YouSaid · the spoken record

Sean Fielder

lines on the record: 74
first: 2022-05-19
most recent: 2022-05-19
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“I don't know. The world's changed, right? So the disinflationary tech stocks ever higher environment is, I think, in the rearview mirror. And I think investors probably should get smarter about oil and gas and gold mining because I think there's still, I think we had a long runway ahead of us still.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So, both different than, I mean, Gold's money and has been used as a money historically because it's not really consumed. So unlike everything else that we produce, whether it's oil or even something like a monetary metal like silver, which is consumed in a lot of industrial processes, gold's not consumed. So if there's seven or eight million ounces of billion ounces of gold above ground, that's pretty close to representation of what's ever been cumulatively produced in human history. Maybe a couple people get buried with gold, but broadly speaking, the gold's not being consumed either in industrial processes or individuals aren't destroying the gold that they have. You're not going to run out of gold. And then mine supply is, it varies a little, but it tends to be one to two percent of that total stock of gold on an annual basis. And that's been...”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“What does the global supply of gold look like? I know when it comes to oil, coal, natural gas, it's pretty likely that humanity is going to stop using them before we fully run out of them. Maybe I'm wrong about that, but that's the way it seems. Whereas like gold, never going to run out of gold, but it's just going to be in such small quantities that it's going to cost so much to get out of the ground. How slim are the pickings now compared to 50 years ago? And in maybe 20 years, how much more slim are the pickings going to be than now?”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So the short answer is no two minds are alike, right? Or the same, right? So there's a lot of variation from asset to asset, and that's one of the things that makes mine investing so... Complicated. So sometimes mines will have a life we had one in Bulgaria that had a life of seven years. Most of the mines were invested in are going to have life's beyond 10 years. Mining companies generally want life of mine beyond 10 years from today. And if they see that 10-year production profile start to tail off, you're going to see boards and C-suites start to look at either expanding those assets, spending more money on exploration, or making acquisitions to fill in that production profile. So even if it would make sense financially to shrink production, you have very few companies in the mining space that are ever going to do that.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Create the community benefits in terms of jobs and employment and economic development and the tax benefits for the government such that you didn't really have a lot of unexpected issues after you decided to proceed with the investment in the project”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Revoked prior to a presidential election. We have the asset in Guatemala. Maybe that's the kind of most glaring one where local tribe, the Shinka tribe, had claimed that this was a violation of a treaty level agreement that Guatemala had regarding indigenous peoples, and that's been in a five-year legal process despite the president's support for that mine and despite that mine having really no technical issues, it's been five years. So, and I guess the point I would highlight to you is every single one of those examples I'm giving to you is in Latin America. So the opposite has generally been true in our experience in West Africa, where if you did a deal, you had a commercial deal, you were able to execute that on that, and you were able to basically navigate some of the local issues.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“It's US and European money. And the US and European money is generally not there to make sure that the mining is done to best practices. The US and European money is usually there to prevent the mining from happening. And so, yeah, so those negotiations tend not to be fruitful. And a lot of the court systems can be very politicized. And so you can get stuck in local court system where really there's the timeline to get out of that is way beyond our investment timeline. So we're invested in a company and the western part of Mexico where their mine permit has been declared unconstitutional. We had an asset in Peru where was protested by a local indigenous community and their license was”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“You know, so in terms of, so there's two sources of money for a lot of these communities. One source of money is the mine. The other source of money is foreign anti-mining money. And so it depends about yet.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“At a countrywide issue. When you go to the community issues, you'll have maybe two or three of the local communities are getting economic returns from the asset, but one's not. Maybe you have indigenous issues or tribal issue where people just feel like they're not really participating in the returns of that asset, and then they're not interested in changing the economics slightly. They're interested in stopping that asset from going into production. And so that's where you really get, you can lose an asset, in my experience.