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Author: cardinalm Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 115  
Subject: Re: No subject specified Date: 12/23/1997 10:52 PM
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I am glad someone brought this up. The stock has had a great deal of past interest. I believe much of this is due to the relatively small size of the company and the magnitude of the BOE reserves they have. Right now the stock is doing quite poorly which again, i have some ideas about. A little more than a year ago, the company became an Cayman islands company while the stock was in the high forties, low fifties. At the time, this rubbed quite a few large shareholders the wrong way due to the capital gains hit if they cashed in any stock. Now, the tables are turned, the stock is well below its value of just a year ago, and I think quite a few people are selling off the original shares to get the loss related tax break. Obviously not casual investors, if this indeed is what is occuring, these people have large amounts of capital for which this strategy makes sense.

So, why is the stock so low and what does it mean? My casual opinions are based on what most of us know. The compainies main source of revenue is the production from the Cusiana/Cupiagua fields in Colombia. Production was advertised to reach target levels of 500,000 BOPD in 1Q 98. However, this has been somewhat delayed, and the most recent production milestone has been steady at around 300,000 BOPD. As if Triton were not impacted enough by this, the political situation in Colombia has always - to my knowledge - been regarded with EXTREME caution by Wall Street investors and they are reluctant to bank on a somewhat unstable future in Colombia. Oxy's trouble with continuous rebel bombing of the Cano Limon pipeline is at the forefront of everyone's minds.

So what is different? The Cusiana and Cupiagua fields are operated by BP. BP has been in Colombia for a long time and are familiar with doing business with all parties there. Historically, they have tended to get what they want with the least damage. To be fair, BP has recently had some troubles with the government over unfavorable production terms for their Piedemonte liscense and have seemingly followed through with a threat to drop the liscense and lay off workers. This obviously does not make them anyones best friends right now, but it does not appear to be impacting the Cusiana production.

Also, the Colombian govt. needs cash badly, and have thrown in military support to ensure Cusiana crude makes its way to market. So maybe it is not as unstable as it seems.

So, back to Triton. Obviously, Tritons other main holding in the Gulf of Thailand is huge, but currently useless due to the lack of a formal sales contract. The Thai political situation is pretty bad these days and i think this also scares investors. However, things in Asia take time to come to fruition. Triton seems to know this and the most obvious display is that they picked up the blocks in a disputed area in the late seventies and sat on it for almost 20 years until the border disputes could be resolved. Few companies large or small would have stuck that out. Exxon had those same blocks and dropped them.

One more thing - I almost forgot, and everyone seems to forgert that Triton has a large interest in the pipeline company that carries Cusiana crude to market, and possibly other operators production in the future as well, so they will get a few bucks out of that.

Okay, so the stock is low. What do i think it means? The enormity of the reserves in Colombia alone make the stock worth more than it is currently valued at. I would venture a guess at 36 a share - down a couple of bucks from years past as the company has grown and divested interest in other areas, but I am not an analyst. On top of this, with patience, the value of the Thai reserves will be realized, so I feel it is worth even more.

I think the stock is an incredible buy right now - not so much for the future reserves potential, but for more hostile reasons.

Triton is partnered with BP and Total in Cusiana. Exxon has a huge infrastructure in southeast Asia. Petronas and PTT - two state oil companies partnered with a small independant Triton in Thailand may want to make things a little easier by removing the partner.

So here it is, I think the short term value of the Triton stock is in the high probability of a hostile takeover attempt followed by a negotiation for the remainder of the shares. The companies listed above are what I feel to be the best candidates, but there may be others who are interested in some of the acreage Triton holds elsewhere as well as guaranteed reserves replacement and production. A few articles kicked around last year began mumbling about this possibility, the most reputable being Business Weekly.

At anything less than 30 a share, I think someone like Exxon could save a lot of money by buying up all they can now before anyone realizes what is happening and negotiate the remaining shares later on. I noticed as the stocke got closer and closer to 28, volumes increased slightly, but nothing to get excited about (to my mind). After the first of the year, when everone is done loss taking, the stock will have an interesting 1Q.

On the topic of energy stocks, another company I think is quite undervalued is Arakis Energy (AKSEF). Anyone out there have any comments? They have the old Chevron concession in the Sudan that already had large proved reserves before Chevron got out for political reasons. Now the block is yielding some large volumes of light crudes at high flowrates. Arakis, really a samll promoter, managed to get Petronas Carigali and Chinese National Offshore Oil Company to come in, and bankroll the 900km pipeline construction and drilling, but Arakis managed to have on to a 25% interest! The company split itself in four and sold off three quarters. It was in the thirties when this happened, and now they have even less overhead and no major responsibilities in the Sudan. Petronas and CNOOC are heavyweights and will ensure that crude makes its way out of there. Again, not an analyst, I think the stock should be worth at least a fourth of its orig, value and then some for its 25% stake in the world class Sudan reaserves.
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