Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
What do you think about OGZPY.......
Gazprom,a Russian state owned energy company,as a long term investment and hedge??
From CSX..........
http://news.investors.com/031214-692969-csx-warns-of-10-cent-hit-to-q1-earnings.htm?ven=yahoocp&src=aurlled&ven=yahoo
"CSX Warns Weather To Hit Q1 Profit But Coal Demand Up"
Back in 2008,ACI low was....
$12.53,and now around $4.00............and fundamentals are reverting back to the 2008 level:more the change,more the same,except the price lag!
I still remember your favorite line........
SHAKE AND TAKE!!
CLD a new 52 week high......
At $20.34!!
From Sterne, Agee & Leach..........
http://online.barrons.com/article/SB50001424053111904628504579425651427530522.html?mod=BOL_hp_oe
"recent Chinese credit market concerns caused industrial commodity spot prices in copper, metallurgical coal and iron ore to retreat around 5%.....We continue to recommend select metals ( Agnico Eagle Mines (ticker: AEM), Coeur Mining (CDE), Gold Resource (GORO), Newmont Mining (NEM)) and coal names ( Arch Coal (ACI), Alpha Natural Resources (ANR), Peabody Energy (BTU), Consol Energy (CNX)) and would add to positions on this pullback."
Pick up some more call option.....
Apr 2014 $4.00/$4.50 C for $0.37/$0.16.
WLT met coal stock heading south........
Hits 52 week low of $8.94!
Another reason for buying US thermal coal companies......
CLD is breaking out and 1% below its 52 week high!!Again,this is a 100% PRB pure play vs others,with exposure to met coal.
Met over thermal?........
I believe thermal(US) over met,at least thermal first,and met second.
WLT and ANR are two of the met players should be interesting to watch in 2014/2015.
Another tough day........
Shake-and-take or another head-fake(start of another down cycle back to under $4.00)? This sector is tough or when you go against Goldman Sachs!
You got it.........
Vertical integration(from ground to power grid) is not kosher,DEFINITELY NOT FROM THE COAL SECTOR:they are worker ants or sweat shop operators! But I believe the old fragmented model has been replaced(MC down 90%?? over the decade) and we are in a work-in-progress of a mon/duo/threesome?????? integration of multiple-sectors with ONE QUEEN,and with THE COAL SECTOR BEING THE WEAKEST LINK AND NEED FIXING!
What I am seeing(thermal)-
For the BIG SURVIVORS in the sector:High level of debt is forcing discipline on cost and price offered,resulting in a cartel-like behavior in 2014/2015 I hope
Barrier to entry:equipment cost higher than company itself!
Uncertainties perceived by the Street to fund any coal-related projects
..............
..............
What I like to see SOON-
One or two of the black swan events(white swan for the stake holders) rear its ugly heads in 2014/2015.......either from Geo-politics,world energy re-balancing act,known unknowns,and of course,UNKNOWN UNKNOWNS!
Beneficiary of coal........
Everybody except stake/share holders in the past decade....I do not believe rail road oligarchs would let the volume of coal collapses,actually I'm certain they would not: In 2013,rail road absorbed quite a bit of losses thru rate concessions,a break(or privately funded subsidy) for their thermal coal customers(account for up to 30% of rail road revenue) maintaining their dispatch curve(from switching to gas).
My point simplified-
You do not piss on the coal volumes without pissing off the OLIGARCH and they would protect their interest.Its o.k. to piss on the coal companies and make the masses feeling good,as the price of energy keep on going up,more off take for all players,real(rail road) and imaginary(politicians),except for the coal equity holders(pissed on dogs):ALL IN THE NAME OF CLEAN AND SUSTAINABLE ENERGY POLICY!!
God bless America:Land of HOLLYWOOD MAKE BELIEFS and 90%(going to 95% population) are SERF!
Ooop!
Let me add......
Before my 1st buy/involvement with this sector,I had a choice of
Long the rail road stocks
or
Long the coal stocks.
I believe the "SAD STATE OF COAL" had not totally priced in the rail stocks,therefore I decided to dip into the US thermal sector,particularity the ACI.
Business model for the coal sector...