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So, the assets tend not to get expropriated. That's not really, so that's kind of, I guess, the quick way to talk about some kind of impairment of the asset. They tend to get frozen. It tends not to be actually national policy. The issues tend to be local community issues tend to be the ones that are the most unworkable or insoluble. The government's national governments tend to be interested in doing a deal, and there's pretty good parameters in terms of what the take are, whether they're taking 40% or 50%. There's a range, but it's not an infinitely large range. And then every government understands that they can't actually operate a mine. It's not like oil and gas asset. There's no real possibility, I think, for rational people to believe that a government can actually operate a mine. And so there you're just really negotiating where you are in the 40, 50% government take when you're talking about”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“And does an asset have a lower likelihood of getting expropriated if it's majority owned by people in that country? If it's listed on an African stock exchange and it's owned by a lot of people there, they're not going to elite miners, they're not going to let their friends and government expropriate that, right? But if its own majority by Canadians, they'll be like, yeah, we're expropriating this.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“In the room, and I was like, gosh, I know a lot about, I just don't know anything about the Kyrgyz Republic. Tell me about what this is like, you know, as a investment geography. And sure enough, they have a lady in the back pop-up. She's dressed in the local costume. And she's like, you know, look, we're a thriving democracy. It's going to be fantastic investing there. And I don't know, 15 years later, they expropriate the asset. It turns out it wasn't a great place to invest. So I think you just have to have some experience in separate sources of information in these countries so you actually know what's going on. Because as you say, the companies themselves aren't often in the business of being as honest as they should be about the local issues that they encounter.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“I'd be like, Well, I think so, the kind of end of your question there gives you the answer is a lot is the people and you want to find the people that are invested alongside of you, right? They own the shares as well and that they have a track record of creating value and behaving well, right? So somebody has a 20-year track record of not creating value and working against the interest of shareholders. would hope he changes his behavior, but I'm not going to invest on that basis. So you really want to find the right boards and the right C-suites to partner with. I think that's kind of the probably the number one factor. And then having additional sources of information within country are really important. I remember there's a company that Center that had, I went to their original listing where they have an asset in the Kyrgyz Republic. And they're at like 50 people.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Tough politics, and then you overlay on top of that the NGO activity that you have in Latin America, a lot of which is foreign financed. And so Latin America is kind of the one jurisdiction where we see kind of writ large, where you could see built assets that don't have really any environmental or structural problem actually get shut down. So we have a mine in southern Guatemala that was built in production five years ago that has been on care and maintenance for five years because they have a local social problem they can't deal with. So that's been a really difficult continent to be invested in the last four or five years. And then the counterpart to that would be something like West Africa where you have really for the better part of a decade you just have mines coming on time on budget and there's a lot of different reasons for that but there's been a lot of value created in that”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Latin America has been kind of a disaster area for certainly last five years. So not just you've had the elections in Chile and in Peru that have been very negative for the mining business and made it very challenging to invest in new mines there. Argentina has been a problem for a long time. Mexico under Amlo has been incredibly difficult. We have companies that have built mines there but haven't been able to connect them to the grid to power them, to turn them on and just kind of bureaucratic inefficiencies then you overlay on all of that. Latin America was particularly hit by the coronavirus and you had policies in a number of countries where you had every worker that tested positive took a week plus off and so you had inefficiencies, costs associated with coronavirus, overlaid on top of”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Right, and I should say a lot of the senior gold miners located in Australia in, I guess some in Europe, a lot in the United States, a lot in Canada. But the bulk of the junior miners, they typically tend to be in emerging markets, frontier markets. So a lot are in South America, some in Africa. You said South America, what do you think about this sort of jurisdictional risk and how are you trying to avoid it and seek jurisdictions that are favorable to mining?”