24/7 Wall St. » USEC

USEC Shares Collapse on Loan Worries (USEC, URRE, UEC, URG, URZ, URA)

Administrator — Fri, 05 Aug 2011 16:02:22 +0000

The sole US provider of low-enriched uranium fuel for nuclear power plants is in serious trouble. USEC Inc. (NYSE: USU) shares have fallen more than -12% this morning and posted another new 52-week low on concern that the company’s loan guarantee from the federal government will not be approved in time to prevent USEC from running into liquidity problems.

Every US company involved in the nuclear fuel business is getting beaten up this morning. Uranium Resources, Inc. (NASDAQ: URRE) is down nearly -12% and Uranium Energy Corp. (AMEX: UEC) is down -4%. Ur-Energy Inc. (AMEX: URG) is off nearly -11% and Uranerz Energy Corp. (AMEX: URZ) is off nearly -5%. The disaster at Japan’s Fukushima Daiichi power plant following the March earthquake and tsunami has essentially killed investor enthusiasm for uranium stocks.

In USEC’s case, the federal government had delayed approval for a conditional loan guarantee for $2 billion to complete construction of its centrifuge project in Ohio. The US Department of Energy is seeking additional information before reaching a decision. USEC has told investors that unless the loan guarantee shows some signs of moving toward approval, the company may have to ultimately discontinue its operations. And a possible shutdown could happen within weeks, not months.

The federal government and the Obama administration re-iterated support for nuclear power shortly after the Japanese disaster, but both remain cautious about making any high visibility moves too soon. Especially moves that indicate on-going support for nuclear power development.

That’s why all the uranium stocks are getting a beating today. Investors have no reason to believe that federal support will be forthcoming for the nuclear industry in the US, and, like so many non-hydrocarbon-based energy projects, lack of federal government support equals the kiss of death.

The other uranium stocks are all miners, but if there is no support for new nuclear development, then the value of these stocks will drop as well. Aside from early comments supporting nuclear power, the US has been non-committal, whereas Germany and Italy have both indicated that no new nuclear plants will be built and, in Germany, existing plants will be closed over the next decade or so.

Just before noon USEC shares are trading down nearly -15%, at $2.04, having set a new low for the 52-week range of $2.03-$6.35. Uranium Resources shares are off -14%, at $1.11, within a 52-week range of $0.50-$3.98, while Uranium Energy shares have come back slightly to $2.94, off -2%, in a 52-week range of $2.40-$7.48. Ur-Energy shares are down -12%, at $1.32, in a 52-week range of $0.80-$3.37, and Uranerz shares are down nearly -7.5%, to $2.41, in a 52-week range of $1.10-$5.93.

The Global X Uranium ETF (NYSE: URA) holds assets in all these stocks and is off nearly -6% today, at $10.57, a new 52-week low with 52-week high of $22.42.

Paul Ausick

Filed under: Nuclear, Politics, Utilities Tagged: UEC, URA, URG, URRE, URZ, USEC

USEC: Rising Costs Making A Nuclear Winter (USU)

247wallst — Mon, 25 Feb 2008 18:18:52 +0000

USEC Inc. (NYSE: USU) is one of more widely followed stocks that is in the group of companies et to benefit from the coming nuclear power surge in the coming years. There is just one problem, well two. The first problem is that this has already fallen some 60% from major highs over the last year.

But the second problem is earnings and future expenses. The U.S. uranium enrichment company disclosed that its plan to build the second uranium enrichment facility on Piketown, Ohio to supply fuel to nuclear energy reactors could run about 50% over budget. It is starting to sound like a familiar reason: pricing pressure on labor, commodities, and construction materials like steel and aluminum is rising much higher than anticipated.

Early last year it forecast a $2.3 Billion cost, but now it is forecast at $3.5 Billion. USEC is trying to take steps to transfer the American Centrifuge technology to strategic suppliers to build the machines and the balance of plant infrastructure.

Shares were up 3.9% to $9.25 today, but shares are down some 19% at $7.50 today in after-hours trading and the 52-week trading range is $6.95 to $25.65.

Last week Business Week went too speculative on one of these uranium stocks.
Recently, McDermott realigned its nuclear operations.
Entergy is spinning off its operations in nuclear.
It looks like media pumped nuclear all up at the top.