SWEAT SHOP OPERATORS AND MAKING PEANUTS!!
Here is WHY-
Similarities:
To save a penny:Coal operators moves from APPL to WEST to IL BASIN and now PRB;
To save a penny:Garment operators moved from the USA to the Southern States to China to Vietnam.
Break down of revenues(100%) PER S/T:
PRB producers : 12 dollars FOB or 15% using INPUT PRICE!!!!!
Rail road oligarchs: $35-$65 paid directly by customers or 85%!!!!
with a total INPUT PRICE about around $50-$75
..........
..........
Gross profit for the PRB coal is about $2.00,less than 5% of the INPUT PRICE used as the basis for retail pricing/calculation purposes!
FOB PRB coal price,ex_rail expense,ex_co2 expense,is "PEANUTS" vs ANY OTHER ENERGY SOURCE,real or imaginary!!
My definition of SWEAT SHOP OPERATORS-
Net profit around 1% of retail price(or 2% of wholesale/input
price).
Why I like US "SWEAT SHOP COAL OPERATORS"-
They are sitting on a HUGE READY-TO-GO QUALITY RESERVE and the market demand is about to change 180 degree!!
Down to one factor driving the stock price..........
A bit too simple,PRB contract prices taken for 2015/2016.
"producer discipline whose evidence remains shallow" .......
MC for thermal and pseudo-thermal players:
BTU $4.3 billion
ANR $1.0 billion
CLD $1.2 billion
ACI $1.0 billion
Number of US hedge funds with over $9 billion in asset as of 2013:
50 candidates who can become the house,thru Master Limited Partnerships,owning the thermal coal companies in 2014/2015 and met coal companies in 2015/2016!
I believe the thermal coal players knew they are likely to have a rationalized US thermal market NOW and a FINAL CHANCE to recapitalize its balance sheet through PROFIT making or,if not and fails,then the sector becomes a fodder for the Wall Street sharks!
Another swan in the making:
When the intention of consolidating the thermal coal sector is clear:biggest squeeze on coal stocks in our life time coming??
"The reserves are amazing, would rather sit on them than sell for cheap. Do you know any companies which are taking that path? Downsizing operations? "
This is an easy one:ACI:but how it can do it?
Balance sheet of $1.0+ billion cash
No debt repayment until 2018
In-the-money PRB coal contract for 2014/2015
ACI still has 15% capacity vs 0% capacity(CLD) on PRB coal supply without changing(up) the cost curve for 2014
...........
...........
Next surprise:announcement of PRB contract price for 2016!!
Goldman Sachs VS. Sterne Agree on coal fight................
http://247wallst.com/commodities-metals/2014/03/08/analysts-fight-over-coal-stocks-low-downside-high-upside/
My favorite from Sterne Agree:
“Regarding coal, the positive impact of improved US coal burn, reduced utility stockpiles and a higher natural gas price deck at times has been offset by continued negative sentiment surrounding global met coal dynamics..."
From Goldman Sachs.........
http://blogs.barrons.com/stockstowatchtoday/2014/03/07/goldman-sachs-kills-the-coal-miners/?mod=yahoobarrons&ru=yahoo
"Mehta and Joshi also maintained their Sell rating on Arch Coal (ACI) and see the most upside in Buy-rates SunCoke Energy (SXC), which they see hitting $26, and Peabody Energy (BTU), which could hit $21."
For US thermal market.........
No exposure to met:
CLD(100% PRB)
With exposure to met:
ACI(80%? thermal:PRB/WEST/CAPP vs 20% met:CAPP)
BTU(don't have it yet,most likely 50:50(met vs thermal),40:60(USA vs Auzzi)
PS-I believe there is enough met exposure with ACI: 8 million tons are projected for 2014 at around $85.00? down from $90.00 a year before from the 2013 10K.
Joy and Shenhua(likely be a big US thermal buyer in 2015/2016) are very interesting but my plate(risk) is pretty full at present.
ANR and WLT are siblings in a trouble(10%+ saturated) market.......
The world met market that I see-
Half or more producers' costs are out of money!
Bright future in 2015?
China demand can only go higher?
India is the next China?
