Saturday, August 02, 2008

Weekend Beach Reading: Monday, August 4, 2008

In the first half of 2008, net income at Arch Coal (ACI-$54.21) nearly tripled to $194.1 million compared with the first half of 2007. The company’s latest operating performance offers more evidence of tight supply conditions and strong demand for coal globally.

Energy watchers buzzed over the announcement that Brigham Exploration (BEXP-$13.98) completed its Mrachek 15-22 1H well, located west of the Nesson Anticline in North Dakota, at an early flowing production rate of approximately 727 barrels of oil equivalent per day. Contrary to expectations, given the highly variable nature of the Bakken Shale Formation reservoirs stretching across North Dakota and Montana,
it is unlikely that aggregate Bakken production will exceed more than three times the current rate of 1,276 barrels equivalent per day in North Dakota.

ExxonMobil (XOM-$79.72) announced record net income of $11.7 billion in the second quarter, up 14 percent from last year, due to record-high oil prices. Management said, however, aggregate oil and gas production slipped 7.8 percent. The Company also spent $8.8 billion on repurchases during the second quarter. Given growing global restrictions on its access to productive reserves,
is a stock buyback the most prudent expenditure?

GT Solar Holdings, LLC, sold 30.3 million shares of its stake in GT Solar International (SOLR-$11.88) at a price of $16.50 per share, leaving the investment entity with a 78.3 percent controlling interest after the initial public offering. The solar-cell equipment supplier lost about 30 percent in market value in its first two days as a public company, suggesting the heretofore unthinkable —
the growth outlook for solar fabrication makers might be powering down.

Although he failed to meet fiscal 2008 performance goals — implementation of Sarbanes-Oxley initiatives and gross margin and net income targets — the Board of Hoku Scientific (HOKU-$6.06) is paying chairman and CEO Dustin M. Shindo a cash incentive payment of $760,000, or 200 percent of base salary for the year that ended in March.
Hoku is rewarding Shindo more for his ability to raise capital than actual management or business strategy skills.

Like most of its coal-mining peers, Peabody Energy (BTU-$64.77) benefited from favorable supply and demand fundamentals in the second quarter. Continued higher-than-expected prices, combined with significant open-ended supply agreements (unlocked pricing) on future tonnage, positions the company to record fiscal 2009 and 2010 earnings, too.
How long before the discussion on windfall profit taxes shifts from oil to coal on Capitol Hill?

Schlumberger Ltd. (SLB-$100.20) said its second-quarter profit rose 13 percent year-on-year to $1.42 billion, as higher oil and natural gas prices led to record spending among customers seeking to renew reserves.
Could the shift of oil-wealth management from integrated oil companies to nation states be a big plus for oil-service contract companies?

Valence Technology (VLNC-$3.75) claims that more than 100 companies are testing or have implemented its energy storage technology. The only way the lithium-battery maker
can cover its working capital needs, however, is by borrowing monies from founder and chairman Carl Berg, according to its proxy statement.

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

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