Post by
bows333 on Apr 10, 2024 1:30pm
TVE vs UPL
But first, a story:
Someone asked a successful CEO what his secret was.
"I make good decisions."
"How did you learn to make good decisions?"
"Experience."
"How did you get experience?"
"I made a lot of bad decisions."
I always chuckle with those who only post their successes. An education takes a lot of time, and a lot of money. I have spent many decades investing, and have lost enough money for several PhDs. In many respects, I am not a very good investor, yet I am still here with more money that I expected to have this year. Everyone makes mistakes, if you haven't had any losses that have made you cry in the past it is because those losses are still in your future.
Ultra Petroleum (UPL) was both one of my greatest successes and biggest failures. Does anyone remember it? I believe it closely resembles TVE. Here is their story:
Ultra Petroleum was a natural gas producer in Utah. The formation they drilled was known to have gas for over 40 years but every well drilled blew out from the pressure. Ultra figured out how to drill these ~12,000 foot wells (I am doing all of this from memory, so the numbers may not be perfect), and they were massively profitable. Ultra quickly became the lowest cost producer in the country, with a break even cost of about 70 cent gas, and payback time for a well was 9 months. They put them on 80 acre spacings, and never had a dry well. The wells had such a slow decline that they eventually went to 20 acre spacing. I got in around 2001, it was obvious that this was a great company. By 2008, many wells had been completed and gas prices spiked. Gas was a steady $8, there were days when the spot market hit $17 that summer. Life was great for the company! Margins had been increasing for a decade, as had production, and they still had at least 10 years of inventory going forward with more cash than they could spend (but never thought about giving the shareholders a divvy). They earned about $2 a share that year, and the market gave the company a premium PE ratio. My sub $2 purchase price hit $100 that summer. Oh, there had also been a 2 for 1 split, so it was really up to $200; 100x my purchase price in about 7 years.
When I look at TVE, I see the same thing. Large land package, great current profitability, no dry wells, large drill inventory going forward, rising energy prices, and a new pipeline that will also lift prices. The largest oil producer in the world (Russia) is curtailing production (for both voluntary and involuntary reasons), Saudis and friends are also cutting priduction. All over the world, old wells are declining faster than new wells come online. If we don't get bought out, I am anticipating a $200 stock price in 6-7 more years. All the company has to do is execute the current business plan. I have seen this before. I am looking at the same setup. I have been looking for another UPL for 15 years.
Alas, I made some big mistakes with UPL. I let a lot go at $6-9 chasing what I thought were better stocks (they weren't). In 2009, the company went on a buying spree, locking up shale land all over Pennsylvania, New York and West Virginia with borrowed money. Gas was the clean fuel of the future. New power plants were gasfired, semi trucks were running on compressed natgas. UPL developed Victory Disease. They leveraged the entire company in order to become the biggest gas player in the USA... and failed. Gas crashed back to $2 and their debt crushed them. The creditors took more than 90% of the company. After a reverse 10 for 1 split the remaining shares I still hold are worth 15 cents. I let shares go too early and couldn't part with shares at the very top. Stupid, but lesson learned.
Again, looking at the macro environment 5-10 years from now, I see energy higher, not just nominally but in inflation adjusted terms. This company is well positioned to take advantage of that. All they have to do is execute the business model and not get greedy.
Comment by
wannabebuffet on Apr 10, 2024 4:41pm
My take on this is not to sell too soon and not to be greedy. I will then sell at 186. I may miss the top but I am okay with that price.
Comment by
IainCaimbeul on Apr 10, 2024 7:43pm
Tripl3, you are exactly right. I do not comment much but I do realise that EVERY other shareholder is a competitor, period. However, we can still exchange ideas and have civil discourse. Best of luck to all.
Comment by
bows333 on May 01, 2024 11:39pm
Glad you got your lower price. I am also continuing to add a little on a monthly basis. I believe it was Buffet who said that in the short term the stock market is a democracy, but in the long-term it is a weighing machine. TVE has a lot of good things on their side of the scale, and from what I have seen thus far the management appears to be at least competent.
Comment by
wannabebuffet on May 02, 2024 9:58am
You got the idea of what Warren Buffett said but it was actually a bit different: It was "In the Short-Run, the Market Is a Voting Machine, But in the Long-Run, the Market Is a Weighing Machine". Warren was quoting his mentor Bill Graham who originally said this. I am thinking May 8th Q1 results will be good. Hopefully that is the case. I think we deserve good news.
Comment by
mofwmofw on Apr 11, 2024 7:55pm
You have no idea what you started. I've been there twice over 2 million up and down. If people don't believe that I really don't care I've been up over 3 million didn't sell in time so whatever now I'm back I'm getting very close to getting back to where I was, you have to lose a lot before you get her. Have a great day.