# Long Run Exploration (LRE.TO)



## doctrine

Thought I'd take another crack at a dividend paying oil company. LRE is amongst the cheapest by several measures. Cash flow is very, very high (2.5x ratio), and production next year is estimated at 42k BOE for a company that will have a 1.2B market cap - not many companies with numbers anywhere near this. I own 2900 shares at $5.68 (mostly funded by my NBD sell).

Anyone else own or have looked at them?


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## dubmac

I tried to check the Pay-out ratio for LRE - there was no data for this statistic. 
Not sure how to interpret "production estimates" for oil co.s.
Why not stick with BTE/CPG or other tried and true distribution payer?


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## doctrine

A portion of my portfolio is dedicated to smaller companies where valuations are often much lower. I have Husky in the large cap space. I came very close to getting Whitecap (WCP.TO) but missed out. I think some of LRE's acquisitions have held down the price due to share issues but I think most of that is behind them. Most target prices are 25% higher plus the 7% dividend. I would also like to get better at analyzing this space and no better way than to be involved. I have seen a lot of theories that the yield on LRE should compress given the sustainability of the dividend. Also, I wouldn't be surprised to see an increase given they have already increased it once this year. LRE cold have a run similar to Surge Energy (SGY.TO).


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## Gabs

I'm a beginner and follow your blog Doctrine, just curious if the high p/e should be a concern? Works out to over 22 atm, with the forward p/e at 11....guess it depends how fast it grows.


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## lostwords

hm.. with the recent drop, I might take a small position in this stock


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## doctrine

I was about to consider finding a way to add to my position (25-50% more), but it jumped quite a bit today. Q2 results were good - everything seems to be going exactly as they have provided guidance.


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## lostwords

doctrine said:


> I was about to consider finding a way to add to my position (25-50% more), but it jumped quite a bit today. Q2 results were good - everything seems to be going exactly as they have provided guidance.


Well I was planning to buy some yesterday but like you said, it had an up tick yesterday. Will wait for an opportunity to get in


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## doctrine

Update here. I have been averaging down into LRE, today at $4.95 with 700 shares. A little contrarian with oil prices moving down, but there you go. The more I examine alternatives in the sector, the more I keep coming back to LRE. I don't know where the bottom is, but it has been outperforming the index (XEG) over the past 3-5 trading days as selling has slowed.


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## My Own Advisor

Is LRE eligible for DTC? Could find that info. on their site readily....


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## doctrine

http://longrun.mwnewsroom.com/press...september-dividend-tsx-lre-201409150968107001

_Long Run Exploration Ltd. ("Long Run" or the "Company") (TSX:LRE) is pleased to announce that the Board of Directors has declared a dividend of $0.035 per Common Share to be paid on October 15, 2014 to shareholders of record at the close of business on September 30, 2014. The ex-dividend date for this dividend is September 26, 2014. *Shareholders are advised that this dividend is designated as an "eligible dividend" for Canadian income tax purposes*._


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## My Own Advisor

Thanks!

Do you think longer-term, LRE will be bought out?


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## the-royal-mail

While dividend payout is high, the capital value of the stock seems to be on a downward slide. Anyone buying now may need to be prepared for erosion of capital value. 

5 days minus 1.01%
1 month minus 6.33%
YTD minus 9.2%
1 year minus 6.33%


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## doctrine

The whole sector has been hit. XEG is down 7% this month, so LRE is actually ahead of the index recently. The previous owners of Crocotta, who received ~30-40M shares of LRE in the acquisition, have been selling like mad and driving the price down. That selling pressure should subside (volumes are already slowing). I don't know if they'll be bought out, it's always possible in this industry. You can't depend on it, and I like their projections for 2015.

Capital loss is always a risk.. I don't recommend anyone invest like me. I can definitely hold on if this drops 25% in a month. CFN dropped 45% on me in 9 months in and I didn't sell; other people online posting that they were fed up and exiting just the week before the acquisition on some other forums, so you really have to trust your own analysis. I think a dropping stock price, without negative news or results, is the wrong reason to sell - its usually short sellers or some other factor (like nervous investors).


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## martinv

Initial buy today @ 4.68. Will tuck it away hopefully for a good long while.


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## liquidfinance

Interesting article on SA

http://seekingalpha.com/article/248...-canadian-e-and-p-with-huge-8_4-percent-yield


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## sikko

Read the article, however, the writer did not answer questions posted by Uncle Pie and Wbrowder about debt and how they are going to pay the 42c dividend.
I do have a small buy order in, I guess I am just a sucker to a juicy dividend!


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## Butters

Down 4% today so far
Tsx is getting hammered
This will likely recover half it's losing on Monday I'd imagine

Seems like that article. Doctrine and everyone likes this stock
But when's the bottom?

At a new 52 week low
Dividend is 9.15% now

Could it go low enough for a 10% dividend?

Could it spike up 10% in one day?

I put in a very small position but thinking of doubling in another couple weeks it if it drops another 5% and stays there

This is a extremely bad falling knife!


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## liquidfinance

I believe a stock like this could easily hit a 10% yield. It could also easily spike 10% in one day as well. 

Looking at the financials this is one Mr Market has forgotten about and is being irrational. Income investors will be cautious as well as it's only recently implemented the dividend policy.


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## doctrine

I think if it hit $4.20 and a 10% yield then I would add again. Thought about it today, but I'll be patient. It's free falling for sure, but the whole sector is rapidly falling out of favor. Pick your spots, and hold on for the ride.


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## Jon_Snow

Great time to have ready cash. Ahem. :biggrin:


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## liquidfinance

Looks like you will be able to go on a nice shopping spree if these stocks keep going on discount.  Good luck!


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## Gabs

As mentioned share price been falling pretty steady, below it's previous 52 week low now. Book value of $4.95 as of the 2nd quarter. Curious to see how low this one will go, support seems broken atm.


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## CPA Candidate

This company has been pummeled beyond belief and all rationality. Overwhelming value here right now.


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## Freedom45

Initiated a position at $4.50 today. Will add if it continues to slide and gets into the $4.00 range. Can't see it getting that low though...


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## Mechanic

Bought some at 4.52. Looks not bad and divvy's while I hold it.


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## My Own Advisor

Current saving to take a new position, this might be one of them as well. 52-week low and yield >8%. Either a dividend cut coming or a take-out me thinks is on the horizon.


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## Jon_Snow

If this investment tanks, well.... at least we're all in this together. :hopelessness:


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## KaeJS

Jon_Snow said:


> If this investment tanks, well.... at least we're all in this together. :hopelessness:


Okay, Belguy.

:biggrin:


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## Toronto.gal

Jon_Snow said:


> If this investment tanks, well.... *at least we're all in this together.* :hopelessness:


Very comforting.


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## CPA Candidate

My Own Advisor said:


> Either a dividend cut coming or a take-out me thinks is on the horizon.


No.


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## sikko

My Own Advisor said:


> Current saving to take a new position, this might be one of them as well. 52-week low and yield >8%. Either a dividend cut coming or a take-out me thinks is on the horizon.


Didn't they just increased the dividend, why cut after just raising it a few months ago?


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## sikko

My Own Advisor said:


> Current saving to take a new position, this might be one of them as well. 52-week low and yield >8%. Either a dividend cut coming or a take-out me thinks is on the horizon.


Didn't they just increased the dividend recently, why cut now just raised it a few months ago. I sure hope you are wrong about a divi cut!


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## My Own Advisor

Why not CPA? Is 8%+ dividend yield sustainable?


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## cashinstinct

In my opinion, the cash the company can afford to pay as dividends is cashflow related.

The value of the stock can have an impact on cash available if they issue new shares and don't get enough capital... otherwise, why would they automatically cut their dividend?


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## My Own Advisor

LRE pays $0.035 monthly. That's $0.42 per year. EPS is 0.24. I don't see how this payout ratio is sustainable unless EPS rises over the next few months and years.


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## doctrine

Was LRE's dividend sustainable in July when it traded as high as $6.09 with a 6.9% yield, but completely unsustainable now with a $4.57 share price and a 9.2% yield? What has changed? 

A year ago, WCS (Alberta oil) was $76 US with a 97 cent Cdn dollar. Today, it is $88 US with a 91 cent Cdn dollar. WTI has not dropped below $100 Cdn a barrel, nor has nat gas dropped below $4 Cdn/MMBTU.

Oil is being exported, whether environmentalists like it or not. The US exports more than 3.5 million barrels a day of refined products - gasoline, diesel, jet fuel, etc. Suncor just shipped a tanker of Alberta oil overseas with the help of rail transport to Quebec. 

Very comfortable holding oil companies here, especially ones that perhaps have been caught up in what appears to be selling by a small number of US institutional investors. A good chance for local Canadians to pick up stocks in the energy sector on sale. Some combination of factors that results in LRE receiving $80-85 Cdn oil and $3 of nat gas or less will have a material effect on their operations and dividend policy, but we're a long way from there yet. Not saying we can't get there, but that's the true risk to the dividend.


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## doctrine

MOA, you do have to use some additional metrics when evaluating oil producing companies. Sort of like REITs. Oil wells are depreciating assets, both in terms of equipment and production. This tends to reduce net earnings more so than other companies..also like REITs, LRE does not pay income taxes. They have tax deduction pools that will last until the 2020's. This also makes it easier to support dividends. 

I can only find positives for LRE. Here's another. Despite acquisitions, they don't have any goodwill against the $5.00 in book value. It's already a tangible book value. I also think that oil reserves are a bit of a multiplier on the balance sheet. One share of LRE comes with 0.8 barrels of reserves, which is about $5.75 a barrel. Pretty cheap - and reserves are up nearly 17% since last year. Suncor, by comparison, gets you a barrel of oil for about $8.50, and they won't ever see a 17% annual growth in per shares reserves again.

If you can't convince yourself it's sustainable, then I'd definitely stay on the sidelines. Oil is cyclical and volatile, there will always be another bus either here or somewhere else.


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## My Own Advisor

doctrine said:


> MOA, you do have to use some additional metrics when evaluating oil producing companies. Sort of like REITs. Oil wells are depreciating assets, both in terms of equipment and production. This tends to reduce net earnings more so than other companies..also like REITs, LRE does not pay income taxes. They have tax deduction pools that will last until the 2020's. This also makes it easier to support dividends.


I honestly did not know LRE does not pay income taxes, that's a big plus.


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## doctrine

They have $1.5 billion in tax writeoffs. They get them from the exploration and oil drilling they do, which is high risk but does create jobs and eventually royalties for production. Just that alone is worth $1.50-$2 a share, and smaller oil companies have been acquired for tax pools in the past.


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## sikko

My Own Advisor said:


> LRE pays $0.035 monthly. That's $0.42 per year. EPS is 0.24. I don't see how this payout ratio is sustainable unless EPS rises over the next few months and years.


According to Scotia, their CFPS is $0.54, enough to cover the dividend, at least for now.


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## doctrine

Nice jump in oil plus another small drop in the Canadian dollar. All positive.


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## mgr1397

New 52 week low... Not sure if i should get in or not


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## liquidfinance

Well well well. I need more capital to deploy. Very tempting at these levels.


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## My Own Advisor

My hunch is it will go lower still....lots of room still on the downside...maybe even $4.


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## rikk

My Own Advisor said:


> My hunch is it will go lower still....lots of room still on the downside...maybe even $4.


Agreed ... but do I want to get into oil at all ... and if so what ... e.g. COS is at it's past low with a 7% dividend ... and tomorrow is Friday, usually nearly almost nearly almost always under current conditions another down day, well, today tbd


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## the-royal-mail

I agree with advisor. The track record for this stock over past year has been on a continual downward trend. Need to see evidence of the trend ending before I will consider.


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## Gabs

Already hit 4.08 today and continuing it's downward slope. Have to wonder where the bottom is for this stock.


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## mgr1397

the-royal-mail said:


> I agree with advisor. The track record for this stock over past year has been on a continual downward trend. Need to see evidence of the trend ending before I will consider.


Well it hit 4.08... getting to that price point. Might buy 1000 shares if I see another downfall in that area. Thoughts?


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## rikk

mgr1397 said:


> Well it hit 4.08... getting to that price point. Might buy 1000 shares if I see another downfall in that area. Thoughts?


Since you asked for thoughts, I'm looking elsewhere ... e.g., COS trading at $19.62


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## My Own Advisor

Geez, I need to save money and get in...will hopefully have a few $ k to invest non-reg. next month. Keep going lower (LRE and COS)!


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## CPA Candidate

It is times of irrational panic that you make money in the markets if you have the fortitude for buying when everyone else is selling.

Everyone was buying the energy sector when oil was increasing (which is when you should have been selling) and now that oil is dropping everyone is selling (when you should be buying). This concept is simple but nearly everyone screws it up, except guys like Buffet.

Every oil company that exists hedges it's production to lock in cashflows in the 6-12 month time frame. Oil would have to stay low a long time for this downturn in the price to serious put debt repayment and dividends at risk.


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## Butters

I love people say the would buy this at 4.00 and now that it's there I'm sure they won't bite 

Down under 4$ on no news
New 52 week low

Soon the forward P/E will be 7, lol

This realistically could go to $6.00 by next year. 50% return plus 12% dividends

Waiting to see what happens.

Anyone else trying to catch the falling knife?


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## My Own Advisor

Next month Shea! Too many expenses this month sadly!


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## doctrine

I put a bid in at $4 late in the day but it didn't fill. Will see how it goes this week.


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## gibor365

doctrine said:


> I put a bid in at $4 late in the day but it didn't fill. Will see how it goes this week.


I put bid late in the day at 3.98  also no fill... I just don't understand why LRE is down 20% in one months while for example EGL.UN with much worse fundamentals is up last month ...


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## martinv

Bid $4.00 didn't fill. Interesting how I was in my own little investing world all day and only now do I see from the forum that others were also watching, thinking, trying to decide whether to buy/sell etc.


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## The ruined man

I´ve been wanting to average down but kept putting it off...glad i did. Lot´s of upset LRE investors are getting out and i think it will dip below $4 soon enough so i wouldn´t worry about not getting your bids filled yesterday.


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## Gabs

Low of 3.91 so far today 30 mins after open. Pretty much sitting there now, will probably go lower today.


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## martinv

This goes a long way towards explaining what is happening to the LRE share price. At least in my humble opinion.Not my best post, but then I am sitting on the beach in Baja. It is a chart of recent oil prices.


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## Jon_Snow

Lol Martinv... I'll be on a Baja beach soon enough, drowning my investment sorrows in copious amounts of tequila.


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## My Own Advisor

Geez, that sounds awful :biggrin:


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## Freedom45

Added more at $3.94 this morning.


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## the-royal-mail

$3.78


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## londoncalling

Started a position on Tuesday @3.95. Just a small bite. Had no idea till I was going to put in an order for this week. apparently work has been too much of a distraction to keep track of my orders. May average down if I think I can guess the bottom. More seriously may add in December.

Cheers


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## mgr1397

Just waiting it out. Make take 1 month or 6 months or 1 year but oil should recover....


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## Butters

This stock has been destroyed. 

10% drop today whereas oil is only 2% 

Getting close to a 50% drop in 2 months. Seems a little insane. 

Does 80 dollar oil make them unprofitable?


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## CPA Candidate

SheaButters said:


> This stock has been destroyed.
> 
> 10% drop today whereas oil is only 2%
> 
> Getting close to a 50% drop in 2 months. Seems a little insane.
> 
> Does 80 dollar oil make them unprofitable?


No, they should still be profitable. Their Q2 oil pricing, including derivatives, was $89 CDN per barrel and corporate netback was $29. It should be also be noted that about half of their Boe/d is natural gas. Refer to their Q2 MD&A.


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## GOB

So if understand correctly, their break even is around $55/barrel (USD). Seems reasonably safe.


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## 1980z28

can sit back and wait

oil has a wait for a stable price

but who knows

can always dip in at this level and have reserves to go back in for a top up


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## My Own Advisor

I will wait until it goes to $2 to collect 15% yield


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## londoncalling

if it hits $2 I will double down :stupid:


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## doctrine

Well, there's no point in predicting how low this will go. Although if you like fundamentals, LRE is now trading at 66 cents on the dollar (66% of tangible net asset value).


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## rikk

23sep14, buy 3000 LRE @ $4.4995 ... comm. $13.32
29sep14, sell 3000 LRE @ $4.50 ... comm. $12.13
15oct14, received dividend of $105.00 ... WooHoo!!!


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## gibor365

rikk said:


> 23sep14, buy 3000 LRE @ $4.4995 ... comm. $13.32
> 29sep14, sell 3000 LRE @ $4.50 ... comm. $12.13
> 15oct14, received dividend of $105.00 ... WooHoo!!!


Wow! You have pretty big investment into LRE...

Do you DRIP?


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## martinv

Order filled @ 3.50. Averaging down....way down! But there we are. just keep those dividends coming....please.


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## the-royal-mail

Looks like the downward slide on this one has stopped. Seems to be sitting around $3.50 now.


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## CPA Candidate

Will LRE have an up day? There have been like 4-5 in the past few months. They are a more risky play to be sure, but the market was pricing them like the operation was shutting down tomorrow.


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## martinv

It is not easy making buy decisions in today's market. You are all alone, at the mercy of your "mouse click"!
Since I am on the beach, I went for a swim first and looked for the "jaws of death triangle". Since "Baja jaws" didn't get me, I took that as a sign that it was okay to put in a bid. Once it filled, I had a brief moment of buyer's remorse but that has passed and I am okay with it.


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## Freedom45

Added to my position at $3.39 earlier today.


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## GOB

Oil has bounced nicely from the $80 level. Let's see if can hold it in the coming days, weeks and months.


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## Killer Z

Eric Nuttall on BNN advised that the payout ratio here is approx (120% -- which in his opinion is not catastrophic) and that the dividend here is being financed (which is not uncommon for these types of dividend energy plays). He does not believe the dividend will be cut anytime soon. 

His only concern is that at $80 oil, their debt to cashflow exceeds 2x, which is uncomfortably high.

I know that several of you do not respect the anaylsts on BNN, however Eric Nuttall is generally a strong source of information for energy stocks. One of my few favorites.


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## CPA Candidate

Killer Z said:


> Eric Nuttall on BNN advised that the payout ratio here is approx (120% -- which in his opinion is not catastrophic) and that the dividend here is being financed (which is not uncommon for these types of dividend energy plays).


