What do you call people who follow Warren Buffet sycophantically? They call people who think it’s a good idea to invest a portion of one’s portfolio in gold, “gold bugs”. So perhaps we should call them “Buffet Bugs”. Isn’t that grown-up of me?
What does the sale of Daylight Energy tell us about the value of Petrobakken?
What does the sale of Brigham Exploration tells us about the value of Petrobakken?
Reflexions on Petrobakken (Updated)
Petrobakken has sold 7% of their Bakken business unit to Crescent Point for $427 million. Their press release says:
The Bakken Business Unit will continue to represent a significant portion of our corporate asset base as this sale represents only 7% of the Business Unit’s land holdings and approximately 12% of its production. Assuming successful completion of this Transaction, our average working interest in our remaining Bakken Business Unit lands will increase from 82% to 86% and we will continue to have over 700 net drilling locations in the Business Unit, representing approximately 10 years of drilling inventory.
In the past two years, Crescent Point has received market love. Its managers are hailed as brilliant and it is consistently able to raise money in the form of new issues. Petrobakken and Petrobank, however, have struggled to get the same kind of love. As a result, Petrobakken/Petrobank has been the better deal for value investors–whereas there seems to be a premium on the shares of CPG compared to industry peers, Petrobakken is still selling at a deep discount to value.
The implied value of Petrobakken’s Bakken Unit
If 7% of the Bakken Business Unit sells for $427 million, the implied value of the remaining unit is: $5.673 billion (427 = .07b; b=6,100 whole bakken unit; remaining Bakken = 6,100-427= 5,673). Petrobakken’s total market capital is currently $2.5 billion. This means that the current market price of Petrobakken sells at a 50% discount to the Bakken business unit alone. Don’t take my word for it. Take the value that the industry’s smartest managers, Crescent Point, have just given to the 7% that they bought. Crescent Point has just done a great favor to Petrobakken by showing that its stock is worth closer to $30 per share (not counting remaining debt and the value of its other holdings, including its Cardium, which I would argue is much more than zero dollars per share).
Disclosure: I am long PBN, PBG and CPG.
See the first installment of this series: Sweeter than Honey I: Introduction
Petros continues the series of posts comparing the law codes of ancient Israel, the United States Constitution, and the Internal Revenue Code. This post considers what the law implies about the purpose of man.
Laws guide behaviour of people in a community. They instruct what the member of the community is forbidden to do and what the member of the community must do. They therefore imply something about the nature of man (both men and women) and his purpose. We shall therefore look at three different law codes to determine what these they imply about man’s purpose.
The purpose of man in the Ten Commandments and the Torah
The Ten Commandments begin with the line, “I am the LORD your God, who brought you out of Egypt, out of the land of slavery.” God, who created the heavens and the earth and everything in them, had set apart the children of Israel as people unto himself. Furthermore, he had demonstrated to them his power and his concern for them by setting them free from the slavery of Pharaoh in the most dramatic fashion. Therefore, he set the Torah over them as a suzerainty treaty with blessings for those who obey and curses for those who refuse.
Now first, the Ten Commandments govern man’s relationship to God: (1) to worship the God exclusively and to worship no idols (Commands 1-2); (2) to not use his name in vain (Command 3); and to keep the Sabbath day holy set apart for rest and for the worship of God (Command 4). Secondly, the Ten Commandments (esp., 4-10) guide relationships between humans to maintain peaceful relationships within the community. The rest of the Torah sets events of the Exodus in a narrative context and provide casuistic embodiment to the Ten Commandments. Thus, the Pentateuch is a sort of narrative commentary on the basic laws set out in the Decalogue.
The Decalogue can be further epitomized in two commands, “Hear, O Israel: The LORD our God, the LORD is one. Love the LORD your God with all your heart and with all your soul and with all your strength” (Deut 6.4); and, “… love your neighbour as yourself. I am the LORD” (Lev 19.18). Each of these commands relies on the nature and character of God and his relationship to the people. Thus, the Torah claims that man’s purpose under the Law is to love God and to love his neighbour.
