When a UCLA professor embarks (on a Saturday night!) on reasoning this sloppy, fact-less, substance-less, on one of the most notorious message boards around, we have to assume it’s done on purpose, with a purpose.
Corrupt or merely grossly incompetent, take your pick. UCLA professor Eric Sussman, about whom we’ve reported before, is at it again. We wonder whether UCLA professors don’t have something better to do than to utter nonsense on one of the most notorious message boards? Especially if there isn’t even a single fact (controllable or otherwise) in his exposé’s, just a whooooole lot of innuendo (partially contradictory even), guilt-by-association type accusations that even on perfunctory assessment are wholly inadequate, false claims about analysts, generalizing from single (inapplicable) examples, and displaying a shocking lack in knowledge about the energy resource sector…
Spending his Saturday night on a message board, despite having two full-time jobs and usually no (short) position in the stock. And that for six years running, thousands of messages without ever having posted even a single message on any other company? One wonders. What’s it all about, Mr. Sussman?
I steer clear or short via calls these sort of hyped story stocks. [Sussman]
Well, he nevertheless goes in full steam ahead, completely unhampered by any knowledge, arguing and insinuating all kinds of funny stuff. A selection:
Explanation for the share drop
In one word, Sino-Forest. Sino-Forest has perhaps made some of these instutional (and other?) investors realize the sort of additional risks that exist when you invest in natural resource stocks in EDCs like PNG or even places like China. They are hard to audit and value, and WS analysts are especially ill-equipped to do the job.[Sussman]
Is this anywhere near comparable? Not really:
- Is Mr. Sussman aware that it’s not even clear Sino-Forest is a fraud, as it happens?
- Isn’t suggesting a company (InterOil) might be a fraud by comparing it with another company (Sino), a simple trick enabling to suggest InterOil is a fraud without actually having to substantiate such claim in any way with data, facts, or information? Isn’t this just a simple guilt by association trick that releases the author to having to substantiate his claims about InterOil?
- Is Mr. Sussman aware of the fact that InterOil hasn’t got its NYSE listing through any ‘reverse merger’?
- Is Mr. Sussman aware that the category under suspicion is those Chinese smallcaps which got their American listing through a reverse merger?
- Is Mr. Sussman aware of four resource evaluation reports by two different reputable companies on InterOil’s resources?
- Can Mr. Sussman spell out where Sino-Forrest has a similar level of independent resource evaluation?
- Even if it did, would that prove, or even say anything about InterOil?
- Isn’t it a fact that while independent resource evaluators can be wrong, in nearly all cases (with rather minor variations) they’re right?
- Does Mr. Sussman have any data, information, or reasoning to substantiate, or even suggest, that InterOil’s independent resource audits are substantially misleading?
- Isn’t it the case that a merely suggestion that independent resource evaluators can be wrong without being able to put forward a single datapoint or reason to substantiate they’re wrong in this particular case (that of InterOil) a thinly veiled scare tactic based on, well, nothing substantive at all?
- Shouldn’t we, in the absence of any data or information (or any other substantiation to prove, or even half convincingly argue) showing that InterOil’s resource evaluations are wrong, take these reports at face value instead, at least until any such data or information contracting these reports emerges?
- Is not doing so not just an exercise in arguing without any substantiation, a habit someone like Mr. Sussman (a university lecturer) should have long shedded?
- Can Mr. Sussman explain why this kind of reasoning is so characteristic of his Yahoo postings on InterOil?
We conclude: a typical guilt by association hack job, suggesting InterOil is a fraud without spelling out why (no details, facts, analysis), but linking it instead to another company, without spelling out anything, that’s proving exactly nothing (but a rather maliscious attempt to suggest InterOil might be a fraud, without having to spell out why).
InterOil isn’t Chinese, hasn’t got its listing through a reverse merger and does have 4 different independent resource audits in three years from two different companies.
Very impressive, Mr. Sussman. What did they teach you at UCLA about standards of proof? Apparently not anything that has stuck with Mr. Sussman. Nothing at all. Of course, the other explanation would be to assume that Mr. Sussman hasn’t forgotten his university lessons, but purposely ignores them when writing about InterOil.
About Matt Badiali
Matt Badiali? Isn’t he a former photographer or something? [Sussman]
Wow! He has a college degree in geology! Puhlease. I think you are confusing education with experience, knowledge, and even intelligence…. How many years did he work for O&G exploration firms? Has he ever worked for a company where he was responsible for monetizing those assets in any way, shape, or form? Has he ever worked for any period of time in PNG or any third world country? [Sussman]
DW: this is exactly what I am talking about. Visting PNG and wellheads is not due diligence. Or, put it this way. It is due diligence, but the most minimal kind. [Sussman]
Of course, he doesn’t. Not a clue. He bragged about how he sent one of his associates to PNG and was so impressed by what he saw, etc., and that was what got him hooked on IOC. That told me that this guy is a riverboat gambler, who has nothing to add to the analysis, as though a visit to PNG would provide great insight into a gas resource below the ground. [Sussman]
Matt Badiali a former photographer? Come on, Mr. Sussman, you can do better than that! Or actually, perhaps not:
- Isn’t this kind of ‘on the ground’ research exactly what is needed in cases like Sino-Forrest? Instead of dismissing it (and the analysts executing it) offhand, would such exercise not have almost certainly brought to light any fraud by Sino (if there actually is any)?
