Mart Resources - multi bagger turnaround play.
MMT.V C$0.14 335MM os/350MM fd.
Dirt cheap on all standard metrics (cash flow, reserve and flowing boe) and has the hallmarks of a multibagger in '10.
Almost went BK in '09 as they had heavy capex spend just as production was ramping up. Forced to put themselves up for sale when oil prices dropped and payables got out of hand. Thankfully (for shareholders), the buyer failed to raise the cash and the deal fell thru in late '09. Market was foolishly disappointed in the lack of sale as the fundamentals for Mart are the best in years and the company is significantly undervalued and has low risk multi bagger upside.
Producing 3700 bpd (gross) 48 API that trades at $2 premium to Brent. They have 95% net revenue interest to recover capex (they front 100% of capex for their JV partner), then falls back to ~50% WI after payback. Expect to recover capex by end of Q1 and they'll revert to their 50% WI. However, as soon as drilling restarts (expected in early Q2), they'll be able to recover capex at 95% again. At $5MM per well and expected ~2,000 bpd per well, they should see quick payback (several months at current prices).
Are cash flowing ~$4MM a month which is expected to them to get current on payables by end of the quarter, allowing resumption of drilling in their field in early Q2. Are current on debt and will retire by year end (as scheduled). Paid back large chunk of debt late last year due to strong cash flows. Own their own 1500 hp drill rig, so masters of their own destiny.
Producing field has ~12MM bbls net 2P reserves (~24MM gross) that is worth, on an after tax NPV10 basis, ~$250MM net or ~$0.70 share. Also have ~8MM bbls 2P in another non producing field that is worth another $150MM net, but until there are plans to drill (and financial capability to do so), I discount it entirely.
Are planning 3-4 wells in '10, targeting some of the 14 oil bearing zones in the field (ie "stacked" pay). Assuming they can double production to ~7000 bpd and MMT WI falls back to 50% after capex payback, they should be generating close to $50MM a year in annualized cash flow. Each well is expected to be a ~2000 bpd producer, so good chance that they can double (or more) production. Have 7 drill locations, but full extent of field is unknown, so likely more locations to come.
Assuming a very conservative 3x cf multiple, that implies $150MM mc/$0.43 share (vs $250MM 2P after tax NPV10). Current EV is $60MM. MMT is trading at just over 1x cf when sector average for juniors is ~5x.
I think MMT has an excellent chance of being a multibagger in '10 as the market wakes up. At current prices, downside is negligible, so risk-reward is excellent.
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