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“And then on top of that, you have different geographies where you have threats of taxation. So Chile is a good example right now where companies are going to have if the constitutional rewrite goes through, they may have their water rights taken away, and then you have potential tax increases on top of that. You go through the list of everything that could go wrong, and it's really pretty substantial. So unless you start to get higher gold prices, I think that population of companies doesn't really make a lot of sense. And I think given the sideways performance of gold in this kind of environment, you now have a fair amount of skepticism about when and if gold's actually going to perform to justify this kind of, even today's valuations and the kind of investment activity you're seeing in space.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so in the GDXJ, you've got it's 100 companies, average market caps about $3 billion. Most of those companies are producing. So the big issue you have right now from a headline perspective is you have capital cost overruns, uncertainty in terms of future capital cost overruns. You have operating cost increases. So some of the procurement budgets that were stable for part of 2021 now have really started to escalate into 2022. I would say those are the number one issues you're facing in that sector. Then you have all sorts of, you have governance problems where you have boards that don't own enough stock. You have boards that have the motivation to make their companies larger rather than generate value on a per share basis. So navigating a lot of those governance issues is a big part of what I think what we do, what investors should do in the space.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“But even if you're buying, investing in economic reserves in the ground that just where their mind's not built, those companies tend to be very, very, very poorly valued and efficiently valued and lowly valued today. The main thing investors are looking for there is an asset that's large enough to be taken out at a premium by a major because the timeline in economics of actually building that mine and developing that asset in most cases aren't attractive to people that have less than a four or five year time horizon from investment perspective. And then the population of assets is actually large enough to attract the attention of a large company where you have a willing buyer and then if you have a willing seller on the part of the junior mining manager.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Maybe you know it's just the reality, the problem is even if you find gold, is it economic, right? Is there enough of it? What are the grades? What's the nature? What's the geology? What's the metallurgy? What's the geometry of the ore body? Is it minable? Is it actually worth something? And so”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“It's a very unpredictable bad business. It's hard to. Gold's scarce sticking holes in the ground looking for it is a high risk activity somebody else can do that. It tends to be that's more of a kind of a lottery strategy.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So, yeah, the producers are profitable today generally. So you have all sustaining costs for the sector today is going to be somewhere around $1,100. So you have a margin versus $1,850 today that producers are generating, and that's true for the juniors as well as the seniors. The issue is that if that gold price goes sideways and those sustaining costs, all in sustaining costs start to escalate, those margins get squeezed, and it's a very capital intensive business, and so the IRRs on the projects, even if they're still slightly free cash flow positive, are pretty marginal and it's not clear they will risk worth all the effort and risk of investing. In terms of the non-producers, there's maybe two big categories of those. One's the Explorecos, which are going around sticking holes in the ground looking for gold. We're not invested in those companies.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Prices don't start to rise, you have that squeezing of those margins, and if this is a cyclical peak in the industry, you're only generating high single-digit returns on equity. It's just not sufficient for generalist investors to want to get interested.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So there's just not a lot. So, one, you've had over the last 12 years, you've had a big derating of both the seniors and the juniors in terms of where the juniors used to trade it closely to net asset value and the seniors at two times that asset value. The juniors are now trading at meaningful discounts. In many cases, 40, 50% discount to net asset value. And the seniors are trading at just a slight premium to net asset value. So you've had a big d rating. And then the combination of factors that you face when you're investing in gold mines have been unattractive to a lot of investors. So gold hasn't moved sufficiently with inflation. You have the concern that gold's going to go sideways into the future as capital costs for mines go up a lot and operating costs start to escalate. So you have operating costs going up in the high single digits, capital costs going up north of that, in some cases close to 20%.