AKK - why the share is heading up, page-30

Hey thanks for your addition to the convo.

Personally you are a little too 'FA' for me as I use a more bastardised approach to it for reasons explained below.

But first re: your comment:

"Keep in mind with your OPEC war on US shale, that US shale is only about 6-8% of total oil production. Somebody lost the plot if that was the sole aim of OPEC."

I partly agree that someone lost the plot in OPEC but for different reasons to you. Despite shale only being 6-8% of total oil output it can have a massive effect on an overall market. The example I use is: think of a traditional set of scales - when all is even the scale does not swing from one side to another. However, if you even put as little as 6-8% more on one side the scale is uneven and the swing it creates can be large with momentum increasing. This is why even shorts on a company of 6 - 8% can have a dramatic effect in pushing a SP down - especially as momentum builds.

Your comment:
"The laws of business are not suspended for AKK. They have to prove to investors (equity, debt, partners etc) that they can make money. And they have not done that. "Simples" says the meerkat."

You are correct in saying the laws of business are not suspended for AKK. However, that is only one side of the coin. For example, we cannot deny that there are many businesses who exist and get equity without 'proof' that they can make money. Speculative techs are a good example of this. I know a tiny tech company who has not even proven it can make money yet but the idea appears marketable and profitable and it achieves equity from institutions. My point is bank facilities often give equity to speculactive companies. If AKK has the basics: low staff costs, low overall debt, low oil production costs per barrell, a macro rising oil price and a product (oil) which is saleable do you think the company will be denied some form of funding even if it is at a higher rate or has conditions put on the loan.

Your comment: re FA and capital costs.

This is where I want to shake and slap hardcore FA guys. Keep your eye on the ball! I say this because yes I accept I bastardise FA - however we are:

1) dealing with a dodgy small oil company and not Rio-Tinto. This is not some multi billion dollar company who we look to scape a few pips off over a long term investment with fellow mum and dad investors desperately hoping they meet guidance so we can gain a small dividend.- My point is 'KISS'. - This company has so many bigger defining issues than trying to calculate complex FA points like IP30, IP365 and capital efficiency. Because guess what? - using a hypothetical example if oil gets held down to the $30 a barrel level for three years AKK is screwed (this takes no FA wet dream to calculate). If AKK's operating costs are high too then guess what? Screwed too! If AKK's well production costs are high then guess what? Yep screwed too!

My point is I bastardise FA to a level as there are so many larger broader things within FA that I need to be concerned with when dealing with speculative stocks. There are also many TA, macro, sentiment and announcement analysis related things I also need to be spending time on when considering an equity I can't spend time just on one.

Your comment: "the number the industry only cares about is IP36"

This comment worries me a lot because you assume the market only consists of FA nerds or the market only responds to such specific FA factors.

In an announcement you do not often read the language you appear to get wet dreams over because it is either dumbed down or not there (for good reason). Stating that; FA nerds only represent a small element of the total market and overall only a few will respond to the things which turn you on. Rather, big things put simply (sometimes FA or other) like: the company is "now making $10 profit per barrel" or "the company has cut staffing cost by 50%" and the well production costs is now 30% cheaper."

Your IP30, capital efficiency comments all sound a bit wankery to me. Kind of like the highschool student who puts big/ complex words into an essay yet it could be done in a far simpler way which conveys the same meaning in a better way and better holds the audience.

I urge people to keep their FA simple - do not get bogged down by FA because FA means jack all when a macro oil crash pushes oil down to $30. Or when a well comes up dry, or if you had a poor entry and exit and your profit is eroded. Or if FA gave you a false belief you could stay in the small speculative stock long term and you have now lost 90% of your entry point.

Finally, as I have commented previously towards other FA guys - If you sit there waiting for 100% proof with 0 risk - written within a FY report and audited before you make your move then you are probably too late! Traders work on multiple analysis tools and reasonable assumptions. I know it's not everyone's cup of tea, however, don't assume the market only responds to technical FA or TA in particular.

Anyway just my beliefs - thanks for the spar!