Value Microcaps Junior Energy

[Bobwins]

KUB.v/TPNEF +.015 to C$.035

Chen is recommending this stock. Cub Energy is in Ukraine and produces mostly ngas. As you might remember from the Chronicles of Putin, Chapter 1, Ukraine has not been a good place to invest since Putin and the "rebels" rose up and emancipated Eastern Ukraine.

But Chen thinks this one will go. He's headed over there to visit the company in a few days.

Ukraine needs their own ngas production. They are still in dispute with the Russians over the gas pipeline that runs thru Ukraine to Europe. Purchase of ngas remains a major drain on the treasury. Recently they reduced the royalty on ngas from 55% to 29%. This dramatically changed cashflows for domestic producers. They might employ other taxes and fees on pipeline usage but for now, they are encouraging drilling and domestic production.

Q3 report was positive with earnings of C$2.2 million vs 314.5 million outstanding shares or .007eps. Share price was C$.020 yesterday so it remains a relative bargain even at the elevated price of C$.035 this morning IF they can keep producing those kind of profits.

http://finance.yahoo.com/news/cub-energy-inc-announces-q3-210507800.html

Here is latest presentation:

http://www.cubenergyinc.com/investor/presentation/


Near term catalysts besides continued earnings:

1. RK Field is out of production since 4/1/16 due to excessive nitrogen production that causes gas to exceed pipeline specs. Company has imported used nitrogen rejection gear from the US but needs some parts to make it work properly. Supposed to be fixed by early 2017 and bring ~175boepd of gas production back online.

2. Cub has 35% interest in a JV with KUB-Gas. KUB -Gas has drilled a gas well and is completing it now. This jv is the major source of Kub.v 's production and KUB-Gas is planning a second well drilling in early 2017.

3. Cub has just sold 50% of the Uzhgorod field for 1.5 million in cash to a Slovakian operator who has producing fields just over the border. They have requirements to map and drill several wells in the next four years. The partner is required to fund all drilling and hookup of these wells but CUB.v will get 50% of production.


Cub is currently receiving C$5.48/mcf for their ngas so you can see why this is a favored investment. Netbacks are more than US producers get for gross ngas pricing. This investment could turn sour in an instant if Putin decides he wants all of Ukraine but it still looks like Chen has found something very interesting. Got outbid at the open but will try to pick up a few over the next few days. The gas well that was drilled has taken way too long to complete so there may be some bad news short term if it's a dud. That might be a good opportunity to get some shares.

If they can replicate .007eps, this is selling at a forward p/e of 1.25. Because of political risk, it's probably going to be like Mart and sell for a p/e of 5 or 6.