3% increase projected to 2018 in world steel production?
..........
..........
Supply rationalization in 2014/2015 a must!
or
More BS.
The met market is going nowhere(need supply rationalization) and there is plenty of time to scoop them up CHEAP in late 2014/early 2015.
PS-Remember back in 2011 the met price was above $300.00;Mal-investment by the big boys are still in the pipeline,yet to raise their ugly heads and bite the already ball-busting-low met price!
This could be the driver.......
http://finance.yahoo.com/news/goldman-sachs-slams-coal-downgrade-170002838.html
But USA thermal coal market vs world met/thermal market are two different animals!Yes,this is another fear drive or a "shake and take moment" by the pros;buying ACI today is a well calculated move.
PS-Added ACI Jan 2015 $4.5 C at $0.93 per contract today.
A good day for entry..........
I hope the price will hold around $4.50 for the next few trading days,as more fundamental factors are building up!
Nuance on coal companies.........
I believe thermal coal producers like ACI,BTU,CLD are ahead/better than met coal producers.ACI and BTU have exposures to met coal,and CLD is a pure PRB thermal coal pure play.I'm a bit more aggressive than most investors and hope this one(ACI) would continue to trend up without any more false head starts,which can cause stomach ulcer if not stopped soon!
Hedge fund Boyeezess are busy buying.......
$$$$$$$$=time to build up thermal sector equity stakes!
The million dollar question: how far can the run last?
My take on ACI:
$7.00 dollar,price 12+ months ago,can be within reach in the next 12 months!
PS-I am biased upward and have truck loads of call options,and have been off at least once since Oct 2013.
Pragmatic and cost effective solution.......
Burning quality coal,unlike cheap Indonesian brown coal,in conjunction with use of off-the-shelve-scrubbers,should solve most of their smog issues around their major cities. CO2 suppression can be added when ready(2030?).
Or rumors of Chinese buyers of US "cleaner coal companies".......
Would change the perception of coal and valuation of coal companies OVERNIGHT!
ACI from Yahoo board..........
bill_billingsly • 2 hours 46 minutes ago
3 users liked this posts users disliked this posts 0
Reply
"Harsh winter reveals necessity of coal" Forbes
For the past three months, millions of Americans on the East Coast have endured constant freezing temperatures, regular deluges of snow, and expensive heating and electric bills. Pulling out all the stops to keep the East Coast’s lights on, utilities and grid operators employed every source of power they could to stave off dangerous brown outs.
Unfortunately, many of the coal-fired power plants that kept the East Coast running are being forced to shutter their doors due to Environmental Protection Agency (EPA) regulations. In early January, around 75 percent of Southern Company’s coal power plants scheduled to retire were called upon to generate electricity. The Tennessee Valley Authority set new records for electricity demand at the same time that nearly 20 of its coal-fired generating facilities are scheduled for retirement.
With 300 units and 44,295 megawatts of coal-fired electricity going offline due to EPA policies, case studies and anecdotes abound about the vacuum that will be left in their absence. Prohibitive EPA regulations banning new coal power plants from being constructed mean that this void will be filled with natural gas electricity. Although the shale revolution has brought previously unthinkable amounts of natural gas to market, the recent cold snap illustrates how depending on one energy source is precarious policy.
Because of temperature driven demand, natural gas prices have reached their 5-year high. Extrapolating on the implications of $6 per thousand cubic feet of gas, the Washington Post warns of a $400 gas bill:
“Utilities are warning homeowners that they are about to get hit with a double whammy — higher natural gas prices and consumption, both of which have been driven to five-year peaks by the Arctic cold that gripped much of the country in recent weeks.
Con Edison in New York estimated that the typical home-heating customer would see a gas bill this month of $388, which would be nearly 17 percent above last February. Older homes, Less
Changes within ACI.........
Before Mr Leer's departure on April:
Personnel adjustments
Sale of non-core operations
Head counts down below 5000
..........
..........
PRB:where the $$$$$$$$$$$$ is!!
Undoing 2011 Mr. Leer's vision($3.4 billion F^^KUP):PRB(Power River Basin) ONLY centric model going forward??