That was with $80 oil and $4.00 natural gas. My opinion is that oil has been brought down with gloomy speculation.
http://www.theglobeandmail.com/repo...by-short-sellers-speculation/article21181724/

I also found a interesting tidbit today, short positions in LRE increased 102% to 2.52 million shares between Oct 1 - 16th. The stock has been under attack from shorts. Total shorts positions are still relatively small compared to the float, but I think the shorts played a role in pushing the stock to such low levels in the past couple weeks. If oil bounces, LRE could go up fast.


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## CPA Candidate

So oil is down .43% today and so the market reacts by sending LRE down 7%.

If you needed any more proof the the efficient market hypothesis is rubbish, here it is.


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## Butters

Oil was below 80 at one point this morning. And LRE was down 10%

All of them are down. Unless we see 100 oil again they will suffer along until then :-(


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## My Own Advisor

Keep going lower I say....I hope the bottom is just in time for 2015 TFSA contributions.


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## GOB

I have an order in to buy my last tranche at $3.00


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## CPA Candidate

As of 2:42 EST, oil is basically flat for the day and LRE is down 7%.

"Why did you sell your shares in LRE?"
"Because it was Monday"

Actually, I think this is more shorting. There is no rational reason for the stock to lose 7% today.


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## doctrine

CPA Candidate said:


> So oil is down .43% today and so the market reacts by sending LRE down 7%.
> 
> If you needed any more proof the the efficient market hypothesis is rubbish, here it is.


Lots of that going on today. PD announced increased revenue, earnings, better pricing power and a dividend increase, and the stock went down 8.2%. It's not LRE only though amongst the producers, the entire oil producing sector was crushed today, as well as the drillers. A 3% drop in XEG is probably one of the biggest yet, although as you point out, oil is only down 0.4% today (and the dollar has been generally weaker by 0-0.15%, negating this a little further).

It might take a while, but the best cure for low oil prices is always low oil prices. This is a huge injection of stimulus into oil importing companies, who also tend to burn the most oil. You'll notice consumer staples companies moving up, as institutions bet that the extra stimulus will be spent on everyday goods.


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## Dom

doctrine said:


> Lots of that going on today. PD announced increased revenue, earnings, better pricing power and a dividend increase, and the stock went down 8.2%. It's not LRE only though amongst the producers, the entire oil producing sector was crushed today, as well as the drillers. A 3% drop in XEG is probably one of the biggest yet, although as you point out, oil is only down 0.4% today (and the dollar has been generally weaker by 0-0.15%, negating this a little further).
> 
> It might take a while, but the best cure for low oil prices is always low oil prices. This is a huge injection of stimulus into oil importing companies, who also tend to burn the most oil. You'll notice consumer staples companies moving up, as institutions bet that the extra stimulus will be spent on everyday goods.



Are you planning on averaging down again?

Its funny because I always remember you writing on your blog that you have this curse of right after buying into a company
it almost always takes a dip!


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## doctrine

Yes, I wouldn't say it's a curse, but it's happened a few times that companies have dropped 15%, 20% even 30% in the first few months after I've bought shares. Some buys really took off from the start though, like ACQ, HCG and CKI. LRE is the biggest initial fall in a while though for me - I have to go back to 2008 to see something similar. It is the whole sector being killed though, not just LRE, most companies are down 30% or more. I have already averaged down into LRE although my last buy was a lot of dollars ago, 1000 shares at $4.50 in mid September. I am now thinking about maybe another 1000 shares. At $3, it is trading at 60% of tangible net asset value. I am getting full of oil companies though, and I probably only have one shot left before I completely sit back and ride it out. There could be more chaos ahead but I think it will work out in the end.


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## GOB

Doctrine, what do you think about PD? I took a quick read of their earnings report and seems like a strong company, and onshore drillers will fare better than offshore with low oil prices. I got into SDRL way, way too early so I'm a bit weary though. Also getting heavy on oil companies - been buying a lot of names on this dip.


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## humble_pie

GOB said:


> Doctrine, what do you think about PD? I took a quick read of their earnings report and seems like a strong company, and onshore drillers will fare better than offshore with low oil prices. I got into SDRL way, way too early so I'm a bit weary though. Also getting heavy on oil companies - been buying a lot of names on this dip.



originally held PD - actually i held interlisted PDS on US market - in the low USD $7 range thanks to selling calls & puts. I sold it in the USD 11s & am now once more selling puts again. Presently i'm short USD march 8 puts in PDS.

notice that US markets in PDS are the volume leaders, also US options are better. But notice also that the PDS dividend is paid in CAD so one has to keep that stock on canadian side of an account.

it's very early days in energy stocks & perhaps it's a tad too soon to be buying "a lot of names." But oh, how inviting they do look each:

ps among drillers, i hold Ensign because of its relatively higher dividend & sell calls. This position is looking somewhat anemic these days. I also used to sell puts in Trican. Timeliness would suggest it's now time to sell TCW puts again but, following KISS, i might double puts in PDS instead, although as drillers they do not offer the same services.


Edit: so sorry, LRE guys. I was just looking at Gob's post on PD & i hadn't realized that this is the LRE thread. I'll move this if ya'll would like ...


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## doctrine

PD looks okay, but does have debt. I like the smaller drillers with no debt, like Akita (AKT.A), or the one driller that I do hold which is High Arctic Energy (HWO). PD will probably have more oomph in a turnaround, although HWO and AKT.A will have an easier time in a severe downturn due to zero debt levels. HWO might bounce back as much as a PD though due to the lower valuation. All of them have been hit by 30-40%. PD gets a valuation bonus for being one of the largest in Canada, but I think can fall the furthest from here. Under $7 though, the dividend would be > 4% and probably little downside after that.


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## GOB

Yes, sorry for going off-topic. Thanks humble and doctrine. Good idea going with the US listing for options income - think I might do it that way too


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## HaroldCrump

humble_pie said:


> ps among drillers, i hold Ensign because of its relatively higher dividend & sell calls.


You sell calls in Ensign?
Pray, how?
I don't believe Ensign is traded on the US markets, only the Montreal options market exists.

It looks dead as a door-nail.
Not a soul is stirring here, and it's almost Halloween...

Take a look...what would you sell?
Options go out only 6 months out.
Premium drops to mere pennies beyond $1 or $2 above current price.

There is zero volume, and those 10 or 15 open contracts are probably my grandpa's RIF account :biggrin:


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## birdman

CPA Candidate said:


> So oil is down .43% today and so the market reacts by sending LRE down 7%.
> 
> If you needed any more proof the the efficient market hypothesis is rubbish, here it is.


I presently don't own any commodity stocks but it seems to me that the drop in the price of a commodity does not necessarily relate to the change in the price of a stock. 
As the commodity price drops to a point where the company cannot extract the commodity and generate a profit the future of the company could be in doubt and some could conclude that the company has no value. Of course there are many other factors including the fact that the price could increase or there could be hedging in place but if the market price for the commodity is insufficient to pay the bills -then what? Not sure what LRE's all in costs are but if the company generated a 20% net profit margin and the price of oil price of oil drops 20% then there is nothing left for value, let alone dividends. I guess investors are just hoping for an increase in the commodity. Am I missing something here?


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## humble_pie

HaroldCrump said:


> You sell calls in Ensign?



boo!

harold u goes to yo granpappy & u tells him trick or treat, he gone pay me big


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## Freedom45

Added more at $3.25 this morning. That's about all I'm willing/able to roll into LRE. Average buy price sitting around $4.14 now. That puts the yield just north of 10% for me, so I'll sit back, collect the dividends, and wait for better days.


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## gibor365

Freedom45 said:


> Added more at $3.25 this morning. That's about all I'm willing/able to roll into LRE. Average buy price sitting around $4.14 now. That puts the yield just north of 10% for me, so I'll sit back, collect the dividends, and wait for better days.


The only problem that those dividends can be suspended .... I just wonder who from those small caps oil guys will do it first...


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## CPA Candidate

gibor said:


> The only problem that those dividends can be suspended .... I just wonder who from those small caps oil guys will do it first...


I can't speak for the other companies you may be referring to, but for LRE....50% of their production is gas and they have hedged the majority of their remaining 2014 oil production between $88-98 US per barrel with collars. Their have hedged about 25% of total 2015 oil production and I think we will see that by Q3 report that 50% of 2015 oil production is hedged at much higher levels that current pricing.

Oil prices who have to stay quite low for an extended period (2 years) to really negatively affect the company to the extent that they would have to reduce the dividend.

My personal opinion is that pricing has been suppressed by short positions and not by the actual physical supply and demand for oil.


----------



## bmoney

CPA, I took a quick look at their Q2 financial statement and note 14 explains their derivatives/hedging position as of March, obviously some of this is out of date. 

It looks like just a bit more than half of the remaining 2014 oil production has been hedged. By my math about 8,650 bbd hedged to the end of this year, compared to approx 12,500-14,000 bbd of production. Only 500 bbd are hedged for calendar year 2015 at $85 WTI, and 2000 bbd hedged to April 2015. 

We can say about 50% of 2014 oil production is hedged, and hopefully more 2015 production was hedged before the price collapse. About 40% of 2015 nat gas production is hedged for calendar year 2014-2015 as-well. The interesting thing is that the market price for the longer dated oil and nat gas hedges are only about 10% better than the current market price. From my perspective it doesn't look half bad if prices remain flat. Forgive me as I'm not a CFA or CA, but their dividend may be at risk? They paid 20 cents to June 30, on 21 cents of net earnings, and recently increased their dividend why are they reporting a payout ratio of 19% based on FFO?


----------



## bmoney

btw, do you know what their production cost is per barrerl? I couldn't find that anywhere.


----------



## Butters

Doctrine said previously that they had a huge number of tax breaks/exemptions for being an exploration company. Read past threads for more info.


----------



## CPA Candidate

bmoney said:


> btw, do you know what their production cost is per barrerl? I couldn't find that anywhere.


Look in the MD&A.


----------



## doctrine

There are so many ways to consider 'production costs'. $13.50 a BoE is the basic cost to operate their current wells. On a more all-in basis, they have about a 50% profit margin, both on existing wells and new wells, but some of the costs decrease as the price declines. Like royalties, for example. They also will be able to report gains on the hedging contracts, as opposed to losses over the last year as prices rose. They also have a lot of land, and lower operating costs in some areas, one as low as $7.50 a barrel. So they can always react to lower prices by drilling less, or drilling in cheaper areas.


----------



## bmoney

Initiated a small position with some capital freed up from selling BBD.B - It's gambling money so I'm hoping for a double lol


----------



## gibor365

bmoney said:


> Initiated a small position with some capital freed up from selling BBD.B - It's gambling money so I'm hoping for a double lol


I don't know why.... but i'm more bullish on BBD.B than on LRE


----------



## bmoney

gibor said:


> I don't know why.... but i'm more bullish on BBD.B than on LRE


LOL, exactly why I'm overweight energy stocks, I've never seen so much fear or pessimism in this space. Sure things could get worse, LRE may stop producing oil and nat gas at some price, but demand is only increasing (albeit slowly). I will take the odds that oil reaches $100 before it reaches $50. Many people are taking for granted the amount of continual investment required particularly in US shale, to maintain output and many US energy producers are financed with debt - they're not looking to operate/invest at the margin. I can be wrong short-medium term but at some point I will be right and prices will recover so I will hang on for the ride and hopefully be rewarded.


----------



## bmoney

Well, that's 9% down in about 3 days, not bad.


----------



## Fraser19

3.04/share
Sure is tempting me. I have some cash on hand I was planning to use for something else, now I am reevaluating what I want to do.

Anyone else make a move or consider making a move on today's drop?


----------



## doctrine

Oil is down today because the Saudis released December pricing. They effectively raised prices for Asia and actually cut prices for North America. They are trying to entice Gulf coast refineries to buy their oil instead of shale oil. There could be more downside as they're basically trying to flood North America with oil contrary to actual market demand. Although with nat gas up 4%, today was a net positive for LRE (plus another 1% on the exchange).

I haven't added any shares, although I thought about it. Their results are out Wednesday, that should be a good read at least.


----------



## GOB

I jumped the gun and took my final entry at $3.02. Full position now.


----------



## My Own Advisor

Still watching...was tempted to get around $4. Glad I waited. Thanks for the update Doctrine.


----------



## Dom

doctrine said:


> Oil is down today because the Saudis released December pricing. They effectively raised prices for Asia and actually cut prices for North America. They are trying to entice Gulf coast refineries to buy their oil instead of shale oil. There could be more downside as they're basically trying to flood North America with oil contrary to actual market demand. Although with nat gas up 4%, today was a net positive for LRE (plus another 1% on the exchange).
> 
> I haven't added any shares, although I thought about it. Their results are out Wednesday, that should be a good read at least.



I feel like you're quickly becoming the unofficial forum spokesperson for LRE lol
And Im looking to initiate a second position very soon


----------



## Jon_Snow

My Own Advisor said:


> Still watching...was tempted to get around $4. Glad I waited. Thanks for the update Doctrine.


I thought you were lacking cash to buy these days. Myself, the temptation is there to buy a couple thousand shares. But then again, I thought I was a genius buying in at $4.50. :stupid:

Will probably sit on my cash pile a little longer until this oil crash shakes out a bit more.


----------



## GOB

Bad decision to jump the gun 

This selloff is relentless. Are we missing something about this company?


----------



## Fraser19

GOB said:


> Bad decision to jump the gun
> 
> This selloff is relentless. Are we missing something about this company?


That is what I am wondering to.
The share price has been going down like crazy, I felt more comfortable about buying at $4.50 than I do at $2.85. 
Seeing shares go from a high of $6.09 to a low of $2.79 within a 52 week period does not feel too good to me. Although a turnaround at this price even by a $1 could prove to be pretty lucrative.


----------



## Spudd

I had an order in to buy at 2.99 that I put in last night, but this morning I saw the price of oil was down again and cancelled it like 5 minutes before market open. Good thing too! I'm planning to wait a bit now and see. It's tempting at this price but so far I'm resisting.


----------



## Jon_Snow

Depending on your view of things, the energy sector is a trainwreck of falling knives, or a screaming buying opportunity. These yields... holy ****.


----------



## AltaRed

Jon_Snow said:


> Depending on your view of things, the energy sector is a trainwreck of falling knives, or a screaming buying opportunity. These yields... holy ****.


I believe it is both, depending on the company and how long this hiatus lasts. Anything with a poor balance sheet are likely Pacman material if oil prices are low for 6-12 months. Those with high payouts will have to borrow (if good balance sheets) to sustain their dividends. Those with good balance sheets and low/prudent dividend policy will weather the storm without much of a hiatus, i.e. SU, CNQ, IMO, perhaps HSE, and probably a few more.


----------



## nobleea

LRE has a pretty good presentation (a year or so old) here:
http://www.longrunexploration.com/upload/media_element/1/30/lre-presentation.pdf
Slides 4 and 5 show sensitivities to cash flow WRT price of oil, FX rate, gas, etc. I'm sure you have all done the math on how much the cash flow would drop if the price of oil stayed in the 80-85 range for the next few quarters. Even with their nice reserve of tax credits, do you think they'd be able to maintain their dividend? I suspect it will be cut if oil stays below 85 for the next quarter. I wouldn't buy it based on yield (currently almost 15%).


----------



## CPA Candidate

GOB said:


> This selloff is relentless. Are we missing something about this company?


It's hardly confined to LRE.

I feel like I am repeating myself, but they are 50% gas. Natural gas is up 14% in the past 5 days. Oil is down 5% in the past 5 days. Overall LRE is better off than they were 5 days ago.

This is a pure fear sell off, nobody is thinking critically.


----------



## Ethan

AltaRed said:


> I believe it is both, depending on the company and how long this hiatus lasts. Anything with a poor balance sheet are likely Pacman material if oil prices are low for 6-12 months. Those with high payouts will have to borrow (if good balance sheets) to sustain their dividends. Those with good balance sheets and low/prudent dividend policy will weather the storm without much of a hiatus, i.e. *SU, CNQ, IMO, perhaps HSE*, and probably a few more.


Upstream producers will be hurt the worst by the falling price of oil. Integrated companies like SU, IMO and HSE are somewhat insulated through their downstream operations.  I'm of the view that we'll have low oil for at least 1 year. I think the Saudi's are trying to choke off a lot of their competitors; they're going to need to keep oil prices low for several months in order to slow down production from their competitors.

If I were to put more money into the oil sector, I'd be looking at one of the 3 integrated companies I listed above.


----------



## doctrine

Can't wait to see their updated forecasts tomorrow. Should be a lot clearer, and hoping they update to show at least $80 WTI and maybe even $75 WTI with a 88 cent dollar. Everything is looking good for nat gas to go higher. It will be a cold week ahead in Chicago..maybe even snow this weekend.


----------



## GOB

> ALGARY, ALBERTA, Nov 05, 2014 (Marketwired via COMTEX) -- LONG RUN EXPLORATION LTD. (LRE) ("Long Run" or the "Company") is pleased to announce our third quarter financial and operational results. Long Run is focused on providing long-term value to shareholders through a sustainable dividend model. Throughout the commodity price cycle, we remain committed to protecting our dividend through active portfolio management, proactive hedging and a focus on cost efficiencies.
> 
> THIRD QUARTER 2014 HIGHLIGHTS
> 
> -- Generated funds flow from operations of $80.2 million, a 29% increase
> over $62.3 million in the third quarter of 2013.
> -- Averaged 34,795 Boe/d of production, a 38% increase from 25,293 Boe/d in
> the third quarter of 2013. Third party restrictions and plant outages
> reduced production by approximately 1,600 Boe/d in the quarter.
> -- Declared monthly dividends of $0.035 per share, totaling $0.11 per share
> for the quarter, or $18.8 million. Maintained a sustainable basic payout
> ratio of 23%, without the assistance of a dividend reinvestment plan.
> -- Executed our focused development program, drilling 21 net wells, with a
> 100% success rate. Capital expenditures totaled $75.8 million, including
> facility costs spent to provide flexibility for future development and
> reduce reliance on third party processing. Expenditures were
> concentrated in our Peace River Montney, Deep Basin Cardium and Redwater
> Viking areas.
> -- Successfully closed and integrated the Crocotta Energy Inc. ("Crocotta")
> acquisition on August 6, 2014 for $346.9 million. This acquisition
> enhances Long Run's new Deep Basin core area, established through our
> initial asset acquisition on May 30, 2014 (the "Deep Basin
> Acquisition"). This exciting new core area, focused on the liquids-rich
> Cardium and Bluesky formations, provides exploration and development
> opportunities and adds strategic ownership of gathering and processing
> infrastructure. As consideration for Crocotta, Long Run issued 43.8
> million Common Shares and assumed $115.5 million of net debt. Our credit
> facility borrowing base was increased by $120 million to $695 million
> upon closing of the transaction.


http://www.marketwatch.com/story/lo...lts-2014-11-05-191732642?reflink=MW_news_stmp


----------



## CPA Candidate

EPS of 23 cents, funds flow of 45 cents per share. From what I can find expectations on EPS were 6 to 9 cents, which seem way off the mark.

