Zuckerberg Nightmare Comes to Life

Poor guy...

As Facebook’s stock price fell below $30 today for the first time, some of Mark Zuckerberg’s worst fears are coming true.

Back in 2010, when Facebook was a mere Internet phenomenon (as opposed to the Universal Harbinger of All Capitalist Things, Good and Bad), bankers were already whispering in Zuckerberg’s ear about the benefits of going public.

If Zuckerberg took Facebook public, advisers told him, early investors and venture capital firms would be able to cash out. Facebook could raise a slush fund to use for acquisitions. And the company could steer clear of the S.E.C.’s 500-shareholder limit, which would have forced it to reveal its financials anyway.

But despite the potential bonanza that awaited a public Facebook, Zuckerberg still didn’t want to do it.

Link to full article: http://nymag.com/daily/intel/2012/05/mark-zuckerbergs-nightmare-comes-to-life.html

A Rather Spirited Petrominerales Today

Bromelia results?

Ithaca Energy Shares Go Clunk - Maybe Time For a Look?

CALGARY - Ithaca Energy Inc. (TSX:IAE.TO - News) shares lost one-third of their value in trading a day after the energy developer announced it has ended talks with all parties interested in the potential acquisition of the company.

Shareholders sold off stock in the Calgary-based company Tuesday after a late Monday announcement that its board decided continuing takeover talks would result in an offer that does not properly reflect the company's value.

"In reaching this decision the board of directors has fully considered the company's current value, its growth potential, the future value that can be delivered to shareholders and the responses of the third parties with whom discussions have been held," the company said in a release.

It said its shares are currently undervalued both because of global market volatility and because oil prices have weakened significantly in the past weeks.

How Hedge Funds Outsmarted JP Morgan

BOAZ WEINSTEIN didn’t know it, but he had just hooked the London Whale.

It was last November, and Mr. Weinstein, a wunderkind of the New York hedge fund world, had spied something strange across the Atlantic. In an obscure corner of the financial markets, prices seemed out of whack. It didn’t make sense.

Mr. Weinstein pounced.

As the financial world now knows, what was out of whack was JPMorgan Chase & Company. One its traders, Bruno Iksil, the man later nicknamed the London Whale for his outsize trades, was about to blow a multibillion-dollar hole in the mighty House of Morgan.

But the resulting uproar, in Washington and on Wall Street, has largely obscured a simple truth of the marketplace. Yes, Morgan lost big — but, as Mitt Romney has pointed out, someone else won. And that someone or, rather, those someones, turn out to be Boaz Weinstein and a wolf pack of like-minded hedge fund managers.

In the London Whale, these traders saw a rich opportunity, and they seized it with both hands. That, after all, is the way hedge funds roll. His cool calculus has made Mr. Weinstein a very rich man: he is in talks to buy the Fifth Avenue co-op of a reclusive heiress, Huguette Clark, for $24 million.

It might seem remarkable that someone like Mr. Weinstein, a man virtually unknown outside of financial circles, could deal such a stinging blow to one of the world’s largest, most respected banks. Jamie Dimon, the chairman and chief executive of JPMorgan and a face of the banking establishment, is struggling to contain the damage from what he has called a “terrible, egregious mistake.” The loss — JPMorgan put it at $2 billion, but it may turn out to be $3 billion or more — has renewed calls for stronger financial regulation.

Link to entire article: http://www.nytimes.com/2012/05/27/business/how-boaz-weinstein-and-hedge-funds-outsmarted-jpmorgan.html

Director With "Midas Touch" Buys $3.7 Million Worth of Petrobakken

http://www.stockhouse.com/Community-News/2012/May/28/Director-with--Midas-touch--buys-$3-7-million-wort

Is Canada About to Face American Style Housing Collapse?

Actor and broadcaster Jeff Douglas says he knows there are “more responsible” things to do than take on a mortgage he will likely have to pay until he turns 70.

But that didn’t stop him and his wife, interior painting contractor Ana Maria Diez, from charging headlong into the battleground that has become the Canadian real estate market.

Mr. Douglas and Ms. Diez fell in love with and purchased a 1,300-square-foot duplex in a middle-class west Toronto neighborhood last month for $632,000. Like an increasing number of Canadian buyers, they sealed the deal after duking it out with several other couples who also wanted the house. They placed no conditions on their contract and finally paid 112 percent of the original list price of $555,000

Link to entire article: http://www.csmonitor.com/World/Americas/2012/0529/Is-Canada-about-to-face-US-style-housing-meltdown?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+feeds%2Fworld+%28Christian+Science+Monitor+%7C+World%29

Hedge Fund Manager Wins $710k in Vegas

Most attendees of a three-day hedge-fund conference in Las Vegas earlier this month left with a canvas tote bag, some free pens and a stack of business cards. One left with $710,000 in blackjack winnings.