Then
Ex ICG assets/Leer met coal mine on the chopping block too for the cheap??
I am guessing but like what I see:BIG CHANGES and biting the bullet,with an awesome balance
sheet,and no major debt payments due until 2018!!
I believe front running the BIG boyeezs...
Is now!I have been off before for the record.
Why:
Volumes are high and steady for this sector:ACI,CLD,BTU.......
Watch out:
when support level of $4.70 is taken out!
Another emerging swan and more.............
Black or white???
http://www.bloomberg.com/news/2014-03-04/buffett-power-hunt-may-target-wisconsin-energy-real-m-a.html
While the US Supreme Court is in the process of redefining the scope(limits of authority on power plants,present/future) of our EPA: a 600 lb gorilla in the room about to ??????
PS-Buffet:owner of Rail companies,of power companies,..........next of coal companies all on the CHEAP?????
Proposed CO2 emission surcharges........
http://www.carbontax.org/progress/carbon-tax-bills/
My favorite
"raising $1.1 trillion in revenue between 2014-2023...."
and
http://www.reuters.com/article/2014/02/21/us-california-carbon-tax-idUSBREA1K06220140221
My favorite
"The tax, which would apply to fuels like gasoline, would start at 15 cents a gallon in 2015 and rise to 24 cents a gallon in 2020..."
CO2+politicians(democrats house/senate)=eat us shrimps
Since this is an election year
http://bismarcktribune.com/bakken/epa-administrator-hears-north-dakota-concerns/article_58b3e648-a0c1-11e3-bcd0-0019bb2963f4.html
EPA is moving to the CENTER from the very Left CORNER!!!Play for votes????
Would energy(nat gas) be used as an equalizer by Putin.......
http://www.bloomberg.com/news/2014-03-02/russia-gas-threat-shows-putin-using-pipelines-to-press-ukraine.html
The BIGGEST WHITE SWAN that I can see, is energy security re-balancing act by EU,and its impact on thermal coal prices for 2014!
Million dollar question: Was this the driver for coal sector ETF jump last week??
PS-Canadian foreign minster is doing our bidding on Ukraine's separation from Russia last week,according to Bloomberg,and my guess is in exchange for what,from our beloved strong green president,during the "three amigos meeting in Mexico"????? I got a bad feeling for "Against Keystone Pipeline Greenies."
Another bail-in by power company first...
Bail-out by tax payers later,thru double digit rate increases??
http://www.bloomberg.com/news/2014-03-01/buffett-says-energy-future-to-probably-seek-bankruptcy.html
PS-Have we learned any thing from ENRON?And if Mr Buffet fails,who can??Will the power sector be taken over by hedge funds like housing sector??
ACI stock price has been down and down and down......
10 years ago
PPS was $80.00 for ACI;
3 years ago
PPS was $30.00;
1 year ago
PPS was $7.00;
Now
PPS is around $4.50,MC doesn't even cover full equipment cost
(maybe 1/3rd based on new equipment prices);
or
Assuming equipment VALUATION=$ZERO,then the company reserves of 5 billion tons are only worth A BUCK FOR EVERY 5 TONS!!THIS IS MAD.
A bit more on green energy/co2 sequestrations
Unless the quantity(green production) is up substantially SOON AND CHEAP,replacing thermal coal with natural gas is unlikely in the NEXT 20 YEARS,as the cost curve for natural gas currently at $4.00 per mmcf is about to be ratchet up,due to newly imposed regulations on waste water recycling and treatment by states.A most probable scenario for next winter would be a choice given of heating home or of powering home,BUT not both,and I'm assuming a benign summer,where natural gas demand for power generation is higher than winter...........I believe we are at a cross road and reality will proceed perception!
A white swan lurking in the background: current US power demand curve under estimates the increasing use of energy by "green cars!"
Bottom line
A low risk and high return stock is FINALLY IN THE MAKING.
ACI jumped to $4.50....
Way over due but has no idea why today!
New highs.....
Finally back above $10.00......go call options!
New high at $9.57........
WOWWWW! WEN Jan 17 2015 10.00 C at a buck seems a good buy/bet.
Natural gas a hair from $6.00......
At $5.946 at present!