Realized pricing per boe was actually quite poor at $50.75 (oil 84.66), which included realized losses on derivatives. Corporate netback of 25.13 including the one time costs of the recent acquisitions, which was about 1.50 per boe. WTI @ $78US is about $88 CDN. It appears their realized pricing in Q3 was worse than what they could get today at spot prices, unless I am missing something.

They saw no realized benefit of hedging in Q3 in price per boe, but unrealized gains were 33 million. The benefit of hedging should come out in Q4 as the contracts are settled. 30% of 2015 production is hedged. I expect the corporate netback to improve in Q4.


----------



## doctrine

Well, the good news is that they think they can keep the dividend for now. And book value increased in the last quarter, so it's not like the bottom is being cut out from the company with deteriorating book value. On the bad side, I'd say that if WTI oil stays below $80 then there is probably a cut in the future, although probably not for 3-6 months out, which is when oil will probably be recovering. They seem to be mitigating by possibly giving up growth in 2015 to protect the dividend if oil stays low (slightly lower capital expenditures, enough to maintain production). Honestly, I'm happy to hold for a while but I don't intend to add. I don't think LRE will return to $5 without WTI back at $95. I do think that will happen at some point given the macro oil picture. $75 = cut, $85-95 = solid, $95+ = through the roof.


----------



## CPA Candidate

doctrine said:


> Well, the good news is that they think they can keep the dividend for now. And book value increased in the last quarter, so it's not like the bottom is being cut out from the company with deteriorating book value. On the bad side, I'd say that if WTI oil stays below $80 then there is probably a cut in the future, although probably not for 3-6 months out, which is when oil will probably be recovering. They seem to be mitigating by possibly giving up growth in 2015 to protect the dividend if oil stays low (slightly lower capital expenditures, enough to maintain production). Honestly, I'm happy to hold for a while but I don't intend to add. I don't think LRE will return to $5 without WTI back at $95. I do think that will happen at some point given the macro oil picture. $75 = cut, $85-95 = solid, $95+ = through the roof.


I concur, the dividend should be fine for the next 6 months, basically until the spring when oil tends to rise. I have no idea why they didn't enter into more forward contacts when oil was at summertime highs. CPG is a lot smarter with hedging than LRE.

The market didn't like that they lowered production guidance slightly.

This stock could double from here if we return to last summer's oil pricing. I'm still in the camp that this lower oil price environment is temporary phenomenon as I don't believe the world's oil producers are going to annihilate themselves for too long. I also think the CDN $ has farther to sink.


----------



## swoop_ds

I picked some up at 2.84, I think it's pretty likely that this stock will be off to the races by spring time. I suppose it could go down more for here but I doubt it would go down much.


----------



## Fraser19

Yeah I decided to go in as well. Picked up at 2.81, so far I am happy. 
Would like to take a long term hold on this one.


----------



## banjopete

I like the path they're on, year over year growth, and they're currently cheap as chips thanks to this world event we're all watching. I think it's a temporary downturn, blood in the streets type of thing. Watching your previous buy price halve, hurts but doubling up on the units bought at the halved price feels like a pretty good antidote.


----------



## Freedom45

Freedom45 said:


> Added more at $3.25 this morning. That's about all I'm willing/able to roll into LRE. Average buy price sitting around $4.14 now.


Made one last small buy at $2.77 this morning. Pulled my average price down to $3.90. Now I wait...


----------



## CPA Candidate

Gutsy buying at this juncture.


----------



## bmoney

Probably not that risky depending on time horizon, 3 years out it's probably a good play, nothing wrong buying low. Short term, oil is working things out, I wouldn't add any more to existing positions until things firm up a bit, especially not in advance of the OPEC meeting.


----------



## londoncalling

my guess is anticipation of the OPEC meeting will be more of an event than the actual meeting


----------



## SkyFall

Took the opportunity with the current oil crisis to add more in the canadian energy sector. Now lets see where it will goes 10 years from now


----------



## My Own Advisor

Perfect time to buy.


----------



## fatcat

My Own Advisor said:


> Perfect time to buy.


agree, long run at 2.40, lots to choose from


----------



## Butters

The yield is so high. 17.5% wow. I got drip turned on, down 50%. This and c oil sands and baytex might have to cut if prices don't rise by summer.


----------



## Chris L

Used some play money to buy...


----------



## CPA Candidate

My Own Advisor said:


> Perfect time to buy.


Have you done any number crunching on that? Q4 is fine, hedging will prop them up. 

2015 @ $65-70 WTI means corporate netbacks in the range of half what they used to be or expected. With average decline rates of 29%, money has to go back in the ground to keep oil flowing. This is pretty serious, because they can't put money into the ground and pay a dividend below $70. LRE's risk management is lacking with only 25-30% of 2015 oil hedged.

I made an investment in this company, but that is when I thought the price of oil would be supported by production cuts. Now it looks like the price of oil is going to be supported by bankruptcy of leveraged oil companies.

If you want to make a gamble on energy at this point I'd look for companies with lots of hedging and low leverage. LRE has neither.


----------



## Killer Z

CPA Candidate said:


> Have you done any number crunching on that? Q4 is fine, hedging will prop them up.
> 
> 2015 @ $65-70 WTI means corporate netbacks in the range of half what they used to be or expected. With average decline rates of 29%, money has to go back in the ground to keep oil flowing. This is pretty serious, because they can't put money into the ground and pay a dividend below $70. LRE's risk management is lacking with only 25-30% of 2015 oil hedged.
> 
> I made an investment in this company, but that is when I thought the price of oil would be supported by production cuts. Now it looks like the price of oil is going to be supported by bankruptcy of leveraged oil companies.
> 
> If you want to make a gamble on energy at this point I'd look for companies with lots of hedging and low leverage. LRE has neither.


Which would you recommend? SU, CNQ, CPG?


----------



## banjopete

You can see the order that safe money is taking. It seems it's ENB, TRP, SU, CNQ in the big players. ENB is looking like a big tough guy, just taking on the chin and standing relatively firm through the past few months. I guess it's easy when you're just shipping the stuff...


----------



## Mechanic

Added another 1000 at 2.38 in my unregistered. Have my avg down to low 3's but have as much as I want now


----------



## Fraser19

Still continuing to drop like a rock.
Dividend is at 19%! 
I wonder if we will see this get down to the $1.00 range? It would be nice to pick it up that low and see a return into the $5.00 range within a year or two.


----------



## CPA Candidate

Killer Z said:


> Which would you recommend? SU, CNQ, CPG?


I wouldn't buy anything until there is some stabilization in the oil price. This fall all the "good deals" in the oil patch have been value traps. At some point you have to stop throwing good money after bad.


----------



## GuzzlinGuinness

Bought into this stock with some play money at 2.78 . 

Definitely a hold candidate.

The world is far too volatile a place for me to believe that markedly cheap oil is here for longer than a year or two.

If I'm wrong, well then most of the other assets in the old portfolio should do well.. because cheap energy usually = economic growth.


----------



## Chris L

Was in at 2.40 now 2.18, ugh. lol


----------



## bmoney

Pretty hard timing a bottom eh? I wonder what their new book value is, and if it's trading below it.


----------



## Franky Jr

Does anyone know what the cost/barrel is here? I think this and debt are going to be the most important metrics coming out of this.


----------



## dogpower

Can't believe people are still buying this stock. What's the rush? Why not wait for oil prices to stabilize and increase in price before buying into this stock. The same could be said for any oil company for that matter because oil is not going to shoot up in price any time soon. Can LRE even survive if say oil prices are 60-70$ a barrel for the next few years?


----------



## Chris L

Is this thing dead? 2.05.


----------



## Fraser19

Jon_Snow said:


> If this investment tanks, well.... at least we're all in this together. :hopelessness:


Would this qualify as tanking? :hopelessness:


----------



## The ruined man

Fraser19 said:


> Would this qualify as tanking? :hopelessness:


I wonder how low this can go.


----------



## bmoney

At this point, the market has discounted LRE so heavily I can only rationally explain that it's because Mr. Market thinks it's going bust.


----------



## bmoney

BTW, I'm planning to hold. It's only another 2k to me if this goes to zero


----------



## GOB

Absolute decimation. Glad I got rid of half my position at $2.17 for tax loss purposes, but still hurting.


----------



## Chris L

Sold off half my shares this morning. The rest will ride it out. I'll wait for a better deal in some other oil stock! Crazy days.


----------



## Fraser19

1.83
Sure is falling, glad I didn't do in with too much money. 1000.00 in so not a big deal, but if there is a recovery ill make a nice return on the money. Got in a 2.80.
At what point would it be a total loss? I have yet to see that happen.


----------



## CPA Candidate

Total capitulation.


----------



## Butters

I keep thinking it can't go any lower. And it does. If only another oil company had money. Their price to book is 33% lol. 

It's hard not to watch as this single stock has destroyed my small portfolio.  at least im Green overall but good lessons here. Glad I got some diversification and other big names. 

LRE needs to cut their dividend by 75% pay off what little debt they have stabilize their operations and get back to the dividend later. 

If they cut it doctrine will probably sell his shares :-(

I'm already down 60% just gonna close my eyes and see what happens in 2 years.


----------



## bmoney

Down 16.5% in one day. This is too funny, never owned a stock like this.


----------



## Fraser19

bmoney said:


> Down 16.5% in one day. This is too funny, never owned a stock like this.


Yeah, I have watched something go into the red so far so fast.
At least ill get a few bonus shares this month, if the div stays intact for dec.


----------



## lostwords

and I thought it was a bargain when I purchased it at $2.50. Will ride this one out


----------



## liquidfinance

My single worst performing stock ever. I question my sanity as to why I'm still holding. A lesson in small cap oil.


----------



## Fraser19

So I am wondering, since this company has gotten so much attention on CMF over the past few months, is anyone planning to add more? 
I know the drop in oil has shaken the industry but LRE has had good performance over the past few years and now it is dirt cheap. I find it interesting that this stock was a smoking deal at 4.00 but is now looked at as a dead fish at 1.80.

Is the current share price indicating a hopeless future or just a drop in oil. Do you guys see this as a deep discount or a stock destined for failure?


----------



## bmoney

I sold some stocks last week (FTS, EMA, T, CUF.UN) to lock in some big gains. I have lots of cash on the sidelines and took another gamble, picked up 1000 shares to bring my ACB to $2.40. Yesterday looked like capitulation, I would be willing to unload some if I can get near even on a snap back, the rest I will gamble with into next year.


----------



## the-royal-mail

I'm a bit surprised it has gone down this low ($1.77 now) as it seemed to stabalize back around $3.50. Hope people didn't lose too much money on this one after reading the earlier excitment in this thread. I brought this one up in the dividend thread going on right now, as a cautionary tale not to chase dividend yields.


----------



## CPA Candidate

At current oil pricing the company faces significant headwinds but I think that has been priced in the stock and then some. I'm not selling my shares. Shareholder's equity was 993 million at Sept 30, and the market cap is 271 million at the moment. That's a startlingly disparity that's not entirely rational. The media is pushing the bad news story pretty hard right now to sell papers and that doesn't help sentiment.

I'm not adding because I don't know where the bottom is and there is no rush to buy more the way things are going. There has been no reward for quick action on oil stock pullback. If I was going to add more oil I'd probably choose a different company just to spread bets and reduce company-specific risk. I often think people fall into a psychology trap of having to "average down" to make themselves feel better when another equally beaten up stock would be a better choice.


----------



## bmoney

CPA you could be right. 

Averaging down has helped me out of a rut before, it's also dug me a deeper hole. Yesterday looked like capitulation, about 9 million shares traded, stock was in a free-fall down 16%, oil was up 5%. Other than the initial gap down this morning, it is so far trading in a narrow range of 1.78-1.82, selling appears to be exhausted. If the stock was being shorted, or we get some positive oil/nat gas news we could get a snap-back, time will eventually give us the answer.


----------



## daddybigbucks

Fraser19 said:


> So I am wondering, since this company has gotten so much attention on CMF over the past few months, is anyone planning to add more?
> I know the drop in oil has shaken the industry but LRE has had good performance over the past few years and now it is dirt cheap. I find it interesting that this stock was a smoking deal at 4.00 but is now looked at as a dead fish at 1.80.
> 
> Is the current share price indicating a hopeless future or just a drop in oil. Do you guys see this as a deep discount or a stock destined for failure?


I haven't even looked at LRE but I just skimmed over this whole thread from the start.
This is the thread of the year.

Ive been caught on a few companies that were similar. I cant remember its name right now (I guess I totally put it out of my head) but in the end, the company got bought out for peanuts in the end. Nova Chemicals was similar. Penn West is the same, sounded like a great deal at the time but it wasn't. I got out of that one in time.

Some accountants can make lead look like gold. I don't know if that's the case here, but if everyone is selling, there is usually a reason for it.

There is just too many good companies out there to try and figure this one out.
Good luck to all.


----------



## Butters

Under $70 oil the will eventually have to cut the dividend. 

If they cut a lot more holders will sell. 

The only question is how long they can hold on by selling assets or borrowing to sustain the divy. Until prices go up. They will be destroying our capital to support a divy. 

The only thing we have for us right now is the low book value.
Unfortunately a couple other companies (legacy) have low book values also. Let's hope ours gets swallowed up. It's easier to buy assets already producing than to gamble in a new area. LRE is 12/12 on drilling. With 27,000 boe it would be an easy way for one of the bigger players to swallow. 
HSE just raised funds, maybe the are looking to buy. 

We need oil back above $80

At $95 oil we will all be rolling in money. 
At below 70 all we can hope for is to cash out.


----------



## Fraser19

daddybigbucks said:


> I haven't even looked at LRE but I just skimmed over this whole thread from the start.
> This is the thread of the year.
> 
> Ive been caught on a few companies that were similar. I cant remember its name right now (I guess I totally put it out of my head) but in the end, the company got bought out for peanuts in the end. Nova Chemicals was similar. Penn West is the same, sounded like a great deal at the time but it wasn't. I got out of that one in time.
> 
> Some accountants can make lead look like gold. I don't know if that's the case here, but if everyone is selling, there is usually a reason for it.
> 
> There is just too many good companies out there to try and figure this one out.
> Good luck to all.


Good food for thought.
I have been half in half out in my mind for averaging down. But really things are uncertain as it is. I got in a 2.84 so really if this does go back up then I am already in at a discount. If it gets bought out or goes down, well I am not in for to much anyways. 
Ill just leave it at what I got.


----------



## bmoney

For me a buyout at this price is a concern, many of us could be taken out with no opportunity to recover losses. $350 million market cap, about 2 billion of assets, 1 billion of debt, 1 times revenue assuming it's now half - sorta back of the envelop calculations here so I could be off.


----------



## bmoney

Really ugly finish, slow melt close near the bottom. Another 8.5 million shares, geez you would think the seller were washed out. Guess not.


----------



## Chris L

What happens to this moving forward and when?


----------



## Fraser19

Chris L said:


> What happens to this moving forward and when?


No idea, just got to wait and see. 
Or decide to buy or sell. I can take losing what I put in, but I am not at a place where I want to add to that. If it comes back up, well I will be very happy with my gain.


----------



## gibor365

liquidfinance said:


> My single worst performing stock ever. I question my sanity as to why I'm still holding. A lesson in small cap oil.


Looks like all buyers of this loser are on this forum, all other investors are sellers 




> I cant remember its name right now (I guess I totally put it out of my head) but in the end, the company got bought out for peanuts in the end.


 I remember that SKW was bought/merged for peanuts by MQL


----------



## SkyFall

My take is, my current position is pretty small compare to my overall portfolio and the stock is so low that I see the ''gamble'' in this stock. But anyways shouldn't touch this for years hopefully!


----------



## Crusher

I think the same can be said for all of us. Our "current" positions are pretty small. :hopelessness:
Amazing how many people are apparently choosing to sell now. Why now? Pure panic? Seems like a smart time to sell oil producers would have been last week pre-opec meeting when it became apparent no production cuts would take place.


----------



## Synergy

Crusher said:


> Amazing how many people are apparently choosing to sell now. Why now? Pure panic?


Perhaps a little tax loss selling - there`s still a few wks left in December. Others maybe getting out before companies start slashing their dividends. If oil stays low for longer and companies are forced to cut dividends, this will put further stress on the stock prices - a little panic for some I`m sure.

Ive never held this name but its been an interesting one to follow. Im no expert, but a lot of the selling in many of these names appear to be a little unwarranted. I guess it will all depend on where the price of oil eventually stabilizes.


----------



## SkyFall

if it drops under a $1 imma stack up some more shares!


----------



## banjopete

Definitely brave pants time across the oil sector. I don't believe oil will go away, but I could believe some companies might.


----------



## jaybee

I would like to see some insider buying on this one. I see that execs were buying in and around $5.00 per share in September. It'd be nice to see some "new" insider buying sometime soon.


----------



## daddybigbucks

gibor said:


> I remember that SKW was bought/merged for peanuts by MQL


Compton petroleum was the one I was thinking of. I kept buying all the way down. Great learning experience though.


----------



## Chris L

Up 10% this morning. Quick, pile back in!


----------



## My Own Advisor

banjopete said:


> Definitely brave pants time across the oil sector. I don't believe oil will go away, but I could believe some companies might.


Time to buy blue-chips and likely avoid small caps. At least I am.


----------



## Synergy

Chris L said:


> Up 10% this morning. Quick, pile back in!


Investors hoping to catch a falling knife! Time will tell...


----------



## gibor365

My Own Advisor said:


> Time to buy blue-chips and likely avoid small caps. At least I am.


I camr to the same conclusion  I don't have big % allocation in small caps, but % wise, my blue-chips large caps outperform in big small caps...


----------



## gibor365

Synergy said:


> Investors hoping to catch a falling knife! Time will tell...


Eric N. told on BNN that LRE is a Speculative Buy


----------



## CPA Candidate

I had emailed the company last week about it's future plans and got a reply today

_Thank you for your email. We are presently reviewing our capital and operating budgets using prices ranging from $65 to $75. We intend to provide our shareholders with our plan for 2015 shortly. We will also address our capital structure and dividend. We are very aware of our balance sheet and the need to maintain production. One lever we have to use in a falling price environment is dividend reduction. I can assure you that everything is on the table.

