next year. That will generate lots of cash for growth.
  
  Also, keep in mind that as their stock prices appreciate, they can get much more cash for selling 5 million shares than when their stock prices are lower.
  
  I'll explain in a future post why I believe the market ran yesterday and today after STP earnings. It had little to do with STP's earnings.
  
  Jack Aug 21 10:44 PM

• Trina Solar: Will 2009 Be a Breakout Year? [view article]

  TO USER 226....:
  
  I don't usually get my facts wrong. I didn't this time, either. Quote from the CC, which is kindly posted on Seeking Alpha:
  
  In respect to long-term financing for our strategic expansion, on July 24th we successfully concluded our convertible bond offering, which can provide for our remaining 2008 funding requirements, in addition to anticipate positive operational cash flows in the second half.
  
  Always good to check the facts very carefully before you criticize someone else.
  
  Jack Aug 19 11:24 PM

• Trina Solar: Will 2009 Be a Breakout Year? [view article]

  A few highlights I think are important:
  
  1) Revenues Q1--$120 million, Q2--$204 million, Q3--$265 million (upper end of guidance, which they will meet or exceed).
  
  2) EPS--ex 1X items--for these three quarters was about 60 cents in Q1 (going from memory), $1.00 this quarter, and I'm guessing about $1.25 next quarter.
  
  3) They announced on the call that they do NOT need any further cash for the rest of 2008, so that takes care of one issue for TSL. By the way, the same applies to CSIQ and SOL, so so much for the guy who was writing on SA a few months ago telling us all these Chinese solars had one foot in bankruptcy court.
  
  4) I don't care what your complaints are about management (and I thought they did a nice conference call this quarter) a company that is growing sales and operational profits at a rate of 25-50% SEQUENTIALLY does NOT deserve a forward PE of SIX (against 2009 earnings that will undoubtedly exceed $5/sh on an operational basis, and may well exceed $5 even taking 1X events into account).
  
  5) As to management's competence, I disagree with the author and above commenters. We all knew that canceling the fab was going to hit Q2 earnings, and frankly, just a $2 million (8-cent) hit is not bad at all. I would have expected twice that.
  
  Second, we all "knew" that forex was going to be a $3 million (12-cent) hit. Therefore, assuming $4 million hit for closing the poly fab and $3 million on forex, you could have reasonably modeled $7 million in one-time hits, versus the actually-announced $8 million (32 cents in total 1X hits).
  
  6) Because we know that closing the fab is over, that hit isn't coming back. As to forex, I still don't understand it well enough to know whether TSL mgt had a choice in going to the US dollar as a functional currency, so I can't either criticize or exonerate management on this issue. But we do know the dollar has shown a lot of strength so far this quarter (I'm not sure if the strength was just against the Euro or also a little against the RMB, although one commenter above suggests the strength is only against the Euro).
  
  In addition, TSL mgt indicated that they are working on diversifying their capital structure to minimize short-term RMB-denominated debt, which will therefore REDUCE the volatility caused by the forex issue. The appreciation of the dollar and the efforts to reduce RMB-denominated debt suggest to me that going forward, the forex losses should be less, and if we have a quarter where the forex losses zero out or become gains, TSL could report a 100% surprise quarter.
  
  7) The forex issue--because it is so large relative to operational earnings--does make it extremely difficult to project earnings for TSL, but even if you take this quarter's $1.00 and subtract the 24 cents of forex, and even if you assume that TSL does not grow EITHER revenues nor earnings for the next 3 quarters, that would give you $3.04 in earnings (76 cents X 4).
  
  Of course, if you make a more realistic (but still very conservative) earnings progression of 86, 96 cents, $1.06 and $1.16, you get $4.04 in earnings in the next 12 months.
  
  Of course, if revenues increase $60 million next quarter, and forex stays the same as this quarter ($6.1 million), I expect that TSL will make close to $1.00--not 86 cents--in Q3. But even taking the progression starting with 86 cents, $4.04 in the next 12 months means that TSL, a company that will undoubtedly double earnings in 2008 versus 2007, and probably go up another 30-40% in 2009, is trading at a forward PE today of LESS THAN 7.5.
  
  Gimme a break. That's absurd, regardless of what you think of management.
  
  And I, for one, think they did fine this quarter (of course, the market is telling me I'm the only one in the world that feels this way, but hey, I'm right and the market is wrong! LOL).
  
