Post by
Valueinvestor9 on Sep 01, 2015 3:33pm
A few points in the CNRL presentation to the Alberta Gov.
Just a few points made in the CNRL presentation to the Alberta Gov.
In horse racing there is only one winner, one horse places, and another shows. All the other horses make no prize money and do not succeed. Similarly in the oil and gas business, only a few companies succeed.
Unfortunately, most juniors do not succeed.
Junior’s have the huge challenge of accessing capital continuously to survive. The challenge for Ray and Steve, is that they do not look to have that ability to raise capital.
Even though ROCE are low on average, there are a few winning companies.
• In horse racing, bettors bet because they believe they can pick winners: the best horse, the best race track
and the best jockey.
Kicking Horse so far has not been performing best in class. In no way does this horse win the race.
Likewise, investors invest in the oil and gas business because they believe they can
pick the best company and best assets with the best management teams. And some companies do
succeed, investors then succeed and keep investing.
Ask yourself, is Kicking Horse, the best company in the industry, does Kicking Horse have the best assets, and finally does Kicking Horse have the best management. Please ask yourself those questions. Does this management team, have the ability to access substantial capital? Does this management have the ability to say, we will put in 10%, 20% of the next financing? That question, I can answer, Steve and Ray own .005 of the company. That is not a good signal to the market place.
• In horse racing, the race track makes the most money overall. In the oil and gas business, government
makes the most money without taking risk. That being said, there are significant benefits for all the service
providers and suppliers who also do very well, importantly all the people who work in the industry have high
skill, relatively high paying jobs. It is very important that the track be an attractive place to race horses so
the people who support the race horses, like vets, groomers, and jockeys, have good jobs.
Kicking Horse is facing the potential change in Royalties in 2017. I pray that the royalties do not get modified as the industry is already under serious stress. What is the risk here? Uncertainty, makes future investors nervous. Nervous funds do not invest. The truth is that there is very limited likelihood of a capital raise other than at steep discounts to the market. Look what happened the last raise of just a few millions. Stock collapsed down to encourage a raise. Investors please watch how this company is managed.
• In horse racing, if there is no prize money, horses and bettors go to a different track. In the oil and gas
business, if the fiscal/regulatory regime erodes returns then companies and investors will go to different
jurisdictions This comment is basically saying Alberta may not be the best place to invest capital. If CNRL is saying this, who else is saying it? Understand that the negative trend is on, and Kicking Horse is potentially at risk. No new monies, and investors going other places, like BC and Sask. Remember this company has booked 65% of its reserves. No real upside in this deal.
• All race tracks compete for bettor dollars and horses to race at their track. In the oil and gas business, all
jurisdictions compete for investment capital.
It is critically important that when reviewing royalties, GHG charges and increased taxes that the Alberta
government does not create a situation in which there are no winners. Because having a few winners is
what keeps investors investing in Alberta, and investment creates and maintains jobs. If the conditions
are right, both Alberta and Canadian Natural can win.
Not sure if Kicking Horse is going to win. If CNRL is concerned about the environment, how does it look for Kicking Horse. How about not even finishing the race. This horse may run out of gas.
As we say in the industry, "do not poke the bear"