Bill Andrew
CEO & Chair
Long Run Exploration
_


----------



## bmoney

They need to slash the dividend, goes without saying. They can return to a dividend growth company down the road.

Thanks for sharing


----------



## gibor365

bmoney said:


> They need to slash the dividend, goes without saying. They can return to a dividend growth company down the road.
> 
> Thanks for sharing


In this case it will become penny stock


----------



## Butters

so whats the game plan for us holders?

A. Wait 6 months hope oil goes to $85
B. Sell now before the dividend cut if oil stays below $80
C. Close your eyes and pray
D. Buyout?


----------



## Edgar

I'm not a religious person, but I'm seeing up the manger scene beside my computer right now


----------



## martinv

The dividend is currently approx. 23%. A cut to 6% or 4% would be okay with me. Still well above my 1.05% so called high interest account.
Even a suspension of the dividend for 6 months or a year until the oil price changes would be prudent.
I do hope that someone doesn't buy them out at $1.50 though!


----------



## Butters

If a company bought them out they'd have to pay $4 I'd think. They need 50% of votes. 

Oil is down slightly in premarket. Maybe ENB up 10% will carry us 

You have to admitt it's not looking good, all we can do is watch COS tank today and loose our glimmer of hope :-(


----------



## CPA Candidate

SheaButters said:


> so whats the game plan for us holders?
> 
> A. Wait 6 months hope oil goes to $85
> B. Sell now before the dividend cut if oil stays below $80
> C. Close your eyes and pray
> D. Buyout?


Option A for me, except I'd say hope for $75.

They have hedges that will protect them from the worst for the next 6 months. They also have exposure to gas which lessens the blow, although gas fetches a lot less per BOE than oil. They probably cut the dividend in the next few months. It will probably be cut in stages rather than to zero.

I personally believe that once summer driving season is in effect and production increases slow down in response to low prices, traders will bring the price of oil back up somewhat.


----------



## Fraser19

I quickly looked though this thread and did some googleing, but I could not find out the production costs. Does anyone know what the production cost of a boe is?


----------



## Crusher

SheaButters said:


> so whats the game plan for us holders?
> 
> A. Wait 6 months hope oil goes to $85
> B. Sell now before the dividend cut if oil stays below $80
> C. Close your eyes and pray
> D. Buyout?


I vote for option B. The main reason is that these stocks always seem to drop when the dividend gets cut. Don't they? If you believe in this stock long term, why not sell now and buy it back sometime in 2015?

Also, oil is widely expected to go lower. I have no opinion on that, but won't be surprised if it goes down to the 50s maybe 40s before coming back up. 

I'm still holding LRE since the dip after the crocotta deal. Got in at 5.19. Considered selling many times, but never pulled the trigger. Bought more than I was comfortable with in the first place. This is very frustrating, but I learned a few lessons.


----------



## swoop_ds

averaged down today. Now my cost is 2.12 . . but only 700 shares so not big money. But it would be great if this stock came out of the toilet!


----------



## bmoney

Full disclosure, picked up some shares I think it was last week in order to average down. I sold those into some strength since I felt I was too early. Still holding my original allotment, made a slight profit on the trade but still down about 50%. On the fence about buying more LRE.


----------



## SkyFall

My target is between $0.90-$1.15


----------



## Crusher

I recommend not trying to catch this falling knife. It's not a cliché. It's time-tested advice. Glad I pulled the trigger and sold at 1.66 last friday (better late than never). 

I'm not getting back into oil producers until oil has stopped freefalling and statements have been made regarding 2015+. On average I'm convinced you will get in closer to the bottom and feel better about your entry if you buy stocks after the dust has settled than if you buy during a freefall.


----------



## Doryman

LRE has convinced me that it is better to buy something on the way up, than try to catch it on the way down.

"LRE at 3.00 is a great price!" I said... "This can only go up!" I said... yeesh


----------



## Fraser19

I read that they will be having a news release next week.
What would you all like to see in it?
What would you all need to see in order to bring feelings of hope back to this company?


----------



## Edgar

I would like to hear them say that they've figured out some magical loophole that allowed them to hedge their oil for the remainder of the year at $100. I expect it will announce a dividend cut.


----------



## Chris L

Things can not get much worse for this company, so any hope is appreciated. As far as selling/buying it has everything to do with what you are able to stomach and your entry point. The going down is always the problem!


----------



## Fraser19

> Thank you for your email. 2014 was a complicated year for Long Run. We entered the year with a strong balance sheet. What we felt was lacking was a good solid third core area that would take the pressure off Girouxville/Normandville and provide better project economics than the Redwater Viking play. Early in 2014 we had an opportunity to transact with Crew on an asset package focused on liquids rich gas in the Deep Basin fairway at Wapiti, Elmworth, Kakwa and Edson/Pine Creek. That acquisition followed up by a larger acquisition of Crocotta that consolidated holdings in the Edson/Pine creek area brought us a third very strong core area of Cardium liquids rich natural gas with an excellent inventory of locations. We elected to do a large portion of these acquisitions with debt rather than issuing equity with a plan to then sell off $125-$150 million in non core assets. The plan was good but our timing was wrong. We came out with our non-core asset package in mid-September with bids due in early November. As prices dropped so dropped interest in our non-core assets. As a result we did not complete the planned sales and we will need to manage our debt until such time that the assets can be marketed again. Our 2015 operating and capital plan is being finalized and will be released along with 2015 guidance and any other news soon. We are very aware of the current strip price on oil and the impact on our funds flow balance sheet. Fortunately approximately 30% of our production is hedged for 2015. That eases the price shock to some extent. Going forward we need a capital program that maintains current production levels and does no add additional debt. To accomplish this we need WTI price in the $75 plus range or if WTI is lower additional source of capital from a reduced dividend and/or asset sale. We are selling downs with other firms that have debt to funds flow levels above 1.5 to 1. In addition we have had hedge funds liquidate their holding aggressively. On a personal level the sale of 10,000 shares was an ongoing charitable commitment that I had for tax planning. In hindsight bad timing but I believe you will see that any sales of LRE stock have been greatly outweighed by purchases. As CEO and Chairman I have very few times in the year when I am not blacked out from buying or selling Long Run shares. Trust this helps, Bill Andrew CEO & Chair Long Run Exploration


Email from LRE posted on another board.


----------



## AltaRed

The dividend has to go to zero very soon (like yesterday), but probably not until they announce 2015 capital guidance. As the email says, they got caught with bad timing. That debt load could theoretically sink this ship much like Compton Petroleum was sunk if they cannot drill enough to maintain production levels.


----------



## Fraser19

AltaRed said:


> The dividend has to go to zero very soon (like yesterday), but probably not until they announce 2015 capital guidance. As the email says, they got caught with bad timing. That debt load could theoretically sink this ship much like Compton Petroleum was sunk if they cannot drill enough to maintain production levels.


Yeah, I would like to see the dividend be completely suspended at this time. They have done well up to this situation which has really created a ruckus but hopefully they can make it through. There production numbers are good and they do have some hedging in place. I guess it really comes down to what will oil stabilize at and when?


----------



## CPA Candidate

December 15, 2014
Long Run Exploration Announces Its 2015 Budget and Intention to Maintain Its Long Term Strategic Plan as a Sustainable Dividend Paying Mid-Size Oil and Gas Company
CALGARY, ALBERTA--(Marketwired - Dec. 15, 2014) - LONG RUN EXPLORATION LTD. (TSX:LRE) ("Long Run" or the "Company") is setting a 2015 capital budget that delivers on a sustainable long-term business model to shareholders. The management and Board of Directors looked at many factors in setting a course for Long Run in 2015. Financial models were run at a range of probable commodity prices. We reviewed our development inventory and need to maintain momentum in both field development and enhanced oil recovery.

In preparing for what is expected to be a challenging price environment in 2015, we evaluated the Company's core values as well as our longer term strategic goals. As a result, we have reaffirmed that our priorities for 2015 will remain: 


-- To improve our balance sheet through a focused high-grade development
program and selective non-core dispositions; 
-- To execute a focused capital program that preserves our momentum going
forward, both in conventional field development and enhanced oil
recovery; 
-- To provide balanced yield to investors from a long-term sustainable
model; and 
-- To continue to develop a balanced inventory of properties which provide
flexibility in future planning as well as upside from improved cost
efficiencies, operating efficiencies and enhanced recovery.

Our 2015 development plan and budget accounts for current and forecast pricing for crude oil, natural gas liquids and natural gas. The workup to our 2015 capital budget is based on a 2015 oil price forecast for WTI of US$70 per barrel and a natural gas price forecast for AECO of $3.50 per GJ. As it is too early to estimate the inevitable impact that lower commodity prices will have on both operating and capital costs, our guidance and 2015 capital budget do not include any benefits from potential cost reductions.

Long Run's 2015 capital budget will support production of 35,000 Boe/d to 36,000 Boe/d based on net capital expenditures of $165 million and the flexibility to reallocate the timing of certain projects during the year. Based on these parameters, we anticipate funds flow from operations to range from $200 to $210 million in 2015. Should commodity prices improve, the Company intends to use additional funds flow to accelerate debt repayment and improve financial flexibility. For 2015, Long Run has placed hedges on approximately 35% of our 2015 production balanced between oil and natural gas. Approximately 50% of our oil production is hedged for the first quarter of 2015 at an average floor of approximately WTI US$91.60, which will assist in supporting our funds flow from operations. Long Run's risk management philosophy is to hedge approximately 35 to 50% of our annual production volumes.
*
Currently, Long Run is paying a monthly dividend of $0.035 per share ($0.42 per share annualized), for a total of approximately $80 million annually based on 193.5 million shares outstanding. We believe, given our commodity price forecast for 2015, that it is prudent to lower the amount of our monthly dividend to $0.0175 per share ($0.21 per share annualized), for a total of approximately $40 million, beginning with the January 2015 dividend payable in February 2015. Based on our current forecasts and budget for 2015, we believe that this level of dividend is sustainable. *

*Long Run's Board of Directors has approved the implementation, subject to the approval of the Toronto Stock Exchange, of a dividend reinvestment plan ("DRIP"). The DRIP will allow shareholders to automatically reinvest all or any portion of the cash dividends received on their common shares towards the acquisition of additional Long Run common shares. The Company expects to use any cash savings generated by the DRIP plan for debt repayment. Participation in the DRIP will be voluntary and it is anticipated that the plan will not include a cash investment option. Further details and timing of the plan will be provided upon implementation, which is anticipated to be in the first quarter of 2015.*


----------



## CPA Candidate

Corporate 2015 Guidance 

Long Run remains committed to providing sustainable long-term value to its shareholders through a focus on capital discipline and operational efficiency. 



2015 Guidance(1) 
--------------------------------------------------------------
Production average 35,000 - 36,000 Boe/d
% oil and NGLs 44%
Funds flow from operations(2)(3) $200 - $210 million
Net capital expenditures(4) $165 million
Dividend(5) $40 million
Dividend per share (annual) $0.21
Basic payout ratio(2)(6) 20%
Total sustainability ratio(2)(6) 100%
Key Assumptions: 
WTI  US$70/Bbl
AECO $3.50/GJ
FX USD/CDN 1.145


1. 2015 guidance has been updated from the preliminary 2015 guidance
released in June 2014 in order to reflect the lowering of our commodity
price assumptions for 2015. June 2014 preliminary guidance was based on
WTI US$92.50/Bbl; AECO $4.22/Mcf; FX USD/CDN 1.1. 
2. See "Non-GAAP Measures" section. 
3. Funds flow calculations are based on average operating costs of
$13.00/Boe and average general and administration costs of $2.50/Boe for
2015. 
4. Net capital expenditures are calculated as capital expenditures net of
acquisitions and divestitures. No acquisitions or divestitures are
currently included in our budget. 
5. Excluding impact of the DRIP. 
6. Based on mid-range of funds flow guidance, excluding impact of the DRIP.

2015 Capital Expenditures

Long Run's capital budget for 2015 of $165 million will be directed towards drilling and tying in low risk, high rate of return light oil and liquids rich natural gas development wells in the Peace River Montney and Deep Basin Cardium core areas. The Company anticipates drilling approximately 40 wells in 2015, with an estimated 12 month capital efficiency of approximately $26,000 per Boe per day. Development plans for 2015 include up to 15 wells in the Peace River area and up to 25 wells in the Deep Basin. During the first quarter, net capital expenditures of $60 to $70 million are anticipated with up to a total of approximately 20 net wells drilled. We will continue a strong focus on advancing enhanced oil recovery ("EOR") projects in the Peace River Montney and Redwater Viking project areas. Long Run will steward towards a sustainable model for 2015, funding our 2015 capital budget and dividend payments with funds flow from operations. 

Long Run currently has non-core property disposition packages that are being actively marketed as part of our ongoing asset rationalization process. For 2015, we are targeting the sale of 1,000 to 4,000 Boe/d of non-core assets. These potential sales have not been included in our guidance or budget for the year. Any proceeds from the sale of these assets would be used to strengthen our balance sheet through debt reduction. 

Deep Basin and Crocotta Acquisition Integration Update

Long Run is excited with the development potential and performance of our newly established Deep Basin core area. The Pine Creek and Kakwa areas provide top tier economics comparable with our Peace River Montney play, and the Deep Basin area as a whole contributes to substantial operational efficiencies and per unit cost reductions. The Deep Basin is a key part of our 2015 capital plan, with capital expenditures of approximately $90 million (25 wells) planned for the area. 

Integration of the Deep Basin assets acquired within the Alberta Cardium trend has been successful and Long Run is pleased with results from our initial drilling activities in the area. Long Run has drilled five successful horizontal Cardium wells in the Pine Creek area to date, and is currently drilling the last of six horizontal Cardium wells in the Wapiti/Kakwa area. 

The first three wells drilled at Pine Creek have been producing since early fall, averaging 315 Boe/d (49% oil and NGLs) per well during their first 30 days, which is in-line with the Company's forecast type curve. Two additional Pine Creek Cardium wells were placed on production in early December with the average initial rates exceeding type curve expectations. 

At Wapiti, two horizontal Cardium wells have been drilled, completed and tested at initial rates that meet our forecast type curve expectations. Completion operations are underway at Kakwa on the first two-well pad, with the second two-well pad expected to be completed early in the new year. These new Kakwa wells will be on-stream shortly after completion to take advantage of capacity Long Run has secured in a newly commissioned third-party gas plant which is scheduled to start up in late December. Access to this additional processing capacity will significantly reduce Long Run's exposure to downtime in the Kakwa area. 

Enhanced Oil Recovery Update

Long Run's ongoing enhanced oil recovery projects continue to advance according to our expectations. Currently, the Company is injecting water for pressure maintenance and enhanced recovery at two major oil plays: the Peace River Montney and the Redwater Viking. We are excited about the potential benefits the Company may see in the next 18 months from our EOR projects, including improved recoveries, lower production declines and improved capital efficiencies. 

Prior to 2013, no EOR efforts had been applied to the Montney at Girouxville or Normandville. In 2013, Long Run began injection via one vertical well at Normandville and one horizontal well at Girouxville, with the intention of testing the injectivity of the Montney zone. Since this time, we have observed that these injection wells are highly capable of accepting water in quantities necessary for enhanced recovery, and have shown no evidence of deteriorating injectivity. The Normandville EOR project expansion became operational in early December 2014. This project encompasses an area of five sections and includes 16 horizontal producers, eight horizontal injection wells and one vertical injection well. Full-field implementation at Normandville is planned to cover at least 12 sections and include up to 60 producing and 20 injection wells. 

At Girouxville, a similar EOR project expansion is underway with startup scheduled for January 2015. This expanded EOR project is planned to cover an area of 1.5 sections and will include six horizontal Montney producers with four horizontal injection wells. At Girouxville, full-field implementation is planned to ultimately cover more than 20 sections and include up to 130 producers with 50 injectors.

These expanded pilots form the basis from which EOR would be implemented across the rest of the Girouxville and Normandville Montney fields, beginning in early 2016. Based on our reservoir models, we expect EOR to significantly improve oil recovery from both the Girouxville and Normandville fields. 

The Viking play at Redwater is the site of Long Run's second major EOR project. Prior to 2013, there had been no EOR activity in this field. Long Run initiated our first Viking pilot EOR project in the north part of the field in December of 2013. This initial project included two horizontal injection wells, six producers, and covered an area of 0.5 sections. A third horizontal injection well was later converted within this project area. A second complementary EOR pilot project, located in the south part of the trend, began injection in early December 2014. Together these projects cover an area of 1.125 sections and include 11 horizontal Viking producers, six vertical Viking producers, and five horizontal injection wells. Technical data gathered from these two EOR pilots will be used to evaluate field-wide EOR implementation, which could ultimately cover in excess of 30 sections along the Redwater Viking trend.

Corporate Reorganization

On behalf of the Board of Directors, William Andrew, Chairman and CEO, announces the following executive reorganization effective immediately: 


-- Dale Miller, President and Chief Operating Officer - responsible for the
production, operations and engineering functions at Long Run. Mr. Miller
will continue to report to the Chairman and CEO. 
-- Dale Orton, Senior Vice President, Development - responsible for
exploration and development strategy and execution, including business
development. Mr. Orton will report to the President and COO. 
-- Corine Bushfield, Senior Vice President and Chief Financial Officer -
responsible for the financial management of Long Run as well as investor
relations and corporate resources. Ms. Bushfield will report to the
Chairman and CEO.

In 2015, the Company will continue to target funding both the capital program and dividend payments with funds flow from operations. With prudent financial management, continued operational execution and on-going risk management, Long Run strives to deliver long-term value to its shareholders through the execution of a sustainable business model. 

Long Run is a Calgary-based intermediate oil and natural gas company focused on light oil development and exploration in western Canada. 

Visit the Company's website at www.longrunexploration.com.


----------



## Fraser19

Looks like a good start for preparing for 2015.
50% dividend cut, frees up 40m in expenses.
Some hedging in place.
Based there budget off $70 WTI unlike some of the other companies that have created there budget off higher prices.

Still a lot of uncertainty for me but I am happy too see some plans coming into play.


----------



## My Own Advisor

And you can DRIP it (LRE). Not bad I guess for almost a penny stock that is bound to increase over time?


----------



## Feruk

The only thing that saved these guys is the hedging. Possibility of 3.5X debt/CF because of the hedging vs 4.9X debt/CF if they were unhedged. If oil price remains depressed for longer than 6 months, these guys are headed for bankruptcy or acquisition at a very low price. Either way, with so many fantastic names on sale, I wouldn't touch this thing with a 10 foot pole.


