There’s nothing I love more than a good capital allocation story. There’s just something about buying a company that’s trading cheaply and where I know the controlling shareholders are going to be hyper rational with capital allocation (read: buying back lots of shares when the stock is cheap) that intellectually makes it a lot easier for me to invest in a company.
I've read numerous articles/posts that are extremely critical of CNX's asset quality and their inflated #s of "decades of tier 1 drilling locations" Based on Nextwave's analysis, they have significantly less drilling locations than they claim, and if you compare previous investor presentations, they have "updated" it to reflect much fewer sites.
Another thing that is an issue with CNX is their governance. They took out the midstream MLP at a depressed price/multiple, which screams poor governance. I'm pretty sure their ESG ratings aren't very high based on the "takeunder" of the LPs as well as the CEO pumping up his stock every opportunity he has.
If CNX was really that great, why did EQT / RRC / SWN decide to pursue other opportunities out there within the private space? Probably because everyone in the industry knows CNX management cannot be trusted nor can their asset quality
After the BNSF merger, Buffett talked to Mark Rose and told him not to hedge as a BRK subsidiary, but then Rose explained that the only hedges used were at the expressed desire of select customers who required fixed fuel prices over their contracts, so WEB made an exception.
Whenever I have the urge to pull the trigger on one of these gas companies, I always wonder about future nat gas discoveries. Any of you remember about a decade ago the wildcats at FCX talking about the natural gas motherload in the gulf. It was extremely controversial at the time because FCX was mainly copper before took these fields in the gulf (about the same time they took Plains?), and there were some insider dealings that people weren't happy about. They were talking about how it would be the lowest cost gas on the planet once they hit the motherload. I don't think they ever did, but the point is they all claim lowest cost until someone finds something lower. Same with the shale oil patches, flavor of the year or decade.
This idea (and most commodity ideas) end up depending entirely on the out year prices. Correlations are probably 90% with gas prices over time. Even great capital allocators have to acknowledge they have no pricing power, and future gas prices are *almost* unknowable. Plus Permian gas...
I would rather have CHTR at a slight premium but with pricing power and much more confidence about the future.
Thought this was a good post by a Twitter account (@NextwaveEFT): https://docsend.com/view/ac9v44dswhtt4vbq
Not sure if you have encountered it, but highlights concerns over CNX's actual remaining inventory, figured I'd share
I had not seen that. Thank you for sharing!
Thanks for sharing that
I've read numerous articles/posts that are extremely critical of CNX's asset quality and their inflated #s of "decades of tier 1 drilling locations" Based on Nextwave's analysis, they have significantly less drilling locations than they claim, and if you compare previous investor presentations, they have "updated" it to reflect much fewer sites.
Another thing that is an issue with CNX is their governance. They took out the midstream MLP at a depressed price/multiple, which screams poor governance. I'm pretty sure their ESG ratings aren't very high based on the "takeunder" of the LPs as well as the CEO pumping up his stock every opportunity he has.
If CNX was really that great, why did EQT / RRC / SWN decide to pursue other opportunities out there within the private space? Probably because everyone in the industry knows CNX management cannot be trusted nor can their asset quality
After the BNSF merger, Buffett talked to Mark Rose and told him not to hedge as a BRK subsidiary, but then Rose explained that the only hedges used were at the expressed desire of select customers who required fixed fuel prices over their contracts, so WEB made an exception.
Whenever I have the urge to pull the trigger on one of these gas companies, I always wonder about future nat gas discoveries. Any of you remember about a decade ago the wildcats at FCX talking about the natural gas motherload in the gulf. It was extremely controversial at the time because FCX was mainly copper before took these fields in the gulf (about the same time they took Plains?), and there were some insider dealings that people weren't happy about. They were talking about how it would be the lowest cost gas on the planet once they hit the motherload. I don't think they ever did, but the point is they all claim lowest cost until someone finds something lower. Same with the shale oil patches, flavor of the year or decade.
This idea (and most commodity ideas) end up depending entirely on the out year prices. Correlations are probably 90% with gas prices over time. Even great capital allocators have to acknowledge they have no pricing power, and future gas prices are *almost* unknowable. Plus Permian gas...
I would rather have CHTR at a slight premium but with pricing power and much more confidence about the future.