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So, for the juniors, you tend to have a handful of assets, maybe one or two assets in many cases, certainly as you get towards a billion dollars, whereas for the majors or the seniors in the gold mining space, you'll have a more diversified portfolio. So investors that haven't visited the assets don't really want to make a decision about the value of a particular asset or the politics of a particular geography, they're going to be more comfortable in one of the largest companies because they'll have five plus operating assets and so they have diversification in that company structure, whereas we really add a lot of value by making an assessment about a particular asset. So we'll go visit the asset. We know the geology. We know the economics of that asset. We understand the local community issues. We understand the regional politics. And we can buy that asset at a big discount to NAV where”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So junior gold miners are just smaller gold mining companies, so where you have like the GDX would be the index of the larger gold mining companies, the average market cap there is north of $20 billion, whereas the GDXJ would be smaller gold miners where you're talking about the average market cap there being about $3 billion. So most of what we're doing is in actually it's in the sub $3 billion range. So the sweet spot for us would be like the one to five, one to six billion dollar market cap.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“They're not marginal companies, but it's not, and a lot of them have actually some very, some of the assets they picked up from the supermajors are world-class assets. And in some cases, they're actually in a joint venture structure with BP or one of the world's largest oil companies. And so you have the quality of asset.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so they're one to $10 billion companies. So for us, that's plenty large and liquid, but yes, they're definitely not the super majors. Right, definitely.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Of the budgeting of these companies. In addition to the conservatism about their future price, the future price they're going to receive for oil and gas, you have a default setting, which is we're going to return capital to shareholders, and you still see the market punishing companies for increasing capEx and trying to ramp production. So it's not just a preference on the part of the managements, it remains a preference on the part of shareholders. Eventually, that'll change. Eventually, we'll get a cycle where we're going to have markets incentivize boards and C-suites to invest in growing production, but we're just not there yet.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So, yes, so they're not going to, so the companies aren't using anything like Spot to dictate their investment practices. We just met with a company earlier this week in London, a large intermediate, and they're using $55 to $60 for their budgeting purposes, to give you a sense, and that's with spot well above $100. And you're still north of that even if you go out five years in the futures market. You're north of $70. So yeah, they're not using these prices in the natural gas market. Unlike oil, where in oil, the price, the farther you go out, the lower the price, natural gas dips, so if spot prices are $7 to $8, you'll dip down to four bucks going out a couple years, but then you start to rise. So again, I still see a lot of conservatism in terms of”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“There. It's not just complicated from the ENESG, kind of the environmental. It's also socially very complicated. And they've chose to exit some of those assets, I think, very attractive prices.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so investors didn't want to own EMP companies and to the extent they wanted to own EMP companies. They wanted to own large liquidity EMP companies with assets in the developed world or in North America. And so you had for economic reasons, for investor relations reasons, and for environmental reasons, you've had some of the international oil companies selling off assets in emerging markets. In some cases, like in the case of Petrobras, that was in part motivated by their own balance sheet stress, where they sold a number of on and offshore assets in Brazil at very attractive prices to some smaller, say billion to $2 billion companies. In the case of West Africa, you've had ExxonMobil, amongst others, selling in assets at very low. We're talking about two times free cash flow kind of multiples because they don't want to be.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I think the kind of the Engine number one in the calpers and the passive investors victory over ExxonMobil. I think that was probably the high watermark of the ESG movement. The idea that they could get three directors to de-garbonize a supermajor over even a long period of time. Maybe they looked okay at the time. I think with higher energy prices, it obviously looks more costly as a strategy. But I think more importantly after Russia's invasion of Ukraine, that looks maybe geopolitically kind of dumb. Do we really want to transfer market share to OPEC and Russia? And the answer is no. So you're seeing behind the scenes, you're really seeing a big change there in terms of, I think, the behavior in the HD movement that hasn't really trickled down to the companies, but I think something like what we saw in 2021 there at ExxonMobil was probably the high watermark of the SD movement.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Doesn't have access to grid electricity. They have very substantial hydrocarbon reserves. The idea that they're not going to use the oil and gas that they have to electrify Nigeria because we have a desire to decarbonize doesn't strike me as kind of a likely outcome. I think it's much more likely they exploit their reserves and they increase their oil and gas consumption in the coming years and decades. And I think that's going to be true for much of emerging markets, even as oil and gas consumption moderates here in the developed world.