----------



## CPA Candidate

If you had bought this stock on Monday, you'd be up 50% already.


----------



## Chris L

I wouldn't count this one out. At a low cost entry point, it could make someone a lot of money.


----------



## Gabs

The CEO bought a bunch of shares yesterday at $1.40. That plus the take over of TLM has given some renewed confidence to the sector. Even though oil indexes are down this afternoon LRE has climbed again today. It has a lot of climbing to do before reaching it's former levels though each:


----------



## liquidfinance

CPA Candidate said:


> If you had bought this stock on Monday, you'd be up 50% already.


ah yes... The wonderful if. . . . if only i remortgaged my house back in 2009 I could be on a Spanish beach sipping Sangria. Sadly I did not and am holding onto a 60% loss. a very small holding though and the paper loss is just a saving at the pump to the tune of $35 a tank ah well.

Onwards and upwards I hope. Merry Christmas all


----------



## The ruined man

liquidfinance said:


> ah yes... The wonderful if. . . . if only i remortgaged my house back in 2009 I could be on a Spanish beach sipping Sangria. Sadly I did not and am holding onto a 60% loss. a very small holding though and the paper loss is just a saving at the pump to the tune of $35 a tank ah well.
> 
> Onwards and upwards I hope. Merry Christmas all



Not that it means much, but you can take comfort in the fact that there are more than a few holding on to 40%-60% losses, myself included. Lets hope that LRE is able to weather the storm.


----------



## CPA Candidate

I did some financial modeling of LRE at varying oil prices based on the information supplied in the most recent financial statements to estimate funds flow and corporate netbacks in the future.

Assumptions: I did not change the total production volumes of oil, NGLs and Nat gas. I did not change the price of NGL and Nat gas from Q3. These have changed, but not materially. I did not factor in hedging, so these are worst case because any hedges can only produce positive results. Royalties are 11.6% of revenues, transportation is $1.65/Boe, operating costs $13.50/boe, general & admin $2.50/boe, interest $2.36/boe.

In Q3, Oil production was 13,071 Boe/day, with an average price of $87.90, making up 64% of revenues.
NGL production was 3,031 Boe/day, with an average price of $57.98, making up 10% of revenues.
Nat gas production was 18,694 Boe/day, with an average price of $25.74, making up 26% of revenues.
Total revenue for the quarter was 166 million, funds flow of 83 million and corporate netback of $25.88.

Keep in mind that stated oil prices are in Canadian dollars for Edmonton light sweet crude. There is a boost for being in CDN dollars, but also a discount to WTI. The latest Edm light sweet price quote I could find Nat Resources Canada website on Dec 5th was $67.42/barrel.

At oil = $70 CDN
Annualized funds flow of $256 million, revenue/boe of $45.17, corporate netback of $19.93/boe and debt/cashflow of 2.81

At oil = $65 CDN
Annualized funds flow of $234 million, revenue/boe of $43.30, corporate netback of $18.27/boe and debt/cashflow of 3.07

At oil = $60 CDN
Annualized funds flow of $213 million, revenue/boe of $41.42, corporate netback of $16.61/boe and debt/cashflow of 3.37

At oil = $55 CDN
Annualized funds flow of $192 million, revenue/boe of $39.54, corporate netback of $14.95/boe and debt/cashflow of 3.75

At oil = $50 CDN
Annualized funds flow of $171 million, revenue/boe of $37.66, corporate netback of $13.29/boe and debt/cashflow of 4.22

At oil = $45 CDN
Annualized funds flow of $149 million, revenue/boe of $35.78, corporate netback of $11.63/boe and debt/cashflow of 4.82

At oil = $40 CDN
Annualized funds flow of $128 million, revenue/boe of $33.91, corporate netback of $9.97/boe and debt/cashflow of 5.62

Management's latest estimates for 2015 indicate approximate production of 35,000 boe/day with 44% liquid/56% gas, and funds flow of $200-210 million. They used an WTI assumption of $70 average, but I'm not sure what that would be in CDN terms for Edm light sweet.


----------



## bflannel

Very very interesting and informative thread!

I would be very keen to hear how some of the more prominent names on this forum holding LRE see the future of this co. I'm not very good at picking financials apart but specifically do you folks see LRE being profitable under this budget? If in the least sustainable over the next few years? I'm also curious as to how I would calculate the potential buy out price for a company in their 'position'.

Thank you so much,


----------



## Greyhound86

Well i am far from a prominent name on the forum but the debt/cashflow numbers are pretty high for most of the price points shown by CPA Candidate. Anything over 3 is not good.


----------



## Fraser19

At this point I don't think anyone can do more than speculate. Unless there is some new information available for review it is hard to say. I don't feel comfortable buying any more of this stock, but I don't feel comfortable selling it either. Really it doesn't need to go up by very much for me to break even on this or even turn a profit, but there is noting guaranteeing that it will recover. 

If I was in a different position where I had an actual disposable 2,000.00 on hand, I would probably buy some more of it. With that said I do very well mean disposable something that I am truly comfortable losing. If oil recovers in the short term this could easily gain 150-200% and this opportunities don't happen a lot.


----------



## Chris L

Down 22% today. What's up?


----------



## My Own Advisor

Chris L said:


> Down 22% today. What's up?


Yikes.


----------



## Fraser19

Makes me curious as to what caused this?
I don't see anything in the news to cause this drop. There is a lot of buzz on stockhouse about a speculative takeover. But I have found that the be one of the most useless places for reliable information.

As of today, -61% on this stock. Thankfully I got in a 2.80. Makes me appreciate indexing a lot more, only down 2.20 on my TD index.


----------



## Edgar

It is down so much because of their dividend. A grand 2 cents. Dundee Securities also placed a 50 cent price objective on the stock.
I don't see this one getting any better any time soon, but I plan to stand on this ship until it sinks


----------



## Fraser19

Edgar said:


> It is down so much because of their dividend. A grand 2 cents. Dundee Securities also placed a 50 cent price objective on the stock.
> I don't see this one getting any better any time soon, but I plan to stand on this ship until it sinks


I thought the dividend cut was announced a week ago, seems like a late reaction for that.


----------



## CPA Candidate

Edgar said:


> Dundee Securities also placed a 50 cent price objective on the stock.


I'm pretty sure this is what made the stock move so much.

Price forecasts on any oil company aren't worth much as far as I'm concerned. As of last reading, LRE had approximately 40% of 2015 production hedged, concentrated in the in the the first half of the year.


----------



## Chris L

Thanks for the lead...here's the report: http://www.lulegacy.com/2015/01/26/...ing-lowered-to-sell-at-dundee-securities-lre/


----------



## Fraser19

Never really followed the whole insider buy thing. 
Good to see some buy from management, but it still doesn't tell me much.


----------



## bmoney

Reloaded my TFSA and picked up 1000 shares since I had money burning a hole in my pocket.

This is a speculative play on my part and entirely unsubstantiated, but I like insider buying and it gets me thinking what could management possibly know. So I came to thinking. LRE has half it's production hedged for the first half of this year, and it's unlikely they could take on much more debt to meaningfully sustain the business for the next few years should oil remain below $70. So if I'm the CEO, I'd be entertaining suitors and positioning the company for a sale, and I have 6 months to try and see what happens. If oil & gas prices turn up by Q3, maybe a sale is unnecessary or maybe I will receive a better valuation. Either way, I don't see management throwing good money down the drain to make a point and they have been loading up. A quick glance at the balance sheet and they have about $1.9 billion of assets and $1.1 billion of liabilites The breakup value of it's assets is worth say $4 share at the moment. Maybe I'm totally wrong but I have to think this company is worth more than a buck provided it can be sold off into pieces.


----------



## Chris L

Where have you seen insider buying?


----------



## bmoney

You can likely find this information through your online broker's research section. TD published INK company insider reports. Between Jan 6 and Jan 30, insiders bought 224,000 shares between $1.43-$1.06. There was a couple hundred thousand more insiders buys at the end of December as well, I'm just to lazy to add those up. These were public market purchases, if you go on SEDI you can look up the insiders, it even tells you whether they hold it in non-reg, RRSP or TFSA. Seems like most of these insiders are also directors of other oil & gas companies like notably Penn West and Encana. These are industry veterans buying stock.


----------



## SkyFall

I hope it can keep a positive momentum and get above my ACB


----------



## merevial

I tried getting it at 1.00 but settle for for shares at 1.04. Dirt cheap yields even if they cut dividends.


----------



## Gabs

For a few months from mid Sept onward as the stock got pummeled during the fall/winter there was no insider buying. The CEO started buying Dec 17th @ $1.40 for 140921 shares, other insiders soon followed, there's been a stream of them buying ever since. Think the highest price I've seen was bought at $1.65 for 25000 shares on Dec 19th by Corine Bushfield the CFO. Sidenote, I find the sedi site slow and painful to use. I get lazy and look up the last 10 transactions at Canadian Insider sometimes https://canadianinsider.com/node/7?menu_tickersearch=LRE+|+Long+Run+Exploration 

Anyhow plenty of folks have lost a lot on this stock over the past few months. Good to see heavy insider buying but I wouldn't get too overzealous. Do think it'll jump up a bit today though.


----------



## Chris L

Thanks, I was able to find the insider file in TDW.

What's interesting is the movement in price of LRE vs. PWT. LRE hit bottom hard and stayed there for quite some time. PWT is all over the map. Up and down in 20% swings. Just an observation. PWT apparently had a bunch of insider trading too, but LRE seems like more recent activity.

Edit: Nice 15% swing today.

Also see TDW report a $4 book value.

Currently trading at $1.28. Did some ACB this morning.


----------



## Chris L

Oops wrong year...


----------



## Fraser19

Chris,
You seem to have a positive outlook on this stock and I can see why. What do you think about the current dividend? Going to get cut again?


----------



## Chris L

Part of it is an attempt at a home run and the other is ACB. I bought at 2.4 so I readjusted my ACB. I think this one has a shot at recovering once the attention comes off the big and middle players. There's not much value in those and at a cheap entry point, I can grab a heck of a lot of shares. I may exit at a break-even price, who knows. Seems like there's a chance that it comes back quickly enough now that it has found a big of legs. I'm not sure about the divi, likely they will cut it, but they may also want to maintain share prices rather than scare them off. Let's see what oil prices do. That's the key to everything right now. Wish I had bitten on PWT at 0.90 lol but I think that ship is sailed.

Up 4% today. If this keeps going, we're looking good.


----------



## CPA Candidate

The dividend has been completely suspended now.


----------



## Chris L

Yup, let's see what happens tomorrow.

https://uk.finance.yahoo.com/news/long-run-exploration-ltd-announces-230000116.html


----------



## Fraser19

I assume they are paying the February dividend?
Anyways sucks to see that there will be no dividend going forwards. But at there current share prices even .01C is too much. Hopefully this thing starts moving a little bit. ABC is 2.73. So I am not too too far away if they can get some some upward moment. 
Hopefully this will be like COS and the cut will move prices upwards.


----------



## CPA Candidate

Seems like they opted for the conservative path by assuming a $53 WTI price in their new budget. I expect that we will exit 2015 above that. They've made the prudent choice of slashing everything to the bone now rather than mid-2015.

On the plus side their recent drilling results are good, new wells are exceeding flow rate expectations requiring less capital outlay this year for the same level of production.


----------



## Chris L

Yes the Feb divi is to be paid. With COS rallying back into the middle, LRE is one of those left playing at the low end and below it's market value. Still some fear to blow over, but it does have a shot to regain much of it's value.

http://www.fool.ca/2015/02/12/why-l...d-offers-considerable-upside-if-oil-rebounds/


----------



## KaeJS

Not sure how I feel about this one. I feel like it could be a make or break and nowhere in between.

All or nothing if you ask me.


----------



## bmoney

KaeJS you're right, but for those of us that have rode it down to these levels, there's no point in pulling the parachute. It's already trading at a discount to book value. Provided they do not add more debt, presumably the company could be sold off for more than the current share price. The insider buying is encouraging, so is their new strategy at $52 WIT that lets them float on. Management is not rolling over. You might lose a thousand or you might turn it into five.


----------



## Chris L

Yes, right attitude. If oil rebounds, we're out of the woods. I doubled down on this because the book value is around $4.5 think. As long as things dont go in the toilet for oil generally, there are better days ahead for this.


----------



## KaeJS

bmoney said:


> KaeJS you're right, You might lose a thousand or you might turn it into five.


That's what is so tempting.

Maybe I will throw $1k at it and see what happens. I believe they will be able to pull through. You are absolutely correct on management. They seem to be doing a good job. I believe earnings release is on March 3? 

I would say that the downside is pretty limited at this point. Much more limited than the upside, of course.


----------



## KaeJS

Okay.

Small position for me. 

I'm in for 1000 @ 1.16.

Current plan is to sell at or above $1.30 and only DCA under 0.90


----------



## daddybigbucks

anyone know when their Q4 is coming out?

I think that will be the real test to see how they are doing.

EDIT: I contacted and they expect to have it out at end of day on March 4.


----------



## KaeJS

Yep. It will be a make or break. You're right.

Hopefully not a break...


----------



## SkyFall

KaeJS said:


> Yep. It will be a make or break. You're right.
> 
> Hopefully not a break...


yup lets hope its not the latter


----------



## Fraser19

http://www.theglobeandmail.com/glob...-vomit-inducing-ride-to-hell/article23211284/

Not the most optimistic reading. I am still playing with the idea of adding another 500 shares.


----------



## My Own Advisor

The trend hasn't been good but hard to say where this one will end up. Same goes for TBE I think. LRE could be bought out? Thoughts?


----------



## CPA Candidate

I wouldn't add, wait and see how things unfold. Now with no dividend and some decent hedges, they are in no immediate crisis, but if oil is at $50 two years from now something bad is going to happen. I only own a small number of shares and I'm just holding.

Based on recent readings, I'm becoming more convinced that the oil price could stay long for a substantial time which would devastate most of the the CDN energy sector.


----------



## KaeJS

Some serious selling in LRE today.

Earnings are released tomorrow at market close. I feel like I'm betting on Red or Black... but I have a hunch the earnings report won't be as poor as people think it will be.
If the earnings report is semi-decent and oil doesn't drop back into the $40 range, we may see a small pop in LRE.


----------



## SkyFall

KaeJS said:


> Some serious selling in LRE today.
> 
> Earnings are released tomorrow at market close. I feel like I'm betting on Red or Black... but I have a hunch the earnings report won't be as poor as people think it will be.
> If the earnings report is semi-decent and oil doesn't drop back into the $40 range, we may see a small pop in LRE.


if it gets into $0.95-$1.00 I am a buyer


----------



## londoncalling

I got a bid in a bid to double down @ 80 cents. Hopefully results are good but if they are not I see this as a takeover candidate. Great properties at firesale prices


----------



## Chris L

Where's the report? I can't find anything.


----------



## KaeJS

Chris L said:


> Where's the report? I can't find anything.


I searched the depths of the internet and can't find anything, either.


----------



## Gabs

Here's the report:

http://www.marketwired.com/press-re...ating-results-year-ended-december-1997676.htm


----------



## CPA Candidate

400 million dollar impairment charge and an annual loss greater than the current market cap. So glad I never averaged down.

They basically wrote off 40% of 2014's additions and acquisitions. What a disaster.


----------



## gibor365

CPA Candidate said:


> 400 million dollar impairment charge and an annual loss greater than the current market cap. So glad I never averaged down.
> 
> They basically wrote off 40% of 2014's additions and acquisitions. What a disaster.


That's right ... market cap is just 200m .... wondering what is the future of this loser?!


----------



## KaeJS

Any thoughts on how far this is going to fall tomorrow? LOL

I'm selling.


----------



## londoncalling

: ( good thing I have a small position. Large paper loss in % on the position but not in $ or on portfolio %. Good reason to keep your speculative plays a small part of allocation when it doesn't go the way you want. Flipside of that is when a pick does well you are regretful you didn't buy more.

Cheers


----------



## hboy43

CPA Candidate said:


> 400 million dollar impairment charge and an annual loss greater than the current market cap. So glad I never averaged down.
> 
> They basically wrote off 40% of 2014's additions and acquisitions. What a disaster.


I would argue that the market knew this was coming somewhere between the share price being ~$5 last summer and ~$1 now.

hboy43


----------



## Chris L

hboy43 said:


> I would argue that the market knew this was coming somewhere between the share price being ~$5 last summer and ~$1 now.
> 
> hboy43


I'm not so sure. I think this with oil price pessimism that it's going down a lot more. 

If I want to sell ASAP in the morning, what do you figure I need to price at?


----------



## KaeJS

Chris L said:


> If I want to sell ASAP in the morning, what do you figure I need to price at?


You need to wait until like 9:28am (EST) before you make any sort of sell order.

You never know. The Ask might be .85, it might be $1.00.

That was a bit of a rough report. I didn't think it was going to be sunshine and rainbows - but that was a pretty looming report if you ask me.


----------



## Chris L

With TDW I can't put in a sell order at a set price? I know I wont be able to know the open, but I could guess, or not?

I may just hang tight....

can it get worse than this?

I'm going to cry if it hits 0.5!


----------



## Chris L

I just checked tdw for insider buying and nothing new since end of Jan, though lots of buying at around the 1-1.2 mark. No selling either though...


----------



## hboy43

Chris L said:


> If I want to sell ASAP in the morning, what do you figure I need to price at?


No idea. For the interests of full disclosure, I am long 17000 at $1.17 and have a Good Til order sitting there for 22,000 at $0.91 (placed a week or two ago) ... which might be retracted when we are all jockeying for position at 9:28 tomorrow morning LOL. I don't think the price will necessarily plummet tomorrow. As I implied above, the report is just saying the truth that was perhaps already obvious in the share price path the last half year or so.

Consider also that today ECA sold equity which dilutes existing shareholders and is also in its own way a concrete acknowledgment of the truth that things are a bit different now compared to 6 months ago. 

Yes, the acquisitions last year were ill timed and there is too much debt. However, I consider buying at $1.17 instead of $5 a fair trade off for this muddle. Sunk cost, water under the bridge.

I glanced over the annual report that came out today. I don't really understand much of it yet, but one thing that stood out for me was a Net Present Value calculation of I believe the net back under various assumed future energy prices and interest rates. The NPV numbers ranged from about 1 to 1.5 Billion. Weigh that against the market value of about $0.2 billion and I think there is scope for good things eventually.