  Jack Aug 19 11:24 AM

• CANROYs Remain Attractive as Oil-Related Investments [view article]

  I'm embarrassed to tell you that I cannot recall why, but I don't like ERF as much as I like PWE and PVX. About a month ago, I re-reviewed my picks, and concluded I liked PVX/PWE better.
  
  Based on my hazy memory (double-check me on this), I believe ERF had a higher payout ratio this quarter that either PWE/PVX, while offering a bit less dividend. ERF's RLI (Reserve Life Index) and/or tax pools may be somewhat less, as well.
  
  Of course, I think all of these Canroy's will do well if oil stays over $100 and nat gas doesn't go lower than it is right now. They all will suffer if the contrary comes to pass.
  
  jack Aug 18 02:21 PM

• CANROYs Remain Attractive as Oil-Related Investments [view article]

  Georealist brings up a good point, which I have made before but want to emphasize:
  
  If you criticize my basket of recommended stocks in the past year (CSIQ, PWE, TSL, PVX and SOL, plus HTE for a while but NOT now), which overall, are probably up 15% after Friday's run in SOL and TSL, then you have to tell me what is better.
  
  If your "better" is to be in cash, that's fine, but "cash" has made people what, 3% in the past year?
  
  Jack Aug 17 02:54 PM

• Game Changer in Solar Energy: PG&E Inks Deal [view article]

  User, I still believe that TSL and SOL offer the best value in the solar space, and have not sold any of my shares in either one. I bought my considerable position in TSL in the low 40's about maybe 3 months ago, so I am way underwater on those. SOL I bought about 3 weeks ago at $13.54, so I'm good on those.
  
  But keep in mind this has been a very fickle, anti-solar, anti-oil market, and even though I thought FSLR and CSIQ announced very well, their stocks really haven't gone anywhere, unlike at any time in the past. Part of this is due to the perceived connection between dropping oil prices and a lower attraction to solar, and part of this is due to negative press on the solar companies and ITC expiration concerns.
  
  TSL is by far the PE leader, trading at what I believe to be a 2008 PE of under 9 (I am projecting income at about $3.50 for 2008), while SOL is at about 11-12 PE, but SOL is much more loved by analysts and the investment community.
  
  TSL announces tomorrow and SOL on Tues. In the past, I would have said that if they blow out their numbers, they will go up 30-40%, but having observed FSLR and CSIQ, I'm not as sure this time around. But the solar stocks have shown some strength recently, so maybe we will get a nice run if these companies report very well. LDK absolutely demolished estimates, and last quarter, probably would have run close to 100%, but only ran about 30% this time.
  
  But since I am not a daytrader, I can wait for the market to recognize the value in these names.
  
  Jack Aug 17 11:32 AM

• Game Changer in Solar Energy: PG&E Inks Deal [view article]

  Don't know much about Optisolar except that it's a private company based in Hayward, CA, where I used to take helo flying lessons! I have often seen it listed as a minor, start-up thin-film producer, but clearly, 550MW is no start-up (to give you a metric--550MW is in the range of what either SPWR, TSL or CSIQ will make in 2009--total company production). Do keep in mind that these contracts won't begin to be realistically performed for at least 6 months, probably closer to a year, and much can change in a year.
  
  My guess (and it is only that) is that Optisolar's efficiency is today in the ballpark of FSLR, which is about 11%. SPWR has laboratory 23.6% efficiency, and I expect their production panels in 2010 will probably be around 25%.
  
  As to McCain and Obama, to my knowledge, neither has come out and stated a position on the ITC, but both have included "renewable energy" as something we ought to do. But even forgetting the two candidates, there is a growing groundswell of support for renewables in this country, and Boone has helped put renewables/wind on the map. Just like poll results will push Obama not to oppose drilling the OCS/ANWR, I believe the same will happen with renewables.
  
  Watch for this topic to become front and center during the debates.
  
  Also, it's entirely possible that this issue will come up when Congress returns from its recess in a couple of weeks. Remember, the states are way ahead of the federal govt on this issue (30 states now have RPS's, Renewable Portfolio Standards), which will also generate pressure on Congress to do something. Finally, as the economy slows, and unemployment increases, extending the ITC will be sold as a "jobs creation" plan--which of course, it will be.
  
  One way or another--and for so many reasons--this country HAS to support renewables. And, I believe that although we'll be late to the party (compared to Europe), once we get to the party, we'll be the heaviest drinkers.
  
