Stevo,
Thank you for taking the time to respond.
I have been watching KAR for some time now. It now looks interesting.
I had missed the "sloppy reporting" that you highlighted (guidance downgrade primarily Who Dat; Who Dat guidance remains unchanged)
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These things happen from time to time. Proof reading read what they expect to see
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I was hoping that someone had done detailed analysis of KAR. Typically, this requires many hours of efforts (not just reading a couple of quarterlies; annuals; presentations) to have sufficient understanding to be able to create a simple but realistic company model.
I believe that Brazil poses the greatest risk due to ageing infrastructure, and long(er) lead times to fix problems.
I would like to see a third asset, preferably in the GOM, to reduce company production risk prior to returns to shareholders.
Any returns prior to another acquisition would either delay an acquisition(s) or significantly reduce the potential targets (max price lower).
I anticipate that the STAM/Sandon push will be unsuccessful.
However, given that others have stated that STAM/Fred are/have been in contact with KAR,
I believe that there is a reasonable chance that Fred Woollard will have a significant win.
Specifically, based on my past experience, I have observed that Fred Woollard/STAM are very good at designing LTIs/STI that align shareholder and management interests. I know that Fred puts a lot of emphasis on aligning management and shareholder outcomes!
I believe that there is a very good chance that future KAR management incentives will be much better aligned to shareholder rewards, i.e., outcomes are more likely to be win-win. Based on the Botton letter, there may have been some progress in this area already.
Effective LII/STI's are very likely to be Fred Woollard's legacy ihmo.
Who Dat PerformanceAt a superficial level, Who Dat performance doesn't look that bad/terminal.
G2 discovered an economic shallower Oil Pool in addition to the original deeper target.On the balance of probabilities, that is likely to be a positive.
They intend to concurrently produce from both pools.
They need to produce from the shallow pool first to equalise pressure between the pools so that can they comingle production from the 2 pools.
KAR states that there are (other?) issues with the G-manifold.
Is this a significant negative versus original expectations is the obvious question.
Gas production curtailed due to low gas prices.This makes sense to me.
They state that this is resulting in a higher percentage production of liquids (NGLs and/or Oil).
Gas production has been reduced.
They imply that oil production has increased. I am not sure that this is the case.
My question, has oil and NGL production increased, and to what extent (oil, NGLs or not much at all)?
Looks like I have a bit of work to do to get to the bottom of some of these fundamental questions
(20min delay)