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Well, even if you look at the IEA estimates for natural gas, so natural gas is, I guess now it's green and now it's a transition fuel. It's going to need to displace a lot of coal over the coming decades. So natural gas production and consumption is going to grow globally by everybody's account for more than two decades. In terms of oil, that's where it was more political. And if you look at, say, the OPEX report versus the IEA's report in terms of consumption out towards the latter half of this decade, it's a big difference of opinion in terms of what consumption is going to be, especially what consumption an emerging market's going to be. And I just don't see the kind of demand reduction and destruction that the IAA is hoping for. If you take a country like Nigeria, for example, where you have about half the population,”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“To support that. And then natural gas, I think, is an even clearer case where you're going to have natural gas market that's globalizing. And by all accounts, that market's going to be growing for decades, not just for the balance of this decade. I think there's a really good long term investment opportunity here, and you just don't have the market psychology that you have depleting assets that have no terminal value is just not, I don't think, particularly compatible with the actually underlying reality.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Global market. So you're talking about in the case of oil, how many millions of barrels a day are you going to add in the coming years? Demand pre-crisis had been growing at more than a million barrels a day and supply had been keeping up with that. It's an incredibly inelastic market. So you only need a very small difference between supply demand to really move the price significant amounts. I think where the market's getting it most wrong is this idea that demand's going to start to moderate and demand's going to peak and therefore we shouldn't be investing in incremental supply. I think we could see years of growing oil demand. So we're at 100 million barrels a day roughly today. I think that could get to 105 plus out by the end of the decade. And I don't think we have the investment in place.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Desire and ability to produce significantly more oil as they take market share as we've suppressed non OPEC production. These two factors should lead to higher oil and gas prices structurally for a long period of time and you should be getting a higher multiple on those cash flows because they're more predictable than what you would have gotten 10 years ago, but the opposite's the case, right? You're paying a lower multiple for better free cash flow returns than you would of going back seven or eight years.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“The biggest factors I'd add to that there's just been a real sea change in terms of the way EP companies are allocating capital. So in the previous cycle, right, they were not just spending the cashflow they had, they were borrowing money to invest in these, what they saw as high return wells on the idea that oil prices were going to be sustainably north of $70. You now have an industry that wants to do deals based on $55 oil and an industry that has spent years promising their shareholders that they're going to return rather than reinvest capital. And so the amount of money they're putting in the ground to expand production is much more modest than it has been historically. And there has been now years of underinvestment. And so that all is a recipe for significantly higher prices. You overlay on that the more complicated relationship we now have with OPEC. And OPEC's”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So there's sort of at least four big tailwinds at the back of the energy investor since October, November of 2020. Number one, economic growth, which was projected to be very low or negative, exploded higher. As such, natural gas and price of oil went higher. Also, you had inflation, which makes sort of short-duration cash flows more attractive and technology long duration and long-duration bonds less attractive. So inflows into there, you had the ESG, you had supply being very low because EVIS ESG under investment. And that's four. And then five, I might also add, yeah, I guess that's four.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Lower, but four to five dollar gas pricing, this is lower than spot pricing and gas is sustainable. And so you're able to buy these companies at incredibly attractive multiples. And so we really haven't had any kind of concern about the run in these companies so far because the valuations have all been really supportive of the prices that we own these companies at today. I think they could easily double from here still. And the market still remains, I think, unduly pessimistic about the future price of oil and gas. So if you take oil prices out and you go out four years, you're still in the low 70s in terms of where WTI is trading. And that just, I think, doesn't reconcile with where the supply demand fundamentals are in the industry.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So, free cash flow yields is the actual cash money that you can take out of the business while you reinvest back into the business. It's the same production. So you're neither growing or shrinking the underlying business. You're sustaining it. And at the same time, this is the amount of cash that you can take out. So it's kind of like earnings proxy, but the way tax works in the E&P business, you tend to use a different metric than actual earnings. On an EV enterprise value to debt adjusted cash flow, you're talking about these companies trading on half of their historic valuation, so they trade on about three times EVDACF versus historical multiples of five and a half to six and a half, something like that. So you're still at these very compressed multiples because the market simply doesn't believe that spot pricing in oil or even”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so the valuations are really pretty overwhelming. So even today, early May 2022, our companies have free cash flow yields north of 20% at $100 oil.