Michael Geismar, who co-founded $4.6 billion managed futures firm Quantitative Investment Management, turned $300 and a $10,000 line of credit at the Bellagio into $470,000 in a six-hour stretch that began on a Tuesday night, the trade publication AR Magazine reported last week.

After a few losing sessions over the next two days, Mr. Geismar turned in another winning performance Thursday night, before the SkyBridge Alternatives conference ended. Betting on other players’ hands and his own, with bets as big as $10,000, he racked up enough to bring his jackpot to $710,000. And that’s after doling out tens of thousands of dollars in tips.

Link: http://blogs.wsj.com/deals/2012/05/29/hedge-fund-managers-710000-vegas-score/?mod=wsj_share_twitter

EDG Sees Incredible Opportunities to Buy US Nat Gas Assets

The coming months will be a great time to be sitting on buying power as there will be producers who need to raise cash at desperate prices.  I'm excited to see what Petrobakken does with the $1.2 billion in liquidity that it is sitting on:

Electricite de France SA’s trading unit is looking at a “long list” of natural gas production assets in the U.S. as prices rebound from a 10-year low.

“In the U.S., opportunities are incredible right now,” Steven Lewis, global head of gas at EDF Trading in London, said in a May 25 interview. “U.S. energy and gas markets are very exciting.”

Link to entire article: http://www.businessweek.com/news/2012-05-29/edf-seeks-u-dot-s-dot-gas-assets-as-prices-may-rise-from-10-year-low

New York State Comptroller Calls for Change at Chesapeake

Our collective voice grows every day.

Dear Fellow Chesapeake Shareholder:

I urge you to WITHHOLD your votes from directors V. Burns Hargis and Richard K. Davidson at Chesapeake’s annual meeting of stockholders on Friday June 8, 2012. The two major proxy advisory firms, Glass Lewis and ISS, agree with my voting recommendation to withhold support from these directors.

The New York State Common Retirement Fund (the “Fund”), of which I am Trustee, is a substantial long-term shareholder of Chesapeake Energy Corporation (“Chesapeake” or the “Company”).  For several years, I have engaged Chesapeake on a number of issues, including board independence and executive compensation, but to no avail.  Like you, I am pained to watch our investment free-fall as shares plummet to lows not seen even during the recent financial crisis.  The Company has lost over $1.49 billion in market capitalization since April 18.   As the chart below illustrates, its stock performance has been dismal:

Chesapeake continues to be perilously overleveraged.  On May 1, when it reported its First Quarter 2012 results, the Company indicated that it could run out of cash by the end of next year.  On May 15, the Company announced it had secured a $4.0 billion unsecured loan that has an effective yield of 14 percent.  While the loan might provide the Company with “breathing room” as it works towards executing an ambitious asset sale plan over the next few quarters, it is clear that negative free cash flow is expected for 2012 and 2013.  (See Barclay’s Research Report, Updated Liquidity Analysis, May 17, 2012). Chesapeake is in a difficult position financially and is therefore a motivated seller of assets; a factor that will work against it should gas prices continue to fall.

Chesapeake’s falling share price and current financial condition are reason enough to WITHHOLD votes from the entire Board of Directors (the “Board”).  However, since only two directors are up for re-election this year, our withhold votes against V. Burns Hargis and Richard K. Davidson should be viewed as a proxy for the performance of the entire Board.

Hargis and Davidson Are Members of Board Committees That Have Failed Shareholders

Mr. Hargis has served on Chesapeake’s Board since 2008 and is Chairman of Chesapeake’s Audit Committee.  Mr. Davidson has served on the Board since 2006 and serves on the Board’s Audit and Compensation Committees.

The Audit Committee is charged with overseeing the integrity of the Company’s financial statements and disclosure, compliance with legal and regulatory requirements, the Company’s internal audit function and the Company’s enterprise risk management program.  The revelations of the past months serve to underline the Audit Committee’s failure:

·

In the last three years, CEO Aubrey McClendon received over $1 billion in previously undisclosed loans secured by his stake in Chesapeake’s oil and gas wells.  The biggest loans were obtained from EIG Global Energy Holdings, which also serves as a major financier for the Company itself.  At the same time Chesapeake was selling off assets to one firm, Mr. McClendon was taking loans from the same firm.  These loans and inter-relationships were disclosed by the Company only after an exposé appeared in the press.  Though the board was “generally aware” of the loans, it did not review, approve or disclose them to investors until after the appearance of the exposé.  (“After McClendon’s Trades, Chesapeake Board Gave Blessing,” Reuters, May 8, 2012; Chesapeake Form 8K, April 26, 2012; “Board Turns on Chesapeake’s CEO,” The Wall Street Journal, April 26, 2012).