Also consider that insiders/large shareholders were buying in January, including Franklin Templeton (or was it Templeton Franklin) which boosted its holdings to 18% or thereabouts, up IIRC 4 percentage points.

Also, even if things get really crappy, it does not necessarily mean bankruptcy. NBD back in 08/09 got into trouble and self rescued with a rights offering. It might come to that and one should prepare to put more money into this adventure to remain in the game until the good stuff comes a few years out.

I sold $31K of COS and $15K of HSE to pick up my $20K of LRE. I am certainly prepared to throw another $20K at this.

I understand a few of you are in at considerably higher numbers than I am. This is unfortunate and I feel your pain (see NCX, NBD, and a few others from my history). However the correct way to look at this is "is LRE at $1.03 a good buy today?" The answer to this question is quite independent from whatever is your or my ACB.

For what it is worth, my thoughts.

Regards,

hboy43


----------



## gibor365

> Also, even if things get really crappy, it does not necessarily mean bankruptcy.


 Who knows?! Remember PSN?!


----------



## hboy43

gibor said:


> Who knows?! Remember PSN?!


No I don't actually. What company is this and what happened?

hboy43


----------



## CPA Candidate

Selling now makes no sense. I really don't expect the stock to go down because of the impairment, that was more or so less taken into account long before it happened.

The disaster I was referring to was the timing of LRE's acquisitions, the latest of which closed in August of 2014. Imagine if they had waited a few more months to make the exact same transaction. They could have had the same assets at the same current FMV with much less debt.


----------



## SkyFall

CPA Candidate said:


> Selling now makes no sense.


yeah I might as well ride it out


----------



## Chris L

Let's see what the day brings.


----------



## hboy43

Hi:

There is our crash on opening, a whole penny.

hboy43


----------



## Chris L

hboy43 said:


> Hi:
> 
> There is our crash on opening, a whole penny.
> 
> hboy43


Okay. lol Yeah, I guess it's a yawn so far.


----------



## Jon_Snow

Lol...hardly a blip.


----------



## KaeJS

I'm still out.
Sold this morning at open. Was happy to see it wasn't decimated.

For me it was speculative and was supposed to be quick. Didn't workout. I rather take my small loss.

I will still watch the stock and I am rooting for all of you that still own it.


----------



## gibor365

hboy43 said:


> No I don't actually. What company is this and what happened?
> 
> hboy43


Poseidon concepts ... it was discussed alot on CMF


----------



## CPA Candidate

gibor said:


> Poseidon concepts ... it was discussed alot on CMF


PSN was a fraud, LRE is just a terribly managed oil company.


----------



## gibor365

CPA Candidate said:


> PSN was a fraud, LRE is just a terribly managed oil company.


Who knows?! Maybe be LRE and many others are fraud too


----------



## Mechanic

I lost a pile of money on PSN. I never did understand why the securities commission didn't go after them as it sure seemed like fraud. Now I've lost more on LRE, too much energy sector focus, my bad.


----------



## gibor365

Is anyone got some prison time for this PSN fraud?! Never heard about anyone was even charged....


----------



## Mechanic

I read that the Alberta securities commission decided to drop the investigation ? How can that happen ? Where is consumer/investor protection when people get ripped off like that ?


----------



## gibor365

Mechanic said:


> I read that the Alberta securities commission decided to drop the investigation ? How can that happen ? Where is consumer/investor protection when people get ripped off like that ?


Ridiculous!!! They are running only after small people... Hell with money I lost, but I want, at least, people responsible of fraud will get punished....


----------



## CPA Candidate

If the makes you feel any better KPMG is being sued over their clean audit opinion of PSN.

As an investor you always have to be weary of companies that are very profitable but the cashflow isn't there. PSN had amazing margins, little cash and a lot of accounts receivable.


----------



## Mechanic

I read somewhere that there is also an action against the bank that promoted the share sales. But, after all the legal fees are paid what will be left? The problem I have with the PSN thing is that investors made a decision to invest based on financials etc, of which receivables were part. Then they decide that the previous financials were mis-stated for quite some time. That, in my opinion, is fraud. It would be like me telling you that my company does 50 million a year in sales, showing audited financials to verify, and convincing you to invest, then next year I tell you that sales are really only 5 million, because we knew we wouldn't get paid for the other stuff we sold, were planning to write it off, and amended our past financial statements accordingly. If you can't rely on the information presented then what are you supposed to base decisions on ? I just expected the securities commission to actually go after them, what other consumer/investor protection is there? As it is, the only thing going on is a class action but I am not very optimistic for the investors.


----------



## gibor365

> As it is, the only thing going on is a class action but I am not very optimistic for the investors.


 This "action" going on for several years, but no any updates..typical canadian BS


----------



## hboy43

hboy43 said:


> For the interests of full disclosure, I am long 17000 at $1.17 and have a Good Til order sitting there for 22,000 at $0.91 (placed a week or two ago)


Well there you have it. After sitting there for 2 weeks, the order executed today ... and the price hit $0.86 in under 10 minutes later. Sigh.

Still, I don't really see what is so different now compared to a month ago when I bought at $1.17, oil price then about $50, now, about $50. Whatever hedging they had in play then for 2015 is likely exactly the same today.

hboy43


----------



## Pluto

I finally read this thread today. Previously I was not interested in even reading about any exploration company. If you look at previous oil price plunges you will note that it is wise to stay away from exploration stocks until the rig count is near historical lows, then pick through the bones. 
Here is one recent article, but there are more. Search for some historical charts comparing rig count to exploration stocks bottoming. 

http://www.reuters.com/article/2015/03/07/us-markets-oil-rigs-idUSKBN0M221N20150307

http://www.wtrg.com/rotaryrigs.html

In these situations wait until rig count is low, then pick and choose a survivor exploration stock. It doesn't guarantee you the exact bottom in the stock, but it can save you a lot of grief and averaging down, and then panic selling. It isn't the oil price bottoming per se to time this, its the rig count, I think. 

Anyway, now that the rig count is down, I'm looking at this stock and perhaps others in exploration, but I still think it may be too early due to oil stock piles, and a potential second wave of oil price declines. I'm not sure what lRE's survivability capacity is.


----------



## lostwords

hboy43 said:


> Well there you have it. After sitting there for 2 weeks, the order executed today ... and the price hit $0.86 in under 10 minutes later. Sigh.
> 
> Still, I don't really see what is so different now compared to a month ago when I bought at $1.17, oil price then about $50, now, about $50. Whatever hedging they had in play then for 2015 is likely exactly the same today.
> 
> hboy43


Same here. got in yesterday at 0.86.


----------



## KaeJS

hboy43 said:


> Still, I don't really see what is so different now compared to a month ago when I bought at $1.17, oil price then about $50, now, about $50.
> hboy43


Actually, something is different now compared to a month ago. That difference is Time.

It's been another month with oil in the dumps, with means more strain on LRE (and all of the oil companies). Particularly, the strain is greater on companies that have lots of debt and are smaller players such as LRE.

I don't think they will go to $0, but it's gonna be tough.


----------



## Wormiez

What the case with LRE hovering around .85? Would it be because LRE doesn't seem to have the volume or media exposure to raise its price. While other energy stocks like COS, BTE, CPG fluctuate together...

Even LTS increased today. Don't even want to start on LTS...


----------



## thepitchedlink

I don't know what to make of this one.....I also wonder why it hovers at .85


----------



## daddybigbucks

thepitchedlink said:


> I don't know what to make of this one.....I also wonder why it hovers at .85


its been on a downward trend for a while. Year end filing came out and they wrote down a bunch of assets. Somehow the market knew that.
Now the book value is $1.25 but LRE has lost the trust of a lot of investors. 
Who is going to buy but penny investors which always seem to lose more money then they make.

So it drift continually down until it becomes a buyout target which in my opinion is around .26c


----------



## GoLong

^ Good points. I'd also argue investors are starting to realize that with supply not budging thus far, we are in for a longer period of low oil prices than expected. If this is the case, it only makes sense that you move from a risky play like LRE that has great potential if oil's $70+ but can't survive at this level into other plays like CPG, ARX, etc. that can withstand the downturn and still have large upside when prices recover. This has been putting downward pressure on LRE


----------



## bmoney

Looking back 25 years, there has been approximately 6 bear markets in oil. Ignoring the period between 1990-1991 which was the first Gulf War, and oil spiked for a brief period during the war before returning to pre-war levels. Peak to trough to Recovery took anywhere between 12-24 months, we are already 9 months in counting the start of the drop in June '14. It's starting to look like we will be at the longer end of the normal recovery.


----------



## CPA Candidate

daddybigbucks said:


> its been on a downward trend for a while. Year end filing came out and they wrote down a bunch of assets. Somehow the market knew that.
> Now the book value is $1.25 but LRE has lost the trust of a lot of investors.
> Who is going to buy but penny investors which always seem to lose more money then they make.
> 
> So it drift continually down until it becomes a buyout target which in my opinion is around .26c


The book value per share is $3.70 (716 million in equity / 193 million shares) even after the writedown.


----------



## Fraser19

So I am still learning about all this. Lets say oil dose not increase for a while, long enough that LRE is in more trouble. In the event another company buys it out do they offer the book value per share or wait until the stock price is next to nothing and take it for that much?

Right no my ACB is just over $2 so I am not in the worst shape with this one. But I am curious how a takeover would work in this situation.


----------



## AltaRed

What an acquirer will pay for an O&G company is based on the quantity and quality of reserves a company has and the cash flow the company spins off at an 'assumed' O&G price. Really has little to do with book value per se. LRE's reserves will be worth between $x/BOE and $y/BOE, and a proper cash flow multiple might be 5-7 times discounted @ some discount rate of, e.g. 10-15%. Then subtract off debt and the result is $/share for the equity.


----------



## daddybigbucks

CPA Candidate said:


> The book value per share is $3.70 (716 million in equity / 193 million shares) even after the writedown.


sorry that was _my_ calculated book value. I don't just give equal weight to asset vs liability. 
And as we can see $3.70 is not realistic at all.


----------



## daddybigbucks

bmoney said:


> Looking back 25 years, there has been approximately 6 bear markets in oil. Ignoring the period between 1990-1991 which was the first Gulf War, and oil spiked for a brief period during the war before returning to pre-war levels. Peak to trough to Recovery took anywhere between 12-24 months, we are already 9 months in counting the start of the drop in June '14. It's starting to look like we will be at the longer end of the normal recovery.


Interesting.
Looking at a couple graphs, I can see what you are talking about.
By the graph it looks like oil companies should start heading up in two more months.


----------



## KaeJS

daddybigbucks said:


> sorry that was _my_ calculated book value. I don't just give equal weight to asset vs liability.
> And as we can see $3.70 is not realistic at all.


$3.70 is definitely not realistic. Not in this environment.


----------



## KaeJS

daddybigbucks said:


> By the graph it looks like oil companies should start heading up in two more months.


One can only hope.
Summer is around the corner... could give a little nudge to oil prices, too.


----------



## CPA Candidate

daddybigbucks said:


> sorry that was _my_ calculated book value. I don't just give equal weight to asset vs liability.
> And as we can see $3.70 is not realistic at all.


Considering that the assets were revalued and written down at December 31 based on future predicted commodity prices, I'd say the book value is fairly sound. If the real book value is $1.20 the auditors and petroleum consultants are grossly negligent for overstating the balance sheet.


----------



## hboy43

Hi:

Another 29000 today at $0.69 for 68000 at ACB $0.88.

I realize this looks stupid to many, and it might be proven in the fullness of time, but LRE is just 2.5% of holdings, along with 4 other energy names to total ~12% of holdings in energy. So I hold less energy than TSX indexers. Year end 2013 was 13% energy, so both a rebalancing in LRE and energy in general.

Next might be an addition to ECA which is sitting under $14 currently.

hboy43


----------



## OptsyEagle

If last years cash flow numbers mean anything, I think you paid 0.3 x cash flow per share. I remember when 3 x cash flow per share was considered very cheap.

Back in the ugly oil days of 1998 I think (don't quote me on the exact date, this is all from memory), I owned an oil and gas company called Ultimate Energy (again I think that was the name, not a huge holding). For those with memories oil went to around $10 a barrel during that down cycle. Something to do with an Asian currency crises and I guess they were never going to buy another barrel. Bottled water was selling for a higher price, at that time. Since I felt the Asians would buy more oil again some day, I decided to pay about 2 times seriously reduced cash flow, for my shares, and wait it out. They had a big dividend compared to their current price, but the market expected it to be cut.

Now 1998 was the early days of the internet, as far as investors were concerned. One day, I was going through Newswire to see the list of corporate news releases, and my company issued a news release that they were suspending the dividend. Now this news was expected by me and I was prepared to ride it out, BUT this news release was issued only about 2 minutes previous, to me looking at this newswire list. When I checked the quote on the stock, is was something like $0.96 down $0.02. I knew the market had not digested this news yet, so wham bam clickity click, my shares were sold at around $0.90 (news still moved fast. This was maybe 8 minutes later). The stock closed at $0.58 by the end of that day. I felt pretty proud of myself for quite a while.

Move ahead to around 2005 - 2006, during the boom of the income trusts saga and that company, who changed its name to Maximum Energy (I think) was not only trading well above $10 but the dividend it paid that year, was higher then the price I sold my shares at, during that so called lucky day in 1998. 

Anyway, I probably would have sold it long before $10 but it is a story I remember. Good luck Hboy43.


----------



## daddybigbucks

hboy43 said:


> Hi:
> 
> 
> 
> I realize this looks stupid to many,
> 
> hboy43


doesn't look stupid to me.


I'm picking up a lot of energy stocks as well. I think they are all undervalued.

Its hard to put serious money into these little guys, but with a couple lucky picks you can easily 3x your money.

I think when one of the big companies (like Shell) buys out a smaller company, your going to see all these little guys double overnight.

good luck


----------



## londoncalling

I don't think we hit bottom yet in oil, oil stocks and LRE but I see more opportunity to make $ longer term. Maybe not soon and maybe not with LRE specifically but I got an order in on a few energy plays as well. If and when they materialize will be interesting. Also, a small part of allocation and much less than the index but definitely a bit more risky. Plan to lower ACB as well. 
If it's a stupid move hboy at least you're not alone.

Cheers


----------



## Toronto.gal

hboy43 said:


> *Another 29000* today at $0.69 for 68000 at *ACB $0.88*/I realize this looks stupid to many....


I get your plan & had similar approach with TLM when the price crashed to penny stock territory [as in under $5, not $1], as I became fairly confident of the takeover at that point given that it had been a target way b4 the oil crash. The math that had made sense to correct my particular situation required increasing my position by 150% of shares; you increased yours by 300% at -26% and -41% respectively [$1.17/$.86/$.69], but admittedly my holding had been higher than 2.5%, so riskier in that sense. 

I have been following not the stock, but your math here, and obviously the purpose was to decrease the ACB [for various reasons], which also increased your unrealized losses [at present time] due to the revised # of shares. LRE is just too risky for my liking even at current price, but I have another takeout target in mind in the $2+ category. I will use this example as yet another study case of mine.

I wish all LRE holders best of luck. If all works well, I'm sure I can expect to see you here at the Toronto International Boat Show hboy. :biggrin:


----------



## gibor365

> Another 29000 today at $0.69 for 68000 at ACB $0.88.


 Looks like you are one of the biggest LRE shareholders


----------



## OptsyEagle

Anyone have a good understanding of those "tax pools". $1.85 Billion in tax pools, seems like it might be worth something, but I am not an expert here. I certainly would appreciate anyone with experience on how a company or an acquirer can turns those into cash, if they can at all.

I have a rough idea but there are many categories and I am not an accountant. They are on Page 27 of this presentation:

http://www.longrunexploration.com/upload/media_element/218/01/investor-update---march.pdf


----------



## AltaRed

Without looking at specifics, tax pools result when a company does not have enough income taxes due to use all the tax credits they accumulate (similar to what we can do in carrying forward capital losses...to use in future years against capital gains). They thus may not have a lot of present value to the company, but can have a lot of present value to an acquirer that is a high current tax position and can therefore put the tax pools to use immediately.


----------



## OptsyEagle

Thanks AltaRed. Kind of what I thought. I think some may have expiry dates but I had a difficult time finding out. Kind of a mute point since it is difficult to know who might be the acquirer, if there even is one. Plus the more pressing question is, will the acquirer be buying them from Long Run Shareholders or from a Bankruptcy Trustee?

All the same, it looks like this company has some nice assets and the stock price is certainly being thrown out with the babies bath water. It is just too bad they have so much debt and that no one will phone me up and tell me what price they are going to get for each barrel oil or cubic foot of gas, they are going to produce for the next few years. _Darn it!_


----------



## londoncalling

I got bored today and bit off another chunk at 67 cents. Only reduced my cash position by 20% so I can buy other companies if the opportunity arises. I don't think LRE will go bankrupt but they may be bought out at a loss for many current shareholders. In my mind going from a 52 week high of $6 to it's current price in the high $0.60s seems a bit oversold. Perhaps the market thinks that won't happen till another 20% drop. I have more money to allocate to energy as well as other sectors if the market decides to hit my bid. These orders are for bigger players in energy and for some big blue chippers in Canada.

Cheers


----------



## Chris L

TDW reports the book value at $3.70.....if that's incorrect, how can they be so far off?


----------



## daddybigbucks

Chris L said:


> TDW reports the book value at $3.70.....if that's incorrect, how can they be so far off?


Because Different interpretations of Book value.

Reality is that book value equals assets minus liabilities.

But say you have a snowmobile that you bought for $5000 last year in November.
Realistically, that snowmobile will be worth about $4500 this November.
What if you tried to sell that snowmobile on the hottest day in July? You probably wouldn't get $1000 for it.

If you were doing your net worth in April, what value would you put on your snowmobile?


----------



## hboy43

Hi:

Added another 12000 @ 0.71 yesterday in my wife's TFSA just because her cash from employment built up over $10K. ACB 0.86 and 3% or portfolio. This is moving more towards speculating than investing, but screw it, I need something to do while waiting for the weather to clear enough that I can get outside and do some work (still under -10C every night, and too much snow to start firewood).

The theme song for this holding is "Long May You Run" 

We've been through
some things together
With trunks of memories
still to come
We found things to do
in stormy weather
Long may you run.

Will I have my backside handed to me. Place your bets now.

hboy43


----------



## bds

I've also spent some time at the LRE casino. Picked some up at 0.69 last week. If it continues to hang around this price I may pick some more up next week.


----------



## lostwords

ugh.. I think this will be my last purchase of LRE at 0.68.