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Well, everything was a lot easier than the lows in April of 2020. So the kind of the zeitgeist of the ESG movement and the idea that We were going to decarbonize and it was going to be painless, and that these were assets that were going to be worthless not in 30 years, but in five or ten years, and that they were just never really going to recover. By the fall or the late summer of 2020, you'd really got into a point where that clearly wasn't the case, right? Oil prices weren't going to be sustainably negative. You were going to have to move back to some reasonable long-term price for oil and gas. And we also started to see some M&A. So in one of the two companies that we were invested in in Western Canada bought a 20% position and another company there that was particularly undervalued, kind of putting a floor under the price. So there started to be some M&A activity, corporate activity in the space that started to indicate that you were really well beyond the bottom by the fall of 2020.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“In most cases for oil. In 2020, you had unsustainably low prices for oil and gas. You had companies were being valued on the idea that they weren't ever going to achieve a sustainable price for their oil and gas reserves. And so even companies with premium assets, top quartile assets in terms of their cost or their quality or the life of the assets were being valued as if though they had basically no terminal value or were very marginal companies and that's just not true. And so we were able to buy some of those companies at these very distressed prices back in 2020. And over the last two years, we've seen a nice revaluation on those companies.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So in the western sedimentary basin, you had some of the terminals, you had problems getting the gas out because of the pipeline capacity. And so in some cases, they could sell the gas for basically nothing. In some cases, they'd get a dollar or two per MCF. Right now you have natural gas at Henry Hubbard in the United States trading between $7 and $8. So there's been a big revaluation in terms of spot pricing, in part because you had really much better capital discipline on the part of the E&P companies here in the United States in terms of not overinvesting and not investing in oil and gas that exceeded their ability to produce it or the market to absorb it. And in oil, that's a global market in gas that can be a very regional market. And so your ability to achieve a good price for your natural gas depends upon the responsible investment of companies in a particular geography in a way that's not true.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“So, a dollar per thousand cubic feet of gas, it'd be like the common metric by which gas is sold here in the United States, whereas in Europe they sell it on an energy equivalent basis, but it's basically the, it'd be like if I'm telling you oils at $100 a barrel, thousand cubic feet would be the equivalent metric in gas that people would use for the benchmark price.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think the oil production that the world needed wasn't sustainable with an oil price of less than $70. And so we'd seen in the years prior to 2020 that oil could go to 20 bucks or 26 bucks at the lows in the previous cycle. And in 2020, we saw futures go negative, obviously. So enormous amount of volatility. And then on top of that, natural gas, even more volatile for a number of years, we had assets in the Western sedimentary basin in Canada that were basically getting very close to zero or only a dollar per MCF on their natural gas.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“I thought the policy wasn't in the long term interest of the dollar as the world's reserve currency. It was a little too aggressive. And so I think we're seeing countries deciding that they don't necessarily want to be in the situation Turkey found itself in 2018. And certainly now the freezing and expropriation of Russia's reserves takes that to another level. I think long term, I think that's going to be a negative for the dollars reserve currency status.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT
“Well, let me say first, we're not invested in Russia. I think there's really important moral reasons not to invest in Russia so long as Russia is conducting its invasion of Ukraine. In terms of forcing people to buy rubles versus the Russian central bank's decision to stipulate a purchase price for gold in rubles, I can't tell you which is more influential in terms of rubles appreciation for the year to date. I think the bigger issue is the weaponization of the dollar. And so if you go back four or five years, so when we were threatening Turkey because of the imprisonment of Pastor Brunson with torturing their economy and depriving them of swap lines and targeting the Lira for depreciation. So that was not just a weaponization of the dollar vis- ⁇-vis a member of NATO, but also doing that with public statements from Secretary Minuchin, then the Secretary of the Treasury as a way to attack Erdogan.”
2022-05-19 · Forward Guidance · Can Gold Withstand the Liquidity Drain? | Sean Fielder · IDENTIFIED FROM THE TRANSCRIPT