·

Chesapeake reportedly has $1.4 billion of previously unreported liabilities that relate to ten “volumetric production payments” (“VPPs”), which are essentially debts, with payments made in fuel rather than in cash.  Although Chesapeake has previously made representations about how much cash VPPs made available to the Company, it had never provided details about the costs to fulfill the contracts. The Wall Street Journal hassuggested that these costs will be far larger than analysts had previously estimated based on the Company’s previous disclosures.  (“Costly Liabilities Lurk for Gas Giant,” The Wall Street Journal, May 10, 2012). For too long, CEO McClendon has been allowed to dominate the Board and the Board has failed to perform its critical role in overseeing the Company on behalf of its shareholders.  Even while promising to replace him as Chairman someday, the Board has allowed Mr. McClendon to continue to serve in this role while it claims that the Nominating and Corporate Governance Committee is searching for candidates to replace him.  As members of the Audit Committee, directors Hargis and Davidson should be held accountable for the Board’s significant failings in its oversight responsibilities. THE SOLUTION FOR CHESAPEAKE?  A BOARD OVERHAUL Withholding your votes for the re-election of Directors Hargis and Davidson is a necessary first step toward reconstituting a Board that is currently entrenched and unaccountable to shareholders. In my view, there needs to be an evaluation of the entire Board’s competence and performance, including an assessment of whether the current directors have the necessary skills and attributes to continue to oversee the Company.  This evaluation should be done both internally, by the Company, and by an independent third party.  The Company’s largest shareholder, in a letter dated May 7, 2012 and filed with the SEC, has publicly suggested that the Company should be “open to any offers to acquire the whole company.”  Now more than ever, shareholders need to be assured that the Board has the requisite independence and skills to evaluate any offer that might be received. A fundamental restructuring of the Company’s Board of Directors is essential if the Board is to regain the trust of stakeholders and regulators.  The Board, which holds Chesapeake’s future in its hands, must be held accountable to the Company’s shareholders, and must protect the long-term interests of the Company instead of promoting parochial interests of maintaining incumbent control. I hope you will consider these comments.         Sincerely yours,             /s/Thomas P. DiNapoli State Comptroller

Pacific Rubiales Acquires Another 18% of CGX Energy

Pure exploration company, looking for some big offshore discoveries:

Toronto-listed Pacific Rubiales, which has plays in Colombia, is paying some C$ 30 million ($29.29 million) for some 18% of CGX in an all-shares deal.

A private placement to pay for the stake is expected within a week and will bring Pacific Rubiales’ holding in CGX to around 35%.

Crucially the share purchase will give the former an option to participate in planned and wholly-owned wells belonging to CGX in Guyana.

If Pacific Rubiales takes up the options, it will fund 50% of the exploration costs and some seismic costs for a 33% share in each well in the Corentyne and Annex licences.

Pacific Rubiales chief executive Ronald Pantin said: "This is a great opportunity for the company to expand its investment in the highly prospective offshore Guyana oil play.

“Through our ownership in CGX, the technical services agreement and a direct earning option, the company will be participating in an exploration campaign in an offshore basin with analogous geology to West Africa and Brazil.”

Link to entire article: http://www.upstreamonline.com/live/article1248256.ece

Robert Rodriguez Q1 Commentary

Your portfolio underperformed its benchmarks in the first quarter of 2012. There were a number of stocks that substantially appreciated in the quarter, but the portfolio’s cash position held back the overall performance. We have written many times in the past, and will continue to mention in the future, our absolute value investment strategy can lag the stock market indices when they are not only rising rapidly, but also richly valued.

As we mentioned last year when we exhibited strong outperformance, our objective is to generate superior returns over a full cycle,  during which we expect to experience periods of underperformance. We are constantly assessing the risk-to-reward ratio of the portfolio’s investments, and as stocks appreciate – all else being equal - the risk-to-reward ratios become less attractive. Hence, in order to protect against permanent impairment of capital, our strategy requires that we trim back or sell positions when stocks reach fair or premium valuations, based on our view of normalized revenues and profit margins.

