Colorado Companies face a test

[dan_s]

Upstream companies with assets in Colorado would be hurt if the initiatives to ban fracking are voted into law. IMO it is HIGHLY UNLIKELY that they will pass, but one never knows what those smoking dope will do. - Dan

Stifel's comments:
Colorado Initiatives Appear Headed for Vote
We believe 2 initiatives that could essentially eliminate oil and gas development in CO and have weighed on
stocks with DJ Basin exposure are unlikely to be voted into law.

Signatures Submitted
Signatures for initiatives #75 and #78 were submitted to the Secretary of State in Colorado for verification before today's
deadline.
> Initiative #75 proposes to grant regulation of oil and gas development to local communities including authorizing
them to prohibit, limit, or impose moratoriums on development. Currently the state regulates oil and gas activities.
> Initiative #78 would increase the mandatory setback from new oil and gas development facilities to 2,500’ from the nearest
occupied structure vs the current rule of 500’. The initiative would also apply to “areas of special concern” such as canals,
intermittent streams, and other specified or locally designated areas. The broad definition would place 90-95% of the land
in the state’s top five oil and gas producing counties off limits to further oil and gas development according to studies done
by the Colorado Oil and Gas Commission and the University of Colorado.

Verification Process
The Secretary of State’s office has 30 days to determine the number of valid signatures for these and other proposals.
Our sources indicate that the proponents struggled to gain signatures although we would be surprised if either measure
fell short of the 98,492 valid signature mark required for inclusion on the November 8th Colorado ballot.

Ballot Risk Weighing on Stocks with DJ Exposure
Stocks with DJ Basin exposure have under-performed our peer group this year, largely due to Colorado’s political risk. For
example, pure plays such as SYRG (Buy, $6.31, TP: $10.00) and PDCE (Buy, $55.54, TP: $70.00) are down 37% and
7% YTD vs our group average of +18%. NBL (Buy, $33.48, TP: $45.00) and APC (Hold, $53.05), larger companies with
significant DJ Basin exposure, have also lagged (+2% and +9%). This risk is likely to remain an overhang until the
November 8 vote for these 4 stocks along with WLL (Hold, $7.93), BCEI (Sell, $0.86, TP: $2.00 - Under Review), and
BBG (uncovered, $5.44).

While investor skepticism in pre-vote polls should be high following this summer’s British referendum, our sources indicate
that the vast majority of Coloradan’s support the state’s oil and gas industry. As such, we would remain buyers of NBL,
PDCE, and SYRG in front of the November 8th vote. All three have strong balance sheets and their DJ Basin wellhead
returns rank among the best in the industry.

CRZO also has minor exposure to this.

[bearcatbob]

I would hope the issues are defeated. However, I have no confidence in any wisdom of an ignorant electorate on votes like this.

Here in NE Ohio some true loons have achieved enough signatures to put a $15/hr minimum wage effective January 1, 2017 on the ballot for the city of Cleveland. Yes - a step function increase in a city on a tenuous upswing. The local politicians - all Dems - are in full panic. They are at least smart enough to know that such a wage limited to the city limits of Cleveland would be hugely destructive. Their fall back is that they support a $15 wage (as good Ds they must) but only if it is applied state wide.

http://www.cleveland.com/cityhall/index ... minimu.htm

My point is that something we think is insane -may well not be to those who live in a land of unicorns and rainbows. I would not touch a Colorado focused energy company.

Bob

[dan_s]

You definitely make a good point. Colorado is full of dope smoking, tree hugging idiots so anything can happen. However, the Governor does know where the state's tax revenues come from.

[bearcatbob]

You definitely make a good point. Colorado is full of dope smoking, tree hugging idiots so anything can happen. However, the Governor does know where the state's tax revenues come from.

And he likely does not give a damn about tax sources in comparison to vote sources.

[dan_s]

I met him at the EnerCom Conference last year and he seems to understand the importance of the energy industry to his state. Also, polls show that the majority of voters in Colorado are against the proposals to ban fracking. Local tax revenues would drop like a rock.

NBL, PDCE and SYRG have the most exposure in Colorado.

It is ALWAYS up to each of you to decide where your money is invested.