The purpose of man in the Constitution and the Bill of Rights
The purpose of man in the Constitution stems from the great awakening of the individual conscience in Western culture that began to blossom with the Renaissance and came to fruition in the Enlightenment: man is now an individual and his greatest good is to pursue happiness as a free person; this is man’s God-given, inalienable right, as enshrined into the basis of U.S. law by the Declaration of Independence. The People later established the Constitution in order to form a more perfect government which would protect the rights which the colonists had fought for in their Revolutionary War of independence from King George of England. The Constitution created three branches of government with limitations of power; each branch could check and balance the others. Moreover, the Constitution strictly limited these powers. Yet the states would not ratify this text without a further Ten Amendments, all of which strictly and explicitly limit the power of the Federal Government. Indeed, the Tenth Amendment says that the United States has only explicit powers and any other power not explicitly laid out in the constitution was to be the sole reserve of the States and the People:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
The purpose of man in the Internal Revenue Code
The convoluted Internal Revenue Code is too extensive for a layman to discern a coherent narrative. Therefore, it is perhaps best to allow the IRS, that body created to enforce the code, to explain to us what is the purpose of man. In a newsroom release, the IRS explains how it is necessary to do past un-filed returns; it offers the following rationale:
Filing tax returns and paying the correct amount of tax is good citizenship. Conscientiously discharging this duty contributes to our nation’s well being and provides peace of mind. And failing to file returns can jeopardize a family’s financial security and future.
This is amazing. The two inevitabilities of life are death and taxes. Imagine if everyone believed that our purpose is to die–then what would be the point in continuing? And yet, the IRS says, in not so many words, “Your purpose is to pay taxes.” Indeed, we see that this mentality pervades the IRS. In a recent comment at the Isaac Brock Society, by 30-yr IRS Vet, who worked in the bowels of the IRS as a litigator, we learned the following rational for FATCA (emphasis mine):
FATCA was conceived because our system of voluntarily self-reporting income and deductions was not working. The theory is, in a democratic society, the government has no right or reason to know what assets we hold or the extent of our personal wealth. The theory is that with an enlightened and educated citizenry, we are on our honor to honestly report our gains and losses on our tax returns. Unfortunately, the government concluded that that was not happening and many Americans were using off shore bank accounts and other foreign investments to cheat their fellow Americans by not paying their fair share.
FATCA was designed to target Americans who were cheating on their taxes through the use of offshore accounts. FATCA is a sad commentary on the fact that in some instances, our honor system was not working. No one in the US government was thinking of Canadian citizens who had little or no connection to the United States when FATCA was enacted.
This accurately reflects the mentality of the IRS. The purpose of man is that each pay his fair share of taxes. That is the greater good. In order to achieve that we must sacrifice our working theory of a democratic society, that each individual has inalienable rights, such as the right not to have his castle ransacked by government without a specific warrant–the intent of the Fourth Amendment was to abolish general warrants such as FBAR, which requires citizens to divulge their bank papers to government without the need of a warrant based on probable cause. But why would Congress create an IRS that had the power to levy draconian fines upon a people for refusing to relinquish voluntarily their Fourth Amendment rights? Because the purpose of man has changed from that of seeking his own happiness in a free country–to one of paying his fair share of taxes.
The real problem for Christians, Jews or adherents of any other religion, is that the Internal Revenue Code redefines humans as no longer owing their allegiance first to their god, but it makes the state itself into the god to whom one owes full allegiance. In a real sense then, the Internal Revenue Code recognizes no other god except the State and expects all others to bow down only to the State. And the IRS are the priests of this state religion. It is not the first time that a political power has required worship. One only needs to look at defied Roman emperors to whom one had to burn incense or die, or at the Chinese emperors or Egyptian Pharoahs who were worshipped as gods on earth. This is idolatry of the state, and those who actually still believe in the Ten Commandments must resist it, as the First Commandment states: “You shall have no other gods before me.” But also to the secularist living in a secular state, the making of the state itself into a god, to whom all allegiance is due, is repugnant.