----------



## KaeJS

hboy43 said:


> Will I have my backside handed to me. Place your bets now.
> 
> hboy43


I think you'll be okay..... your capital will just be tied up for a while.
I don't think LRE is going to disappear.


----------



## Chris L

Up 13% today. Did I miss something? Or just playing catch up to the new price of oil?


----------



## Barneystinson

Probably the new price of oil. I suppose, since its really cheap to buy, as soon as oil price goes up price goes up, but as soon as it goes down well... 
http://www.fool.ca/2015/02/12/why-l...d-offers-considerable-upside-if-oil-rebounds/


----------



## hboy43

Might have something to do with one of the talking heads having a buy and 12 month figure of $3.50!

http://www.theglobeandmail.com/glob...-gas-analyst-josef-schachter/article23813209/

Of course he called it out April last year at $5.44 too, so take it with a grain of salt LOL.

Frankly if it has any realistic chance of being $3.50 in a year, I imagine somebody would take it out.

hboy43


----------



## daddybigbucks

a lot of people think that the drill rig count is at the crux right now where supply equals demand.

I tend to believe that as well, and though it wont be a linear uptrend. I think 3 weeks ago was the lowest the oily stock will go.

of course I could be completely wrong but I am all-in right now.


----------



## hboy43

Hi:

Gordon Pape has published his thoughts on this one. I saw it on the TDW site, but I imagine there is a primary source somewhere.

The summary ... 

"I do not recommend speculative stocks as a rule and this is what LRE has become at this stage. Therefore, my advice if you’re a shareholder is to sell and use the capital loss for a tax write-off. But if you’re more comfortable with one of the other scenarios, go for it."

hboy43


----------



## lostwords

hboy43 said:


> Hi:
> 
> Gordon Pape has published his thoughts on this one. I saw it on the TDW site, but I imagine there is a primary source somewhere.
> 
> The summary ...
> 
> "I do not recommend speculative stocks as a rule and this is what LRE has become at this stage. Therefore, my advice if you’re a shareholder is to sell and use the capital loss for a tax write-off. But if you’re more comfortable with one of the other scenarios, go for it."
> 
> hboy43



saw the article on GlobeandMail yesterday


----------



## oob

Do you guys have a thesis on this other than oil must go up?


----------



## hboy43

oob said:


> Do you guys have a thesis on this other than oil must go up?


Na, my thesis isn't even that strong, more like oil might maybe possibly perhaps go up. More of a buy low play, last summer to now is something like $6 to $1, in comparison to a large integrated like say SU which is something like $42 or $44 to $39, or essentially no move at all. At least one of these situations is nonsense (and both could well be).

As to why LRE over others in a similar situation, just arbitrary.

hboy43


----------



## CPA Candidate

Considering the decent hedges the company has for this year, selling now makes no sense. The real issue is what lies beyond 2015 for pricing. I have a pretty good idea of LRE's cash flow for this year and it's adequate to pay interest, reduce debt and more or less maintain production levels. I wouldn't say it's a buy, but a definitely not a sell.


----------



## CPA Candidate

Josef Schachter had LRE as a top pick recently on market call, with a target of $3.


----------



## hboy43

CPA Candidate said:


> Josef Schachter had LRE as a top pick recently on market call, with a target of $3.


Folks like this one today. By noonish, double daily average volume and up to $0.99.

If this gets to $3, if I ever get a really big boat, I'll have to call it "Long Run" I think. Of course in the long run we are all dead. 

My investing buddies here will think of LRE, sailors will think "running" as in travelling downwind, and I'll think "how am I not dead yet?"

hboy43


----------



## Chris L

I like LRE at $3. Keep going.


----------



## Toronto.gal

hboy43 said:


> 1. *Folks like this one today.* By noonish, double daily average volume.....
> 2. if I ever get a really big boat, I'll have to call it "Long Run" I think.
> 3. running" as in travelling downwind, and I'll think *"how am I not dead yet?"*


*1.* My attention since last night, had been on PM Modi & the expected agreements with Canada 2day. Anticipation of deals = handsome profits short & long-term!
*2.* Great name, but why skip the E....how about Expeditionist or Enthusiast? 
*3.* Time in the market vs. timing the market, right?


----------



## Fraser19

Looks like the earnings will be released on may 4th.
Naturally I feel it is safe to assume that the 1Q earnings for most companies will be fairly awful. Do you guys think LRE's share price will take another nose dive once the earnings are out?


----------



## bmoney

The market anticipates bad earnings no surprise there. I believe analyst will be paying close attention to debt and how well they have been able to manage costs. The over-arching question is how long can LRE survive and at what price WTI. If LRE can demonstrate they have sufficient liquidity and measures in place to ride this out, and at a production cost in this perceived new normal (of lower prices), that will go along way to quell concerns and at the least, make their assets more attractive so that they do not trade at such a discount. I think management has been fairly realistic in setting expectations at much lower WTI. Futures markets are already pricing WTI north of $60, as early as Sept, higher than management's projections at $52.50.

At the moment, people are pricing this stock as though the company is going out of business, I think the bar is pretty low and the risk reward is to the upside.


----------



## Fraser19

Has anyone seen the earnings report?
Was supposed to be out yesterday, but I can't seem to find it.


----------



## AltaRed

Fraser19 said:


> Has anyone seen the earnings report?
> Was supposed to be out yesterday, but I can't seem to find it.


AGM is May 7th. They will publish that morning.


----------



## daddybigbucks

AltaRed said:


> AGM is May 7th. They will publish that morning.


earnings just came out.

no comment because I don't own any.


----------



## CPA Candidate

Annualizing 1st quarter cash flow, they are trading at .9x cashflow. I expect funds flow to exceed 80 cents per share this year. Hedge book has been increased to cover the majority of 2015 production and small portion of 2016.

With oil recovering nicely, I think this is a buy for the non-risk adverse investor.


----------



## the_apprentice

Initiated a small position today; 453 shares at $0.86.


----------



## thepitchedlink

Bump to the top to get the discussion going again.....I'm thinking of getting in for a little while if this gets close to .70...might be today!!!


----------



## lostwords

last time I was in, it was 0.68... waiting for it to come down to get back in again


----------



## thepitchedlink

Anyone watching ?. Comments. With OPEC meeting this week and expecting no change in their output, might be looking at a new low at the end of the week.


----------



## CPA Candidate

The review of their credit facility has finished and their credit line remains unchanged and the financial covenants have been loosened.

I've been modeling the rest of their year and I see light at the end of the tunnel barring a further decline of oil prices. I see them being able to reduce their debt and stick to their cap-ex plan.


----------



## My Own Advisor

A new low...and maybe a takeover?


----------



## CPA Candidate

My Own Advisor said:


> A new low...and maybe a takeover?


I don't think the market liked the effective interest rate of their debt increasing from 4.5% to 6% with the review of their credit facilities, but it is hardly a surprise, they are that much more risky.


----------



## bmoney

These guys are treading water. The question is, for how long? With management loading up on shares sub $1, me thinks they are hoping for a buyout or return to higher prices. As I've expressed before this is a 24 month recovery and we are only half way there.


----------



## londoncalling

I am not interested in a buyout. I am hoping for share price to appreciate. 24 months would be nice. I can wait that long to turn a profit.


----------



## Fraser19

I am wondering how those of you who hold shares of this company are feeling about it now?
I have 550 shares in the company. I there has not really been any news for a while, what are your thoughts?

Also wondering if there would be any benefit for the company to so a reverse split? Say 1:6 From what I understand there is a benefit to having a higher share price then .68 cents even if the market cap is the same.


----------



## martinv

Fraser19 said:


> I am wondering how those of you who hold shares of this company are feeling about it now?


Considering I paid $4.68, not feeling very (expletive deleted )good! Wish I only had 550 shares.


----------



## AltaRed

Fraser19 said:


> Also wondering if there would be any benefit for the company to so a reverse split? Say 1:6 From what I understand there is a benefit to having a higher share price then .68 cents even if the market cap is the same.


The only real difference as I understand it is a share price >$1 might come on to the screens of some money managers who otherwise do not look at penny stocks. That said, a pig is still a pig regardless of its lipstick and it would only be the small cap players that would be looking at this market cap anyway. In short, likely a waste of precious cash for LRE to implement that.


----------



## Fraser19

30m in debt reduction, that is useful.
I haven't had enough time to fully read the reports but it seems they are making some progress.
I am a little surprised to see the 10% drop with the news release.


----------



## Fraser19

up 38% today.
Looks like there is going to be a bunch of new shares issued too. That sucks but it will probably keep the company afloat during these hard times. $200m of warrants going to be issued at $1.30.


----------



## CPA Candidate

The company entered into a $200 million private placement for 155,000k units at $1.30. Each unit consists of a common share and 1/5 of a 18 and 24 month warrant.


----------



## thepitchedlink

wow....oh well, missed that boat


----------



## hboy43

thepitchedlink said:


> wow....oh well, missed that boat


Well recent $0.69 with $200M coming in to keep the bank happy doesn't look too unreasonable to me as compared to a week ago at $0.53 and bank overhang ... you are getting more (ie reduction in risk) )so you pay more.

hboy43


----------



## OptsyEagle

hboy43 said:


> Well recent $0.69 with $200M coming in to keep the bank happy doesn't look too unreasonable to me as compared to a week ago at $0.53 and bank overhang ... you are getting more (ie reduction in risk) )so you pay more.
> 
> hboy43


Yes, but the upside has just been cut in half.


----------



## Fraser19

OptsyEagle said:


> Yes, but the upside has just been cut in half.


If this deal happens, the purchaser would become the controlling majority. Anyone have concerns about that?
Personally I feel good that LRE management is doing what they can to make the company survive. Hopefully I can move forward from my -60% loss, but there is little info on the company that this deal is being made with. Once they become the majority would it not be easy for them to make LRE private? 

Also why would it make sense to spend $200,000,000.00 on 155,000,000 shares at 1.30 when you could theoretically bought all of the existing shares yesterday for around $106,000,000.00?
Seems odd to me that they would pay almost twice the value off all the shares for half the company.


----------



## hboy43

OptsyEagle said:


> Yes, but the upside has just been cut in half.


Maybe the upside if life gets back to $100 oil in 5 years was the $6 we had last year. So now it is only $3. Still, that would be a 3 bagger for me. The reality is that the $3 to $6 future share price range when oil gets back to $100 one day was was already gone. If anyone believed that would be reasonably possible, the current price would not be $0.70. The only point of debate would be how it would be permanently registered, through a slow bleed towards bankruptcy, asset sales at low prices, or a big fat dilution. We are choosing door number 3.

If the transaction goes through and all the warrants are exercised, the new investor will have half the company for $300M invested and the implied market value will be $1.80 * 410M shares outstanding = $738M. Contrast that with the whole company being valued at just over $100M a week ago. If he gets half the company, that implies I get at least a double in under 2 years, a very satisfactory result. Even if the warrants are not exercised, buying 44.5% of the company at $1.30/sh implies a market cap of $450M, also a number far larger than last weeks $0.53 * 193M.

Even people who bought x$ at the high of $6/sh a year ago invest another x$ today at $0.70 will have an ACB of $1.25. If LRE sees $1.80 within 2 years these brave souls who can double their investment today will have a return of 44%, or about 15% annually over 3 years.

Of course, if the company drifted into bankruptcy, having the whole upside would not be of much use. I find it very comforting to have half the upside with greater certainty. I think the expected value has substantially increased today, far more than the 20% stock price rise in fact. I bought more today at $0.70.

To those who have a high ACB, face the facts, you have a permanent loss on that money. I invite you to look at LRE at $0.70 and maybe make a case for buying at this price level.

hboy43


----------



## CPA Candidate

Fraser19 said:


> If this deal happens, the purchaser would become the controlling majority. Anyone have concerns about that?
> Personally I feel good that LRE management is doing what they can to make the company survive. Hopefully I can move forward from my -60% loss, but there is little info on the company that this deal is being made with. Once they become the majority would it not be easy for them to make LRE private?
> 
> Also why would it make sense to spend $200,000,000.00 on 155,000,000 shares at 1.30 when you could theoretically bought all of the existing shares yesterday for around $106,000,000.00?
> Seems odd to me that they would pay almost twice the value off all the shares for half the company.


Control is 50% + 1, so they wouldn't have control, but would be the largest shareholder and have significant influence.

True, you could buy the entire company for less, but there is a chance (and not a small one) that the shares could be worthless 12 months from now. Buying new shares/warrants from the corporation injects cash so it can survive and makes all shares, new and old, more valuable. This will be enough to reduce bank debt by about one third.

As part of LRE's debt renegotiation a couple months ago, part of their revolving credit line ($245 million worth) was changed to a term loan, due in full May 31, 2016. There was no chance of making this payment without a major asset sale or some other type of financing. Asset sales are very difficult right now and they would have probably been forced to sell the best assets for a low price.

Although the dilution is significant, the company was likely going bankrupt without it. Unless a miracle happened and OPEC cut production, there wasn't any upside at all.


----------



## OptsyEagle

It is still kind of peculiar that this new company would be willing to pay $1.30 per share when the stock was trading below $0.60. The warrants would add some value but not $110 million (which is about how much they overpaid based on yesterday's trading price).

Soooooo, the question is why did they pay so much.

The optimists might say that this new company saw the potential of LRE and decided it was worth north of $1.30 a share and were happy to pay up for it. Well, if I thought a $2 stock was worth $5, I would still attempt to get it for something less then or close to $2.

The optimists might also say that this $200 million dollar shores up so many of the problems that LRE had that the company is easily worth more then $1.30 a share once the transaction was done. Well they will still have a boatload of debt when this deal is done and the interest savings on $200 million dollars of debt is not going to be overly material to the company.

The optimists might say that LRE management are just better negotiators then these new investors. Well, I can't say who is better or worse at negotiating but that was quite the negotiated price, I will give them that. I doubt these guys are that stupid, but who knows.

So this is where I wonder what the pessimist think. Obviously the stock did not immediately go to $1.30 a share so one can be sure that this transaction did not immediately improve the value of the company by a 125% or more. LRE's will still have a lot of debt and therefore their problems are not solved in a huge way. It does seem to me that these new investors must have some strategy on their mind that may not be obvious. But what?

I mean, usually these types of deals are done at a discount not a 125% premium. You see what I am saying.


----------



## sags

Interesting that Maple Investments was incorporated only a few days ago on July 29, 2015.

One of the conditions of the deal is that Maple secure funding for the acquisition.


----------



## hboy43

OptsyEagle said:


> I mean, usually these types of deals are done at a discount not a 125% premium. You see what I am saying.


All good points. I think the poster child for this situation is Nova Chemicals which was trading in the $CAN1.50 range before being purchased at $USD6 (about $CAN7.50) a month or two later. So deals of this nature suggest that the market is not efficient. For LRE we have the book value at about $3 (likely drifted lower since last recording period) and the market value at $0.70. I think deals like this suggest the truth lies in between somewhere, and will presumably be revealed in the fullness of time.

hboy43


----------



## hboy43

Hi:

I think Mr. Market is telling us that the deal is not going to happen.

hboy43


----------



## Gabs

hboy43 said:


> Hi:
> 
> I think Mr. Market is telling us that the deal is not going to happen.
> 
> hboy43



Definitely not a done deal. BNN did an interview with the CEO regarding the topic. http://www.bnn.ca/Video/player.aspx?vid=672258

I think Mr. Market doesn't think LRE is going to survive. Pretty unsure myself really.


----------



## mgr1397

Anyone still holding? I still have 750 shares at $3


----------



## cashinstinct

price paid is irrelevant in decision to hold or not.


----------



## Doryman

mgr1397 said:


> Anyone still holding? I still have 750 shares at $3


1500 at $3.20, here. Ugh.

Kept holding as the stock dropped. Thought that I could ride out the storm, but now I'm not sure the stock will survive. If I sell now, I'm still out 4k. Not sure what to do. This one might be a write off.

I 'm still holding COS, as well. Can't I pick 'em, though.


----------



## CPA Candidate

hboy43 said:


> Hi:
> 
> I think Mr. Market is telling us that the deal is not going to happen.
> 
> hboy43


I think it's just that the oil price keeps going down and that's a pretty big hurdle to overcome.

Anyway, giving Mr. Market too much credit is a mistake.

If the investor backs away, they are liable for a $25 million dollar penalty.


----------



## londoncalling

Good point CPA. I am looking to avg down as I feel a buyout will lock in my loss. ; )

Cheers


----------



## summer

I am still holding. I am questioning how wise this is.


----------



## gibor365

LRE reminds me PSN :upset:


----------



## londoncalling

LRE doesn't remind me of PSN. The pain may seem similar but they are not in the same league. Poseidon was a stock that had no moat, assets or barriers to entry. LRE does own actual oil reserves and when (eventually it will happen not sure if LRE will be around when it does) those reserves and assets will appreciate in value for whomever owns them wether it be LRE or some other company. I am down considerably on LRE but it is such a small portion of my portfolio that my winners definitely outshine all my oil stocks. As an aside I used to hold oil stocks so I wouldn't feel terrible paying for high gas prices. Seems to me oil tanked and gas prices are still considerably higher the last time oil was $50-60 a barrel. :upset:


----------



## CPA Candidate

gibor said:


> LRE reminds me PSN :upset:


PSN was a financial accounting fraud, they booked fictitious sales and receivables. LRE had atrocious timing of acquisitions financed primarily through debt that blew up in their face only a couple months after they closed. PSN was finished regardless of the business environment but LRE has a chance if oil can get back to $60 and gas $3.


----------



## gibor365

I'm not talking about fraud, but aboup stock price pattern movement


----------



## Fraser19

I find it interesting that after the proposed equity deal the share price has fallen even lower than it was before the deal was announced.


----------



## Tourist9394

This MIE holdings is a private corporation with the CEO that has Chinese state enterprise connection. This is not a Hong Kong company, rather a corporation that holds oil field in NE China. I am not sure if Investment Canada will allow this to go through, the deal is most likely to close until after the election. This investor from China are very aware of Canadian public's animosity towards Chinese investment, this is why they are paying 120% premium, to test the waters after investment Canada made comments about Nexen deal due to populism. You can be sure the PRC government is watching this, or people like Jack Ma, who have stated he wanted to open a NA headquarter for Alibaba in Vancouver. 

Having said that, MIE Holdings have interests in Kazakhstan oil fields, their currency plunged a quarter last week.


Presentation for LRE by MIE holdings: 
http://www.mzcan.com/hongkong/01555...EH-LRE Investor Presentation_3EEhAA54Fkjn.pdf


----------



## Killer Z

Possible purchase of LRE?