Jon C. Ogg
February 25, 2008

As Media Touts Nuclear Power, Time To Review Nuclear & Uranium Stocks (CCJ, USU, SGE, FLR, GE, URRE, USEG, URZ, CAU, MOS, CF, NLR)

247wallst — Fri, 14 Sep 2007 12:32:16 +0000

It seems like the media is touting and flaunting more and more for a return of nuclear energy. This may or may not happen as the applications are again for "Next Year" and it is with no surprise that it’s becoming the topic of much labor in Mexico pronounced "Man-ya-na" (sorry no N~ without changing languages). You can also see where spot Uranium prices have come down significantly from the pre-summer ramp and summer highs. TradeTech’s Uranium site shows its price chart for Uranium and The Ux Consulting Company shows much of the same. But with $80.00 per barrel of oil and T. Boone Pickens calling for even higher oil prices you never know just how long the "call for nuclear power" will take to resurface from the investment community. Nuclear power is getting more media coverage again.

Let’s assume for a moment that we forget about the discussions leading to delays that have been perpetual. Let’s for get about the political side of nuclear power. Lets forget about killing land under mountains where we’ll bury the stuff in Nevada. And let’s forget about the potential environmental catastrophe that can result if something goes horribly wrong.

There are many stock plays in the U.S. alone that will be huge beneficiaries of this if even one nuclear power plant approval goes through. If there is one, why not the full dozen of them. Here is the lot of companies:

Shaw Group (NYSE:SGR) is perhaps the most vertical of the engineering and construction firms. Fluor (NYSE:FLR) is also in there. And we can’t leave out the monster General Electric (NYSE:GE) for new reactors, nuclear fuel, reactor services and performance services.

Cameco (NYSE:CCJ) out of Canada is THE go-to behemoth in the stock market for Uranium miners and producers. The much smaller company in the US is USEC (NYSE:USU), although its shares were hit exceptionally hard Friday after testing started. Some more smaller and much more speculative stocks in the sector are Uranium Resources, Inc. (NASDAQ:URRE), U.S. Energy Corp. (NASDAQ:USEG), Uranerz Energy Corp (AMEX:URZ), and even Canyon Resources Corporation (AMEX:CAU). Mosaic (NYSE:MOS) and CF Industries (NYSE:CF) are stealth plays in the sector that can enrich uranium from phosphate, but you should know that prices have to be very high and have to be expected to remain very high for quite some time for those to be cost effective.

The Economist recent magazine cover also flaunted a comeback for nuclear power.It said America’s nuclear industry is about to embark on its biggestexpansion in more than a generation. This will influence energy policyin the rest of the world. CNET today discussed the wave of coming applications for more nuclear power plantsthat are coming. Personally, I’m a believer in this. No greenhousegases, no pollution, no icky air around the place. But the dark sideis not Three Mile Island. That was nothing. The dark side isChernobyl and a vast area of land that won’t be habitable forgenerations and generations. The other thing that might act as apossible lid on investors reviewing nuclear power stocks this timearound is that local gas prices for your car are far lower than earlier this year when energy prices were rising but not as high as the $80.00 seen this week.

No wonder Merrill Lynch got creditfor what seemed to be overly bullish analysis that ended up lookinglike they had a crystal ball for a few months. They gave a huge safetynet for uranium prices. The Canadian National Post also gave some buyout picks in the sector based on Raymond James analysis.

Nuclear power plants are coming online more and more in China andIndia, and Japan and France are largely dependent upon the glowinggreen juice to power those nations. Russia is showing it is expandingnuclear power use again and South Korea is expanding its program. Noneof us in the Western hemisphere are going to be too excited about this,but the chances that we are going to have to deal with a nuclear-usingIran is getting larger instead of smaller.

Back in August an ETF was launched as the Market Vectors Nuclear EnergyETF that launched on the American Stock Exchange under the "NLR" ticker, but only a portion of these stocks in here are US-based and many names wont be familiar. Here is the full list of the company stocks in the ETF.

Jon C. Ogg
September 14, 2007

Jon C. Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.

Cameco: Playing Pinocchio or Pangloss (CCJ)

247wallst — Mon, 30 Jul 2007 22:18:00 +0000

Cameco Corp. (NYSE:CCJ) did something interesting, and it’s a move that most companies do when they aren’t happy about a reaction to a news release. This morning the company issued earnings at $0.55 EPS, well above consensus estimates. But the Uranium producer’s guidance was deemed under plan for 2007. The problem with this is that the company apparently did not believe that its guidance was going to be received in this manner. Then tonight came the ‘clarification press release.’

If the company thought it was going to have a positive reception to the news, then it wouldn’t have made a clarification press release tonight.

.….While future sales levels were reduced in our assumptions about forecast realized prices, this is not expected to significantly impact our profitability….. During the call, the company provided some background information regarding the updated sales volume assumption for the 2007 to 2017 period. The sales volume assumption in the 2007 first quarter report was 35 million pounds per year for 2008 to 2017. In our 2007 second quarter report, the sales volume assumption was reduced to 30 million pounds per year to eliminate the influence of near-term spot market purchases and subsequent resale…….