With most of the major indices exhibiting strong gains in the quarter, it is clear investors are feeling more bullish on the U.S. economy and corporate profits. This bullishness translates into the high price-to-earnings ratio (P/E) that investors are paying for companies today. For example, the P/E ratio for the Russell 2000 and 2500 rose from 23.0x and 20.2x, respectively, at the end of 2011, to current levels of 25.2x and 22.6x. These are very high multiples, exacerbated by the fact that profit margins are near all-time highs. Your account currently has a weighted average P/E of approximately 13x.  Remember, our fishing hole for investments includes only small-to-mid capitalization companies, not the large mega-cap companies like Apple, Exxon, or Wal-Mart, which today are relatively cheaper than smaller companies.

Link to entire report: http://www.fpafunds.com/docs/hc_capital/smav-commentary-and-outlook-2012-q1.pdf?sfvrsn=2

Bill Ackman Tells CNBC He Was Motivated By Sex

Hey, he said it, not me:

Oil India Interested in Chesapeake's Mississippi Lime Assets

(Reuters) - State-run Oil India (OILI.NS) is looking to buy stakes in U.S. gas driller Chesapeake Energy Corp.'s (CHK.N) Mississippi Lime basin and ConocoPhillips' (COP.N) oil sand assets in Canada, its head of finance said on Monday.

The cash-rich Indian explorer, whose assets in India's north-east account for its entire crude oil production and the bulk of gas production, has been aggressively scouting to bolster its overseas assets portfolio.

Oil India has earmarked 60-70 billion rupees ($1.3 billion) for overseas acquisition, T.K. Ananth Kumar told reporters after announcing the company's quarterly results.

He said the company had identified the U.S., Canada, Australia and parts of Africa for acquisitions and hoped to seal a deal in the current fiscal year that began on April 1.

When asked if the opportunities included Chesapeake's Mississippi stake, to which the company had earlier been linked, he replied "yes".

Link to entire article: http://www.reuters.com/article/2012/05/28/us-oilindia-chesapeake-idUSBRE84R0DQ20120528?feedType=RSS&feedName=innovationNews&rpc=43

Gulf Keystone Spuds Exploration Well

How many multiples of the current share price would this company be trading for if this oil was in North America?

http://www.rigzone.com/news/article.asp?a_id=118166

DealBook on the Venoco Management Buyout

Some interesting detail for those who have followed the story:

Some corporate decisions leave you wondering what the board might have been thinking at the time. That seems to be the case with the board of Venoco, a California oil company that is the subject of a proposed $770 million management buyout.

On Jan. 16, the Venoco board of directors agreed to let the company be acquired by its chairman and chief executive, Timothy Marquez, for $12.50 a share. The deal came after Mr. Marquez, the owner of 50.32 percent of the company, and the board had announced that he had made a bid in August 2011 at the same price.

Management buyouts are fraught with peril, and the reasons are fairly obvious. Management not only has superior information about the business, but studies have also found that managers can time a bid opportunistically to pay a lower price.

Link to article: http://dealbook.nytimes.com/2012/05/25/management-buyouts-can-be-too-cozy/

Justin Beiber "Roughs Up" A Photographer

I have to admit that Beiber is one of the most intimidating 13 year old girls I've seen.......

http://www.dailymail.co.uk/tvshowbiz/article-2150862/Justin-Bieber-roughs-photographer-date-Selena-Gomez.html

Iran Will Not Halt Uranium Enrichment

TEHRAN - Iran's nuclear chief, reversing the country's previous statements, said on state television on Sunday that the country would not halt its production of higher-grade uranium, suggesting that the Iranian government was veering back to a much harder line after talks in Baghdad with the West last week ended badly.

The official, Fereydoon Abbasi, said there would be no suspension of enrichment by Iran, the central requirement of several United Nations Security Council resolutions. He specifically said that applied to uranium being enriched to 20 percent purity - a steppingstone that puts it in fairly easy reach of producing highly enriched uranium that can be used for nuclear weapons.

"We have no reason to retreat from producing the 20 percent, because we need 20 percent uranium just as much to meet our needs," Mr. Abbasi said, according to Iranian state television.

Mr. Abbasi's statement will be of particular concern to the United States and Israel because Iran is producing more of its 20 percent enriched uranium in a deep underground site that is considered highly resistant to bombing. The site, called Fordow, is on a military base and was discovered by Western intelligence agencies several years ago, but Iran only acknowledged the work there in 2009.