CALGARY, ALBERTA--(Marketwired - Dec. 21, 2015) - Long Run Exploration Ltd. ("Long Run" or the "Company") (TSX:LRE) is pleased to announce that it has entered into a definitive arrangement agreement (the "Arrangement Agreement") with a group of investors based in the People's Republic of China (the "Purchaser") pursuant to which the Purchaser has agreed to acquire: i) all of the outstanding common shares of Long Run ("Long Run Shares") for cash consideration of $0.52 per share (the "Share Consideration"), and ii) all of the outstanding 6.40% convertible unsecured subordinated debentures due January 31, 2019 of Long Run (the "Debentures") for cash consideration of $750 per $1,000 principal amount of Debentures plus accrued and unpaid interest (the "Debenture Consideration"). The proposed transaction (the "Transaction") is to be completed by way of plan of arrangement under the Business Corporations Act (Alberta). The Share Consideration represents an approximate 215% premium to the closing price of the Long Run Shares on the Toronto Stock Exchange (the "TSX") on December 18, 2015, being the last trading day prior to the date of the Arrangement Agreement. The principal amount of the Debenture Consideration represents an approximate 257% premium to the closing price of the Debentures on the TSX on December 18, 2015. The aggregate value of the Transaction, including the assumption of Long Run's current net debt and Transaction costs, is approximately $770 million. The Purchaser is a group of investors based in the People's Republic of China. Principals of the Purchaser have extensive experience in oil and gas operations around the world and hold significant and controlling interests, directly and indirectly, in midstream and downstream oil and gas assets and LNG projects in China and have recently undertaken and completed significant controlling investments into the upstream oil and gas sector in Canada.
Read more at http://www.stockhouse.com/companies.../long-run-exploration-ltd#iFsBBggKhweZuBsb.99[/I]


----------



## CPA Candidate

Yes, Long Run is likely kaput, or should I say Short Run? The market still doesn't believe it though, with the market price beneath the offer of 52 cents by a dime.

I seriously hope none of their management works in the industry again. The team was largely that of Penn West, namely CEO Bill Andrew. I think once you run two companies into the ground, that should be the end of your career.


----------



## OptsyEagle

CPA Candidate said:


> I seriously hope none of their management works in the industry again. The team was largely that of Penn West, namely CEO Bill Andrew. I think once you run two companies into the ground, that should be the end of your career.


That sounds fair.


----------



## peterk

Damnit, and I was thinking about doubling down last week. lol

I was actually considering selling this one out of my TFSA and moving it to unregistered so that I could at least take the tax loss if it went to $0. Thank goodness I didn't.

Overall down $2000.


----------



## hboy43

peterk said:


> Damnit, and I was thinking about doubling down last week. lol


I last bought at $0.225 IIRC, and it was down in half a week or 10 days later. Just could not go again as I figured bankruptcy was the most likely outcome. Now, it is my best performing resource held for more than a month LOL. Don't know if I will wait for $0.52, but I think I want more than $0.38. At $0.52 I break even to slight gain, a very good result of late.


----------



## martinv

Not the happiest of days.
My loss is $19,000. That hurts!
Thought I did all the right things when I bought.
What did I learn?
Don't buy oil stocks when oil is trading at $105.
Bought it bit by bit as it was trading down. Dollar cost averaging but that didn't help either.
Hindsight is great though. Shouldn't have bought this one!


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## peterk

Sorry to hear that martin, at least you got a bit of a pop to make it not hurt so bad. I'm down 50% and $2,000.

Good to know you are close to breaking even on this one Hboy. I know you dumped a boat load into it.


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## OptsyEagle

Doesn't seem to be too much confidence in this bid. It begs the question as to why all the secrecy regarding the purchaser.


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## londoncalling

I think quite a few of us got taken out behind the woodshed with this one. Be curious to know if anyone made money on it. For me it was quite a learning experience. ACB @1.69 If this goes through I will still be taking a loss. I have a feeling the story isn't done. 

Cheers


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## Feruk

Feruk said:


> The only thing that saved these guys is the hedging. Possibility of 3.5X debt/CF because of the hedging vs 4.9X debt/CF if they were unhedged. If oil price remains depressed for longer than 6 months, these guys are headed for bankruptcy or acquisition at a very low price. Either way, with so many fantastic names on sale, I wouldn't touch this thing with a 10 foot pole.


I said this 360 days ago. Called it. 

I wouldn't get too excited about 52 cents either... the stock won't trade close to it due to the risks here. Hopefully shareholders are smart enough to realized that if they vote the deal down, the company pretty much falls into receivership now (as the other deal was cancelled). There's also the question of exactly who is buying Long Run and whether the government will allow the foreign ownership. 

Looks like market's saying ~60% chance the deal happens.


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## Value

Never been interested in a position in this... 

Now however, I'm wondering if it cant be a nice 40% upside... 

Are you guys gonna vote for the sale or against? Seems like the insiders will vote for it... Why is the market not believing it ?


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## Feruk

If the new buyers back out, this plummets to under 10 cents. Market doesn't even know who the buyers are... Pretty sketchy.


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## Value

Can he actually back out?
http://longrun.mwnewsroom.com/press...lan-of-arrangement-tsx-lre-201512211037620001

'' it has entered into a definitive arrangement agreement ''

For sure if the deal does not go through this will plumet, I realize the risk associated to it, but still seems pretty serious.


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## OnlyMyOpinion

_...buyers are likely smaller Chinese companies that have made forays into Canada in the past two years, such as Sinoenergy Pacific Corp., which bought Calgary-based New Star Energy Corp. in July.
New Star CEO Steve Sugianto formerly ran Galleon Energy Inc., which transformed into Long Run after a merger with WestFire Energy Ltd. in 2012. Sugianto could not be reached for comment.
Other players include China Oil and Group which bought privately owned Calgary-based Baccalieu Energy Inc. for $236 million last year, or Tri-Win International Investment Group Inc. that took over junior Alberta company Hyperion Exploration Corp. in January, or Yanchang Petroleum International Ltd. that acquired Novus Energy Inc. for $230 million last year..._
http://business.financialpost.com/news/energy/chinese-investors-to-buy-calgary-based-long-run-exploration-ltd-in-770-million-deal?__lsa=33df-82c7


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## CPA Candidate

The government is not going to stand in the way of a takeover of a very small company that is on the verge of bankruptcy.


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## Value

Any new comments? Info or feeling towards this anyone?
I'm thinking I will throw a few bucks at this.


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## scorpion_ca

What All Went Wrong With Long Run Exploration - 

http://www.moneygeek.ca/weblog/2015...015-what-all-went-wrong-long-run-exploration/


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## richc3

Value said:


> Any new comments? Info or feeling towards this anyone?
> I'm thinking I will throw a few bucks at this.


I decided to buy in during the purchase news and got in at 0.35 a share. I've gone back and fourth on selling for an 8% profit or holding out for the full amount and realistically I don't expect it to do much until there's some more information out, but no one knows the timeframe on that. Personally, I'm cautiously optimistic, but I also recognize I'm basically YOLOing my investment here.


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## richc3

Note: The parties in the following article are different from the group of investors buying, LRE (outside of being Chinese), but it may give you an idea about market sentiment. LRE mentioned is mentioned, but nothing new)

China Investment Corp retreats from Canada after mining, energy investments sour 
Source: http://business.financialpost.com/n...m-canada-after-mining-energy-investments-sour


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## Value

Any one as good new info about this one or cares to share is feelings?

It seems like the lenders are not giving LRE's management much slack in terms of time extention to be let the deal get voted...

I can understand, with the vagueness surronding the deal.


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## hboy43

Hi:

Pure coin toss at this point. Deal happens or bankrupt I think.

4 directors bought about $700,000 worth of shares at ~$0.50 Dec 31 under compensation plans or something. One was even at $0.54, so guaranteed loss if the deal goes through. So this could be taken as a signal that the deal is on: they are going down with the boat (in addition to what they already own which might be considerable) if the deal fails, but don't materially benefit if it happens. Or it could be that the bank wanted some cash pronto and these guys chose to fall on their swords. Or it could be that I misunderstood and they did not actually pay anything, but were granted these shares gratis.

Who knows. I have been mentally prepared for some time now to write it all off. I have not had a bankruptcy since Nortel, so I am due. This is the way I roll.

hboy43


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## Chris L

I don't have too much in this one and can make up for it with other trades. Hopefully it turns out okay, or quick turnaround.


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## Value

I think if the deal is genuine, the share and debenture holders will vote for the sale...

As you stated (hboy) it's either the deal goes through or it`s bankrupcty... 

I'm more concerned about this not being a real deal offer... There is so much secrets and mystery around this...Really makes you wonder why...

I bought a bit of debenture at .41 ... Hoping the sale passes and I can get .75 for it... 

We will have to wait and see...


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## Value

Nice little pop today on the news it's working with the lenders... Can't wait for the information circular, and hoping it will provide more details...


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## Value

SO the buyers are Sinoenergy... Meeting will happen on the 29th...

What's your feelings now?

I`ll sure vote on for the sale with the bedenture I have.


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## richc3

Value said:


> SO the buyers are Sinoenergy... Meeting will happen on the 29th...
> 
> What's your feelings now?
> 
> I`ll sure vote on for the sale with the bedenture I have.


I imagine the shareholders will tender, but I'm not entirely sure about getting a majority of the debentures to. Still, the deal can go through with just the shareholders on board. In any case, I'm more-so concerned with the continued downturn of oil prices and the general global economy hitting the fan this year so I'd prefer to have this wrapped up ASAP.

Beyond that, I think it's reasonable to fathom the deal going through.


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## Value

I share the same concerns... We will have to wait and see, but I do believe even debenture holders do understand that this is make and break and if they vote against they have a lot to loose.

Likewise, I`d like to get this done with ASAP and just wrap it up... With the economy and downturn in the oil fields, its getting more and more risky.

What do you think of Sinoenergy?


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## richc3

Value said:


> I share the same concerns... We will have to wait and see, but I do believe even debenture holders do understand that this is make and break and if they vote against they have a lot to loose.
> 
> Likewise, I`d like to get this done with ASAP and just wrap it up... With the economy and downturn in the oil fields, its getting more and more risky.
> 
> What do you think of Sinoenergy?


Regarding debentures, you'd logically think it's tender or bankruptcy and thus it's an easy decision, but this article from Dec 23rd, 2015 -- http://business.financialpost.com/n...is-looking-out-for-us-where-is-our-full-value added some concern as to how some debentures holders may vote.

Here's the main snippet...


> “The debenture holders would be silly to tender,” said one holder, who argues that Long Run has a covenant with the debenture holders.
> 
> “It’s like playing poker. They are bluffing you. The ideal situation,” notes this holder, “is for the buyer to offer a few cents less to the shareholders and offer one hundred cents on the dollar to the debenture holders.”
> 
> This holder then did the calculation. An extra $17.125 million to the debenture holders would mean $17.125 million less to the common shareholders. Accordingly they will receive $83.494 million – and not $100.6 million as previously expected. Given that Long Run has issued 193.498 million shares outstanding, they would receive $0.43 a share.
> 
> And at that level, the “shareholders would still tender,” noted the debenture holder. “It makes no sense to have a $770 million deal flop for not paying $17.125 million to the debenture holders,” he argued.


Now, we don't know whether this sentiment is from a major holder or how many others may hold similar opinions. Conversely though, the market today is looking gloomier than it was in December and perhaps this holders view may have shifted since then. Regardless, it does add some question marks as to what may happen. I think it's entirely possible that shareholders tender, debentures don't, the deal continues forward and the debs fight for $1000 per $1000 -- which I'd assume could drag out.

In terms of Sinoenergy, I think they're trying to establish a presence in Canada to send natural gas over to China. China as you may know, primarily uses coal for their energy needs, which naturally is harsh on the environment, so they are quickly trying to shift towards natural gas and I'm assuming that's part of why LRE was purchased in the first place. My primary concern is I don't know how much we can play hardball with Sinoenergy because I'm unsure of how many other natural gas players in Canada are basically on the verge of bankruptcy just as LRE was and ripe for the taking. If we put up too much resistance they might say "no deal" and gobble up someone else.


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## Value

richc3 said:


> Regarding debentures, you'd logically think it's tender or bankruptcy and thus it's an easy decision, but this article from Dec 23rd, 2015 -- http://business.financialpost.com/n...is-looking-out-for-us-where-is-our-full-value added some concern as to how some debentures holders may vote.
> 
> Here's the main snippet...
> 
> 
> Now, we don't know whether this sentiment is from a major holder or how many others may hold similar opinions. Conversely though, the market today is looking gloomier than it was in December and perhaps this holders view may have shifted since then. Regardless, it does add some question marks as to what may happen. I think it's entirely possible that shareholders tender, debentures don't, the deal continues forward and the debs fight for $1000 per $1000 -- which I'd assume could drag out.
> 
> In terms of Sinoenergy, I think they're trying to establish a presence in Canada to send natural gas over to China. China as you may know, primarily uses coal for their energy needs, which naturally is harsh on the environment, so they are quickly trying to shift towards natural gas and I'm assuming that's part of why LRE was purchased in the first place. My primary concern is I don't know how much we can play hardball with Sinoenergy because I'm unsure of how many other natural gas players in Canada are basically on the verge of bankruptcy just as LRE was and ripe for the taking. If we put up too much resistance they might say "no deal" and gobble up someone else.



Hello Rich,

Thanks for the anwser... I read that article before my Debenture purchase and asked the author for feedback. He said he would make a feedback article, but was waiting to meet his contact... Well that was weeks ago, so I'm not sure what's happening now. Otherwise, I bought some debenture because the return was much more interesting than the one on common shares, even at 75% of face value. On top of it, at least you hold debt in the compagny rather than common shares, however the debenture is convertible, so it's a wear argument, but still one to take into consideration. On top of it, my votes for the deal will be on debenture rather than shares. All positives.

Anyways, I'm wondering why anyone is buying shares for .34 for a return of .52 when you can buy debenture for .43 to .47 for a return of .798 (including the 48/1000 interest)... 

I still think debenture holders will tender. I'm guessing the one from the article paid a lot for his debenture and is just irritated about loosing his 25%, but any rational person knows that .75 is better than .20 .... He just has to accept it and move on... I'm thinking his take on it changed... I sure as heck don't want to call bluff on SINO... they win... lol

In regards of Nat Gas and China... Indeed, that is probably the compagny's strategy... I have concerns with Chesapeake... If they go under or try to sale some properties to come up with some money by the end of the month, their could be better opportunities for Sinoenergy, however, not in Canada... I'm also more concerned with a change of mind by the compagny.


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## Value

Looks like the markets are increasingly confident about this sale... Synoenergy seem to be serious and are doing the required bureaucratic work to get this deal done. No major shareholder opposition or opposition group in sight. Independant firm recommanding to sale.

Of course, we have to wait and see, but the market believes more and more.
For my part, I`ve voted my debenture in favor.


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## londoncalling

got my proxy today... This deal will likely go through and I will take a huge loss (77%)... Learned a lot but lost little capital (about 2.2% of portfolio currently) Not ecstatic but I knew it was a risky investment.


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## hboy43

londoncalling said:


> got my proxy today... This deal will likely go through and I will take a huge loss (77%)... Learned a lot but lost little capital (about 2.2% of portfolio currently) Not ecstatic but I knew it was a risky investment.


Just got the proxy yesterday? I got mine 2 weeks ago. What's up with that? Anyhow, I think voting closes tomorrow so don't sit on it.

I think if shareholder and bondholder approvals next week, lots of people will sleep better.


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## hboy43

I could not find a primary source, but some wag on stockhouse reports 98% approval by both classes.


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## Freedom45

http://longrun.mwnewsroom.com/press...al-for-arrangement-tsx-lre-201603011045018001


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## peterk

Good news.

I'm putting in a sell limit order at 48c. Not worth it to me to hold out for an extra 10% at the risk of the whole deal collapsing and LRE going to 0.


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## humble_pie

hello convertible debenture holders ...

i've never held a conv debenture through any critical vote period, so i don't know about this. But does the holder of a convertible debenture get any votes at all? i always thought votes are restricted to common stock shareholders. Not even preferred shareholders get to vote. Is what i thought.

IIRC there was loud uproar from BCE debenture holders when the company was planning to convert into a unit trust. So perhaps since that date (happened in 2008, very early 2009), conv debenture holders have had some kind of clout?


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## Value

Hello Humble,

The Chinese were looking to buy everything LRE related... Common stock and debenture... I suppose they have the means to finance it all and were'nt looking to keep paying the 6+% annually untill 2019.

They offered 52 cent for common shares and 750$ per 1000$ of principle on the debenture and put a clause that both types of security holders would have to tender in order for the deal to pass. 

Therefore both Shareholders and Debenture had to agree to sale at 66,66%+...

I am not familiar with your BCE case, but every deal is unique (as you know) and the Chinese buyers put in their clause for this in a way where they would purchase back the debenture as well as common shares, so the debenture vote mattered in the case...

Hope that helps 

Your romantic investor.


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## fstamand

Had a few stocks of LRE, what happens now ?


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## Mechanic

fstamand said:


> Had a few stocks of LRE, what happens now ?


I had some shares of this too but I see they are gone and i got .52 a share in my account. There goes another $18k down the tubes dammit.


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## fersure

fstamand said:


> Had a few stocks of LRE, what happens now ?


http://longrun.mwnewsroom.com/press-releases/long-run-exploration-ltd-announces-closing-of-arrangement-tsx-lre-201606301061058001

$.52/ share should be deposited to your account.


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## daddybigbucks

Happens to the best of us.
I had the same thing with compton petroleum. 
Dropped from $7 down to pennies and the whole time the books looked great.
Hard to trust oil companies. Maybe they should have to do a NI format like gold miners.


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## londoncalling

Same here. Crash n burn... Live and Learn...


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## AltaRed

Many small O&G companies in a similar position. Buyer beware on small caps in particular. A great bulk of them are often one curve ball away from implosion due to leveraged balance sheets.


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## Value

I now call this one Long gone exploration...

Sorry for all the longs of Long that got burned. Find a meaningful lesson from it as it's all you can do now.

Personally, it was an awesome ride... about 70% profit... But boy was it ever nerve racking.


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## CPA Candidate

Value said:


> I now call this one Long gone exploration...
> 
> Sorry for all the longs of Long that got burned. Find a meaningful lesson from it as it's all you can do now.
> 
> Personally, it was an awesome ride... about 70% profit... But boy was it ever nerve racking.


I personally like Short Run Exploration. The company did not make the long run, at all.


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