- So instead of dismissing it off-hand, it should have gotten a long way in easing any fears that InterOil was anything like Sino-Forrest (on top of being no reverse merger and having independent resource audits)? Should Mr. Sussman not, therefore have welcomed this PNG visit wholeheartedly instead?
- Is Mr. Sussman aware of what the due dilligence Badiali and his ‘associate’ (who happens to be Texas oilman Cactus Schroeder) involved?
- Can Mr. Sussman point out any errors, omissions, exaggerations, or unrealistic assumptions in Badiali’s report?
- Can Mr. Sussman spell out his industry qualifications for assessing his report?
- Has he actually read it (one needs a subscription to do so)?
- Isn’t Badiali and Cactus Schroeder way more experienced and trained to interpret the resource data, could they have seen proprietary data from the well testing?
- Is Mr. Sussman aware of the fact that, although he might also be a photographer, Mr. Badiali is in fact a geologist and Mr. Schroeder a texas oil wildcatter with decades of experience in the industry?
Here is what Stansberry had to say about that PNG trip:
We sent analyst Matt Badiali to Papua New Guinea to research the company in person. And we sent our friend Cactus Schroeder with him. Cactus is a Texas wildcatter. He knows more about on-the-ground oil and gas research than anyone we know (he just sold his last discovery in Texas’ Eagle Ford for $1 billion). The only reason we were able to maintain conviction on InterOil is because of our on-the-ground research… Matt actually walked InterOil’s discovery, halfway across the world. He spoke with top management and other analysts. He listened to every opinion out there.[Growthstockwire]
About other analysts
Look at the IOC analysts. Evan Calio is a perfect example. He’s an MBA from Cornell, as I recall, and worked at the SEC before joining MS. Best I can tell, he has zero real world experience in O&G. [Sussman]
Until one of these so-called analysts can really get their arms around – and comment intelligently about – Mitsui, Flex, EWC, PNG leadership, etc., they really have nothing to add to the analysis… [Sussman]
Wayne Andrews was the only one with geologist training, and he went to go work for the company, after cheerleading about it for years? [Sussman]
There he goes again, but it doesn’t hold any more substance this time:
- Is Mr. Sussman aware that Evan Calio is Morgan Stanley’s premier energy analyst (writing about companies like Chevron, ConocoPhillips, Exxon, Hess, Marathon, Occidental Petroleum, amongst others)?
- Can Mr. Sussman point out where Mr. Calio is wrong, or has been proven wrong by others?
- Can Mr. Sussman point out any inaccuracies, overestimates, unrealistic assumptions, etc. in Calio’s reports on InterOil?
- Can Mr. Sussman spell out what kind of industry experience or background knowledge he possess that qualifies him to belittle Mr. Calio?
- Has Mr. Sussman himself commented “intelligently” about Mitsui, Flex, EWC, PNG leadership, etc.?
- And even if he did comment what qualifies him, over and above analyst with industry training and experience, to do so?
- Has Mr. Sussman been able to point anything out as wrong, exaggerated, or contradictory in the writing of these analysts?
- Does Mr. Sussman think it’s fair to brush aside a host of reports and even the analyst itself without having any qualifications to judge his work and not having pointed out even a single item wrong with the analyst’s work?
- Can Mr. Sussman point out where Mr. Andrews was “cheerleading” in the form of being wrong, exaggerating, or unduly optimistic?
- Isn’t it a fact that Mr. Andrews 2004 presentation of possible resource finds (before the first find at Elk1 in 2006) turns out to have been, well, pretty accurate?
- Isn’t the fact that a trained geologist with a good job and deep knowledge about the company joining the company a positive, rather than a negative sign for InterOil?
Argues that a world-class resource might not be monetized with examples from real-estate in LA
If you want to read a story that is not just interesting, but sort of relevant, just Google “California Coastal Commission and U2’s the Edge”. 100 acres is not 100 acres, even in Malibu…or it’s not worth what it should be because it cannot be monetized.[Sussman]
Soo, Elk/Antelope will not be monetized because Bono made a mistake with real-estate in LA? Huh?
- Uhhm, didn’t they teach Mr. Sussman in university that one cannot generalize from a single example (especially one so unrelated as his one)?
- Isn’t it true that the odds of prime resources getting developed are overwhelmingly favorable, even if one is able come up with a single counter example from a completely unrelated industry?