You can read the press release here on the next page break for the full data. The problem with ‘clarifications’ such as this is that it is often symptomatic of ‘corporate communications.’ I fear that this may be taking hold as a culture in Cameco and this is the major Uranium stock play. I have listended in on the conference calls regarding the Cigar Lake flooding SNAFU, and it just seems from an outsider’s point of view that the company either isn’t doing enough of the right things or that the company has lost control of being able to communicate its message. The call-in questions and ‘criticisms’ seem to be escalating in tone from the sound of it, and a falling stock price won’t curb that.

Selling product into the future at fixed and locked-in prices is quite normal. Making production guestimates is quite normal. Even making commodity market price assumptions is somewhat normal. But sometimes it goes wrong. This stock is closer to its yearly low, but the truth is that this would still easily be considered in the middle part of its 52-week trading range. The problem regardless of the last year is that the company has seen shares slide from $55 (U.S.) down to the $40 area most recently over the last 45 days.

Clarification press releases are needed sometimes, but it makes you feel sometimes like the company is trying to do what kids do in games. "DO OVER!" This company is the largest play on the Uranium market, and with thousands of shareholders and a hot market for its key commodity it would be in the company’s (and its shareholders’) best interest to communicate better or be in a bit better control than it has been.

The excitement has left this one too because of delays from its flooding of its Uranium project at Cigar Lake: In early July, Cameco announced that the startup of Cigar Lake production could be delayed from 2010 to 2011. Shares were indicated higher and the ‘clarification’ may help shares onTuesday. It is just not that frequent that a company worth more than$10 Billion has to make clarifications.

Please see the NOTES REFERENCED ON PAGE 2 at the bottom here showing the descriptions of all of its giuidance remarks from the press release.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

NOTES REFERENCED ABOVE

Outlook for Third Quarter 2007

We expect consolidated revenue for the third quarter of 2007 to be about 10% higher than in the second quarter. This is primarily due to anticipated higher sales prices for uranium and electricity. Reported sales volumes for uranium are projected to decline relative to the second quarter due to normal variability.

Projections for the quarter assume no major changes in the ability of Cameco’s business units to supply product and services and no significant changes in our current estimates for price and volume.

Outlook for the Year 2007

In 2007, Cameco expects consolidated revenue to grow by about 40% over 2006 due largely to higher revenue from the uranium business.

In the uranium business, we now expect our reported revenues to be about 75% higher than in 2006, due to stronger realized prices under our contracts relative to 2006.

We anticipate that revenue from the fuel services business will be nearly 5% higher than in 2006 due to an anticipated increase in the average realized selling price. Reported sales volumes are expected to be about 5% lower than in 2006.

At Port Hope, full production of UF6 will likely be suspended for a minimum of two months until Cameco has determined the source of the previously disclosed uranium and chemicals found under the UF6 plant and we have developed appropriate remediation plans. We will provide a revised conversion production forecast once this work has been completed. Uranium dioxide (UO2) conversion and other activities at the site are not affected.

BPLP revenues in 2007 are projected to be about 7% higher than in 2006 due to higher expected realized prices. This outlook for BPLP assumes the B units will achieve a targeted capacity factor in the low 90% range.

In 2007, Centerra’s gold production (100% basis) is now expected to total between 550,000 and 560,000 ounces compared to Centerra’s earlier forecast of 700,000 to 720,000 ounces. The reduction is due to an expected production decrease at the Kumtor mine to 300,000 ounces from 450,000 ounces, due to the decision to change the angles of the pit wall. Centerra’s gold production from its two mines totalled 587,000 ounces in 2006. Gold revenue is expected to be similar to 2006 primarily due to higher expected realized gold prices.

The financial outlook noted above for the company is based on the following key assumptions:

- no significant changes in our estimates for sales volumes, purchases and prices,

- a uranium spot price of $120 (US) per pound, reflecting the Ux Consulting spot price at July 23, 2007,

- an average gold spot price of about $650 (US) per ounce,

- no further disruption of supply from our facilities,

- no disruption of supply from third-party sources, and

- a US/Canadian spot exchange rate of $1.05.

For 2007, the effective tax rate is expected to be in the range of 10% to 15% compared to 6% in 2006. Our effective tax rate varies from the Canadian statutory tax rate primarily due to differences between Canadian tax rates and rates applicable to subsidiaries in other countries. This range is based on the projected distribution of income among the various tax jurisdictions being weighted less heavily toward foreign subsidiaries compared to 2006.