The Fordow plant, near the holy city of Qum, is so deep that Israeli officials say if Iran makes progress there, it will have entered a "zone of immunity" where it would be safe from Israeli or American military action. Getting Iran to halt its 20 percent enrichment, and ultimately dismantle and close the Fordow plant, has been described by American officials as their top priority.

Mr. Abbasi's remarks, which included an announcement that Iran would start building two nuclear power plants in 2013, are bound to complicate the already difficult nuclear talks between Iran and the world powers, which are to be continued in Moscow on June 18. If the talks fail, the powers are planning to tighten sanctions on Iranian exports and financial dealings as early as July 1, including placing an embargo on all sales of Iranian oil to Europe.

Link to full article: http://mobile.nytimes.com/2012/05/28/world/middleeast/iran-wont-halt-production-of-higher-grade-uranium.xml

Sheila Bair - Dimon Should Break Up JP Morgan

FORTUNE – When I was a child, my sister and I loved watching the goings-on at a chicken farm near my grandmother's house in rural Kansas. Chickens are interesting social animals, resembling, somewhat, the way we in Washington interact with one another. They were always on the lookout for one vulnerable bird that they would corner in the coop and then peck relentlessly on its head.

Jamie Dimon, the CEO of J.P. Morgan Chase (JPM), is getting his head pecked these days. To be sure, he set himself up for it by very publicly leading the industry chorus of criticism against key financial reforms. He has made many good decisions for his bank, but Chase's recent serious missteps have provided reform advocates with loads of ammunition. I mean, really. Losing $2 billion (and counting) by "hedging" a bond portfolio against losses? What were he and his minions thinking? If Dimon wants to regain his place in the pecking order, he should take the initiative and shrink Chase to a manageable size.

Entire article: http://finance.fortune.cnn.com/2012/05/25/jp-morgan-chase-breakup/?iid=HP_River

Why American Nat Gas Will Change the World

‘It was the best of times; it was the worst of times’ – never a truer word spoken for the gas industry. Whilst Chesapeake is fighting for its life in the US, spot gas prices are reaching all-time highs in Asia. In this ‘Tale of Two Cities’ you’ll get $2/MMBtu inNew York (Henry Hub) and around $20/MMBtu in Singapore (Asian spot). The divorce between the Atlantic Basin and Pacific Basin couldn’t be any starker – the question is whether these spreads will incrementally narrow under inexorable laws of economics, or whether politics will throw a spanner in the works. Depending on how you answer this ‘convergence question’ will have dramatic implications for hydrocarbon asset prices in the years to come. Not to mention the contours of international energy relations.

‘Convergence’ makes most sense for the US of course – Chesapeake’s foibles merely mask a structural problem for American gas players; they are selling their gas for a pittance in the US when they could be making an absolute killing overseas, roughly to the tune of $1bn spreads a day in Asia. Whatever the economic merits of keeping ‘US gas for US consumers’ improving balance of payments, fast tracking coal to gas for emissions, as far as gas players are concerned, it’s still a damp squib. Great, they’ll get $5/MMBtu rather than $2/MMBtu with some unfortunate mothballing / defaults in between. Not exactly the giddy heights of Asian LNG.

Link to entire article: http://www.forbes.com/sites/matthewhulbert/2012/05/26/why-american-natural-gas-will-change-the-world/

Aubrey McClendon - Billionaire Wildcatter

Before we sit down to a dinner of steak and fries, billionaire wildcatter Aubrey McClendonhandles the wine bottles arrayed on the table of Oklahoma City’s well-worn Deep Fork Grill. “This one’s okay, a $10 wine. Here’s another $10 wine.” He grins: “It’s up to you, Chris: We can drink cheap wine, or we can drink good wine.”

McClendon’s proposition was rhetorical. He co-owns the restaurant and had already picked the wine, which was decanted two hours ahead of time. Only the royal stuff: a 1989 Petrus, a 1989 Haut Brion and, conspicuously, a 1982 Lafite Rothschild. Easily ten grand worth of tipple.

Erudite and confident, with rimless glasses pinned to a face that looks far younger than his 52 years, McClendon is charming. And he’s not shy about spending money. Professionally, he’s combined those attributes to stunning effect, building Chesapeake Energyinto the nation’s second-biggest producer of natural gas after ExxonMobil, pumping 3 billion cubic feet per day out of the 13.7 million acres it controls—a landholding roughly equivalent to West Virginia.

Link to entire article: http://www.forbes.com/sites/christopherhelman/2011/10/05/aubrey-mcclendon-chesapeake-billionaire-wildcatter-shale/