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MWM

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MWM

Re: MWM post# 8

Wednesday, 05/21/2008 4:29:30 PM

Wednesday, May 21, 2008 4:29:30 PM

Post# of 164
Excellent DD Summary from another board...

MrSockPuppet on 1/22/2008 10:34:52 PM

This is a long, twisting tale of how I came to buy JDOG.OB.

The following is a email I sent to my son-in-law concerning an off-the-wall idea. for the past 2 weeks, I have had a GTC in for 4000 shrs at $0.67 (aks $0.80) and I figure someone got a margin call today because I bought twice today at $0.67 (total 2004 shrs).

"Park, 1/9/08

I have an interesting investing idea to run past you. I keep looking for natural gas plays, although the port is overweight with recently purchased energy, I believe we are most likely facing a downish overall market, however, nat gas is priced way undervalued to oil.

Last summer, we found out that a Mr Osborne had purchased 6% of MAM (his cost around $2.8 mil). I found this by reviewing SEC filings online. Over the course of several months, he systematically bought shares just about every day, starting at $25 and up to $32. This aroused my interest – who would want to buy 6% of the smallest electric uts in the US? And why? I think this guy has to be pretty smart (not quite as smart as us, as we bought at $16). I started looking into Mr Richard Osboure, and am intrigued.

The SEC Statement of MAM Ownership gives a brief run down of Osborne, and he is CEO and/or Chairman of Energy West EWST and John D. Oil & Gas JDOG.OB. and Corning Natural Gas (Corning NY) CNIG.OB Claims the investment in MAM is “for personal investment purposes” (yeah, right). EWST seems to have had a hard time a few years back (2003-05), discontinued its dividend, lost money, and brought in new management to turn it around. I think Osborne was part of that team.

EWST is a new addition to the port. Small regulated gas uts in rural Montana with non-regulated 167 gas wells in NW Montana, gas trading, and 2 short gas pipelines in cnetral MT for field gathering and local distribution. 19% of current regulated gas utility demand is filled from their own gas wells, making them vertically integrated for that portion of their business.

Sold a propane business in AZ, and took the proceeds and bought 2 small gas uts – one in NC and one in ------Maine. Coincidence that EWST, controlled by Osborne, buys a gas uts in the same general area as MAM, of which Osborne now owns 6%? Don’t think so. But, time will tell what the intention of EWST / Osborne is concerning possibly expanding its footprint in Maine.

EWST is also putting some its capital to work finding new gas reserves in Montana to grow its local gas production business, giving it the option to further expand its vertical integration. I think this is a good move, and one of the reasons I bought the stock. Continuing annual EPS are around $0.76 with a dividend of $0.64 (paid monthly). Oh, by the way, Mr Osborne seems to own over 30% of EWST stock and the co has a market cap of $40 mil.

Then I began looking at John D Oil and Gas JDOG.OB (bulletin board stuff), the other company Osborne manages. It seems the origin of JDOG (founded in 1982) is with Mr Osborne and a bunch of self storage units outside Cleveland Ohio. In addition to owning several storage operations, JDOG leases Ohio farmland from farmers with known, but small, reserves of nat gas, and drills wells with the associated connecting pipelines - sells the gas production, pays the farmer a royalty and makes a profit between the two. In the Spring of 07, Osborne sold the self storage units (except 1), changed the co name to John D Oil (from Liberty Self Storage), and has put the storage unit sales proceeds into natural gas development in ----Montana. Hey, that is the same place as EWST operates. JDOG is structured as a REIT (due to the now-exited storage units) and retained its activity in small natural gas developments in Ohio. The co may have to change corporate structure with the sale of their real estate operations.

Now it gets interesting. In Sept 07, JDOG and a newly formed exploration co, called Kykuit LLC, purchased 200,000 acres for gas exploration in the “Montana Breaks” region, with JDOG having about 40% interest in the production, and Kykuit owning most of the balance. Kykuit is partially owned and backed by… EWST. These 200,000 acres are most likely near the EWST pipelines in central Montana. I think this plot of land may also be near the “Missouri Breaks” (misprint in the financial press release?) National Monument Park in central Montana, and if so, is suppose to be an up and coming area for new nat gas exploration (based on press releases from the Greenies that do not want to develop gas properties close to a National Monument). JDOG has already completed drilling 10 new wells on the property that are active, has another 10 ready to go on stream, and is currently drilling another 10.

Osborne has personally guaranteed JDOG’s debt, totaling about $3 mil. There are 9 mil shares outstanding with a float of 2.3 mil. Osborne bought 2 mil shares in 2/ 06 at $0.50 and another 1 million shares 6/06 at $0.62. Osborne not only owns 30% of the shares, but is tied to the co with his personal guarantee. It appears he is on the hook for around $6 mil if JDOG goes under (3 mil in stock, 3 mil in debt). The 2 yr high/low for share price is $0.30 - $1.01 and it trades mostly between $0.50 - $0.75. Current price is $0.75. Market cap is $6 million and 3-mo average daily volume is 847 shares (I’ve bought smaller – Nantucket Bank in the 1980s had vol of under 500, was bought by Compass Bank, that was bought by Sovereign).

I don’t usually buy penny stocks due to unacceptably high risk, lack of reputable Street following, and all the shenanigans associated with a possible pump and dump, with new start-ups, ect. JDOG is not making money currently as Montana gas production is just ramping up. I can’t find much else about Osborne. Unlike EWST, I can’t put a value on the shares nor get a feel for what they are/may be worth. As a nat gas production co, I can’t even find annual production or potential reserves. Too early and the co is too small.

That being said, I think Osborne is assembling interesting exposure to natural gas in Montana. He controls EWST, a regulated uts (that is also buying neighboring and far-away small gas uts), that does some minor exploring for gas, has a local pipeline and marketing activity. Osborne also controls JDOG, which should be active in adding potentially close-by new nat gas reserves that could feed EWST’s activity, if this recent purchase pans out (unverified by me).

I think we may want to round out the port by adding JDOG since we already own 2 of Osborne’s 4 investments – MAM and EWST. Worse case – Osborne is a scam and we lose another $3k. I’m getting used to that as we have been getting killed recently. Let me know your thoughts.

Give my best to the troublemaker."

Geo Fisher

http://dripinvesting.org/Boards/Read.asp?MID=64604&Thread=Yes

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