Post by
JackDeeValentin on Jun 16, 2016 10:06pm
Jack Dee is definitely not that bright
Just very lucky that the two major investment banks and energy fund I've worked at for the past 25 years to do equity and debt research on North American energy companies were focused on hiring the bottom of the barrel.
Over that amount of time even a dumb guy like myself picks up a few things along the way.
Cost of capital compared to return on capital and internal rate of return. When the spread is negative the allocator of capital is creating negative value and destroying shareholder value.
When you spend $100 to create $50 of value this means something is wrong. In the case of RMP it is approximately $650m spent to create an enterprise worth $250m.
When a stock loses value from a peak price, it does not mean your shares are "undervalued", it means they've declined in price. All offers from better capitalized, highly valued industry players and private equity should be brought in front of investors to decide.
Management's who have had prior success (former companies where value was created) can become introverted and lose all perspective when it comes to value creation as underlying conditions change. The stop listening to opportunities, advisors and others and will do things their way only. This can snowball into a loss of trust, institutional support, a depressed valuation and access to reasonably priced capital. Again, just luck, but this dumb guy has many close contacts in the industry and a basic understanding of the current dynamic.
RMP has had some great wells but creating value in the E&P space has as much to do with building a resource of economic locations and reserves. The unbooked locations and more recent results have created more questions than confidence and this has contributed to one of the worst performing names and lowest valuations.
You do not issue 25%-30% cost of equity to buy land. If you like the prospects you shed assets (even at a discount to gross invested capital) the market gives you zero credit for and never will. The market for less appreciated natural gas assets and infrastructure is active even for smaller transactions.
But privileged to have ABC contributing and sure she knows this opportunity was created for geniuses like her. Now I know why the shares are so low.
Comment by
righand2 on Jun 17, 2016 10:17am
Yet another loud mouth to ignore. What a drag this site is. :o(