- Can he name any other energy resource of similar quantity and quality that didn’t get monetized?
About the resource
Claims of substantial assets. [Sussman]
InterOil doesn’t just “claim”, Mr. Sussman…
- “Claims?” What “claims??” Does Mr. Sussman try to suggest that InterOil makes “claims” that cannot, or even have not been substantiated?
- Is Mr. Sussman aware that GLJ, one of Canada’s premier resource evaluators, did a resource evaluation three years running?
- Is Mr. Sussman aware of Knowledge Reservoir’s evaluation (even before Antelope 2)?
- Is Mr. Sussman aware of the unusually impressive well data from the Elk/Antelope resource?
- Is Mr. Sussman aware that InterOil doesn’t execute any of the testing (DST’s, coring, seismics, logs, etc.), that these are executed by third parties like Schlumberger and Weatherford?
- Can Mr. Sussman provide any company communication where they “claim” anything beyond the GLJ reports?
- So what does IOC in fact “claim?”
US spot market relevant for, what?
As an encore, we’ll leave you with an example of the “depth” of Mr. Sussman’s energy market knowledge. One would think (or at least hope) that after thousands of post on the Yahoo InterOil boards for six years running, he could at least get some of the basics right. Alas.. Talking about US spot and future gas prices:
Now, Stp has argued time and again that the spot market for natural gas is irrelevant vis a vis IOC, because all that matters is 2014-2015 in Asia. I have countered back at him that he is wrong, because i) spot prices are highly correlated to future prices; and, ii) investment and financing decisions are made today, and therefore, the spot markets are extremely relevant.[Sussman]
Really, Mr. Sussman?
- Is Mr. Sussman aware that gas in Asia is overwhelmingly sold in long-term off-take agreements lasting 15 years upwards?
- In IOC’s case, that would mean selling gas from 2014 (at the earliest) onwards (15-25 year contracts). Is Mr. Sussman aware of any gas futures covering that period?
- Can Mr. Sussman explain how (if at all) US gas futures influence the Asian LNG market, providing that the US doesn’t export any gas and prices in Asia are 2-3x as high?
- Is Mr. Sussman aware of the fact that in long-term LNG off-take deals in Asia, the negotiated price is almost always linked to that of crude oil (usually by some sliding scale)?
- So can Mr. Sussman actually spell out how any US gas price, whether spot or future, will have any impact whatsoever on LNG off-take pricing in Asia for deals?
On Papua New Guinea (PNG) he seems equally clueless:
“Business as usual” has meant a dearth of economic development, a dearth of significant risk capital, a dearth of projects to monetize O&G prospects and resources in the country, which have been known to exist for quite some time. [Sussman]
- Is Mr. Sussman aware of the economic growth rate of PNG?
- Is Mr. Sussman aware of a host of foreign investment in the PNG resource sector?
Which is, well, really curious, as just minutes later, he argues:
Politics and rhetoric and promises all go hand in hand. I prefer to watch what the private sector does and their money. When the actual billions of private sector dollars comes in, let me know. [Sussman]
- By linking InterOil with Sino-Forrest, Mr. Sussman releases himself from providing any data, fact, or information that could substantiate, or even indicate InterOil is a fraud, embarking on a cheap guilt-by-association type of reasoning.
- Even that guilt-by-association’ exercise is terribly weak:
- 1) InterOil isn’t a Chinese company
- 2) InterOil hasn’t gotten its listing through a ‘reverse merger’
- 3) InterOil has (unlike Sino-Forrest) four independent resource audits by two different companies in the last three years
- 4) At this stage, it’s not even clear Sino-Forrest is actually a fraud, something Mr. Sussman seems blissfully unaware off
- Having warmed up, Mr. Sussman then goes on to dismiss several well-known analyst. Not only does he get the qualifications of almost all of them wrong, we wonder, what kind of qualifications does he have to judge them?
- We’ve provided some examples that are illustrative of his ‘knowledge’ (or lack thereof) of the energy resource space
- Mr. Sussman’s dismissal of analysts is a proxy for dismissing their research reports. It’s a clever exercise that releases him having to deal with the reports themselves, as he can’t point out even a single item that is wrong with them.
- By likening InterOil to Sino-Forrest, Mr. Sussman should have warmly embraced the trip of Matt Badiali and Cactus Schroeder (unlike what Mr. Sussman alleges, these are highly experienced industry men, unlike Mr. Sussman himself) to PNG. Instead, he rubbishes it.
There are many more similar examples, but you got the picture, when reasoning is this sloppy, but is nevertheless uttered by a university lecturer (on a Saturday night!), we have to assume it’s purposely sloppy. We stand by our earlier judgement, based on similar sloppy and substance-less reasoning that Mr. Sussman is corrupt. He could and should know better, but chooses not to.
But by all means, judge for yourself.