David son of Jesse of the tribe of Judah wrote many psalms. One such psalm records the following words as translated from the original Hebrew text (Psalm 19:7–10; RSV):
The law of the LORD is perfect, reviving the soul;
the testimony of the LORD is sure, making wise the simple;
the precepts of the LORD are right, rejoicing the heart;
the commandment of the LORD is pure, enlightening the eyes;
the fear of the LORD is clean, enduring for ever;
the ordinances of the LORD are true, and righteous altogether.
More to be desired are they than gold, even much fine gold;
sweeter also than honey and drippings of the honeycomb.
This text is striking when we compare it to our own situation vis-à-vis the Federal Law code in the United States. The law of Israel was summarized in the Ten Commandments and expanded in the first five books of the Bible, known as the Pentateuch or the Torah. The Ten Commandments contain 149 words in the Hebrew text. The whole Torah contains about 80,000 words in the original text. It is simple, understandable, even elegant.
The basis of the laws of the United States is the constitution and the most important principles contained in it are the first Ten Amendments. The US constitution (body) contains about 4500 words; the first Ten Amendments are 482 words. It is simple, understandable, even elegant.
The number of words in the Internal Revenue Code is a difficult thing to estimate. One blogger writes:
By the way, if you go to the US Government Printing Office (www.gpo.gov), you can order a complete set of Title 26 of the US Code of Federal Regulations (that’s the part written by the IRS), all twenty volumes of it, at the bargain price of $974, shipping included.
According to the US Government Printing Office, it’s 13,458 pages in total. The full text of Title 26 of the United States Code (the part written by Congress–available for an additional $179) is a mere 3,387 printed pages, bringing the adjusted gross page count to 16,845.
The number of words has been left as an exercise for the student.
The Internal Revenue code is difficult, obtuse, requiring experts to understand it. Can you imagine anyone extolling this Internal Revenue Code as sweeter than the honey? No? I can’t either. Yet David wrote many generations after Moses handed down the law. David wrote Psalm 19 not as a lawyer, a priest or a king, though he became king of Israel later; but as a poor shepherd boy who tended sheep and composed many of his great hymns as he worshipped God under an open sky. He was just an ordinary person who had great admiration for the law of his people.
He looked to the law to guide him in his everyday life, to show him wisdom and to understand what is right and wrong. He often fell short. He is a famous adulterer and murderer. He found himself in violation of the Law, and yet I would venture that even at the end of his life, after so many miserable failures, he could still sing the words of Psalm 19 to the God of the Torah.
By contrast, I have no praise for the Internal Revenue Code of the United States. Who does? Even those who enforce it find it so hopelessly complicated that they inadvertently violate its demands (Geithner) or require a professional in order to comply with it (Shulman). I only have loathing and resentment for this so-called law that instructs me neither in wisdom nor in the difference between right and wrong. It is only a burden put on my shoulders that I am unable to bear. This law is oppressive and destructive. It makes what should be a free people into slaves. It is more bitter than vomit in my mouth.
I propose in the next few days to discuss the IRS code in comparison to two other great law codes: (1) the Ten Commandments and the Torah; and (2) the Bill of Rights (Ten Amendments) and the United States Constitution. Over the course of these posts I will compare these law codes under the following categories:
- The purpose of man
- The purpose of the law
- The knowability of the law
Law is not supposed to be a thing that causes estrangement and hostility. Rather, it should guide our relationships with one another and help us to achieve harmony and prosperity, what the Hebrews called shalom. When law helps us achieve shalom, it is sweeter than honey. Our laws today do not lead to shalom; they have become instead an instrument of State control in our lives, and thus they have become more bitter than vomit.