  Jack Aug 16 05:11 PM

• Game Changer in Solar Energy: PG&E Inks Deal [view article]

  I wrote a series of articles on solar on this site several months ago, so, to avoid repetition, my comments here will be brief:
  
  1) It was actually another Calif utility--Southern Calif Edison--that launched meaningful utility-scale solar in the US with its 250 MW announcement on March 27 of this year. SCE's is a distributed model, where they will rent large commercial rooftops on which they will install dozens if not hundreds of panels. Therefore, solar on distributed rooftops will continue to grow and prosper, especially in new construction (as noted above) and via BIPV (building-integrated photovoltaics).
  
  2) The distributed model has both cost advantages and disadvantages. The disadvantage is that it's easier to install 10,000 panels in one site than to install 100 panels in 100 different sites. However, the advantages probably overcome this--no need to buy land, no need for new transmission (a real issue in many parts of Calif and elsewhere), and minimal transmission losses, which routinely exceed 10-15% of power produced in a power plant.
  
  3) One of my articles argued that in proper locations, we have essentially reached grid parity. SCE's, and now, PGE's deals, prove this to be true. Why is this true? To briefly recap points in my previous series of articles:
  
  a) Solar's power-production profile better suits peak load (although trackers can achieve close to full power for 12 hours, as my own domestic tracking-PV system has now proved for 4 years), making solar KWH's much more valuable than wind's or conventional power plants.
  
  b) The cost of coal and nat gas have increased a lot in the past year (even taking the recent falls into account), making "conventionally-p... power much more expensive than it used to be.
  
  c) Utilities and their financiers are starting to take carbon production into account, and once you do that, solar becomes very competitive as well.
  
  d) Cost of making solar panels has dropped and will drop even more in 2009 and 2010. Note that the panels for the PGE project won't be getting made until 2009 at the earliest, and more likely in 2010, by which time many solar manufacturers believe their cost of making the panels will be 30% less than it was last year.
  
  Finally, although on the surface of it, this project appears to be "contingent" on extension of the ITC, the reality is that this announcement was meant to put pressure on Congress to do exactly that. I consider it extremely unlikely--especially in the face of this announcement (and I predict you will see other big projects also announced which will be contingent on extension of the ITC)--that Congress will not extend the ITC.
  
  Remember, we also have the likes of Boone Pickens lobbying (and putting pressure on) Congress to act in favor of renewable energy.
  
  Jack Aug 16 01:54 PM

• CANROYs Remain Attractive as Oil-Related Investments [view article]

  I can never "explain" market irrationality, Paultaut. The fact is that PWE delivered what I expected it to deliver, and if PWE was worth $30 when its "free" cash flow was far less than zero and its payout was over 70%, I reasoned that if free cash flow went to $100 million this quarter (which was the amount I was modeling, it actually came in at $123 million), the stock should go to $40 this quarter.
  
  To look at it a different way, whatever percent risk there was 6 months ago that PWE would not maintain a dividend of $4.08/year has DECREASED substantially as payout ratio has dropped from over 70% to about 50%. It will continue around 50% as long as oil does not drop below $100, and I think most people believe it won't.
  
  Therefore, a stock that had a 20% risk (let's say) of the dividend being cut and now has a 5 or 10% risk or being cut and a decent prospect of being raised shouldn't be more valuable?
  
  I'm sorry, Paultaut, but my money projections for PWE were spot on (look at the cross-arguments between David Bui and I three months ago, and look at his recent article on PWE results). My stock value projection has turned out to be waaay wrong, but not because either my facts or analysis were wrong. I have asked people here and elsewhere to point out with SPECIFICITY what FACT or analysis was wrong in my article, and nobody has done so. On the contrary, this quarter's results have borne out my projections.
  
  Finally, what I just said about PWE applies equally to my TSL articles. TSL has done all that I expected it to (financially speaking), and more, yet the market has decided to give it a 25% haircut from where I recommended it. Again, my money projections were right on, but the stock has tanked (of course, other solars have tanked more).
  
  My predictions on SOL and PVX are in the money (SOL is up almost 50% in the three or four weeks since I recommended it at $13.54), primarily because I ended up buying them after the big drop in the oils and solars. But that's as much luck as anything else because I could have easily bought these stocks when I bought TSL andf PWE, and they would have also been underwater.
  
  The point is, I try very hard to get my facts straight and to provide a logical analysis. As we have seen, what the market does with those facts is often far different than what I think the market should do with those facts. BUT, value will be recognized, and since I do not buy stocks that I will ever HAVE to sell, I can wait out the market's irrationality for a loooong time.
  
  Let's see what happens with TSL and SOL this Mon and Tues.
  
  Jack Aug 16 11:11 AM

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