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I think they are conservative. I talked with CFO a couple of months ago and mentioned my estimate for q3 of .069 and he thought that was high. They came in at .07.
Production has been stated at 1100+100 behind the pipe at 11/05. Revs can't change that much unless they shut in wells. This is still very cheap. Reserves and inventory of future drilling sites are probably the weak spots but cashflow/share price is exceptionally cheap and going to get much cheaper after q4 numbers come out. Bobwins
Does anyone here have concerns about the recent presentation posted on the company's web site? According to the presentation, total revenue for '05 will be $16.2 million, which implies only $4.45 of revenue in 4Q05. Additionally, '05 CF per share is projected at $.45, which implies only $.13 in 4Q. Finally, Net Income is $.18, which implies $.08 (that one I like). Do you think the projections were done a while ago or that the Company is being overly-conservative and sandbagging?
If you read the q3 financials, you will hear about reductions in operating costs as production ramped up. I was high on operating costs in my q3 estimate. Simply modifying q4 to match reality of q3. Bobwins
Bobwins re 4th qtr
Why will operating costs decline by $200k vs. 3rd qtr?
Yes the larger trusts (like ARCH) like the 2000 BOE amounts but there are many smaller trusts that can't swallow quite that much.
You need more money, I need you to find me some more great buys. How about an equally good non energy company. Hard to find companies growing their production at 50 % or more per year with great margins other than in the small cap energy sector.
nuts, I thought I read somewhere that the Trusts like 2000bpd of production. They don't like a lot of exploration but will take a driller with lots of developmental wells ready to be drilled.
In any case, I think we can look forward to Rival, Xpd and others yet undiscovered juniors to be discovered and have their day in the sun. The trusts are one source of speculation that will support the price but the obvious great numbers they are going to be putting up in the next year are the main driver.
Seems like every week or so, another one pops up. I need more money!!!! Bobwins
Yes now that the uncertainty regarding the taxation of trusts has been eliminated (as of a couple of days ago), I think we can expect more energy stocks to convert to trusts and of more importance more energy trusts begin to actively pursue underpriced juniors (it is probably cheaper and certainly quicker for a trust to buy out a Rival or an XPD) than to try to grow production through the drill bit themselves. I think we will see trading volume in such stocks pick up substantially over the winter months, when a lot more drilling generally takes place. Certainly we have seen pretty good volume in Rival and it made a great rebound today and I expect the same will hold true for XPD. 500 boe is a nice size addition for any but the very largest trusts.
croc, good point about the jrs not reaching expected valuations.
There must be some sort of standard, or average, I'll check the Iradesso reprt again. I think Bobwins mentioned 4-6X cash flow as
a standard, but I could be off on that.....
Re XPD.V - Thanks for your thoughts. I felt I was being a bit conservative with my analysis, and I definitely like yours better :). I can certainly see the logic in your analysis, and I agree that given some of the same assumptions as the Q3 report that we could see a share price of more like $1.50.
The one problem I've found (in my short experience with Canadian Juniors) is that they tend to have a hard time reaching my expected valuation targets. The trading seems to be thin at times, and it seems that undervalued stocks trade for extended periods of time without gaining the share price that I would expect. I'm a little skeptical that XPD could hit 1.50 in 4 months simply because the demand isn't there to drive it to those levels. As opposed to a US company, Canadian Juniors seem to continually struggle for exposure, and have a hard time reaching a reasonable share price/valuation. Still, if Expedition can continue on that same ratio of cash flow and earnings per share, it's bound to get recognized by investors, and eventually maybe a trust. It should be a fun ride.
Re XPD.V I like your analysis. I tend to look forward. They reported 4.5 cents cash flow per share for most recent quarter on an average production of 310 boe/day. On a straight line extrapolation basis, they are currently at 450 boe/day or 6.5 cents cash flow per share. They expect to exit this quarter at 550 boe/day or almost 8 cents cash flow on a quarterly run basis. Moreover, operating costs per barrel should come down with increased production and prices should be higher. I'll use a cash flow of 9 cents as an 05 exit run rate. At a price to cash flow multiple of 4 (very conservative given demonstrated growth and management), XPD is worth 4 (quarters) x 4 (cash flow multiple) x .09 (quarterly cash flow per share exit rate) or $1.44 conservatively. At a current price of 57 cents it is trading at a 60 % discount to my numbers. Realistically, I think we could see a share price of $1.50 by March of 06 (say 4 months from today) and that would represent a gain of 153 % and an annualized return of some 460 %. I guess I'll be buying more (was doing the analysis as I typed). Now of course there are risks, primarily commodity price risks but frankly I think there is a greater chance that we will see higher natural gas prices between here and March than that we will see lower prices. And if we see higher prices, well...wow
OT: XPD.V - Nuts, I can't remember where I posted this, but below is my quick analysis on XPD.V. I can't say I'm a pro at researching Junior O&G companies, but based on annualized Q3 figures, I get an estimated annualized cash flow of about .25/share, annualized eps of .12/share, and expected stock price of about 0.85. I do think XPD is undervalued based on Q3 data and expected Year End exit rate of 550 boe/d.
Bobwins XPD.V
After a lot of analysis, I decided to buy some XPD.V today. I'm probably responsible for much of today's volume on the buy side. Another underpriced Canadian junior, price to cash flow looks good and it's been somewhat of a laggard price-wise recently. I really like the amount of new production coming on stream in the 4th quarter (possibly the best of the group percentage wise) and even more importantly, they appear to have management that has proven they can grow production and improve shareholder value in a short period of time. Hope I wasn't buying from you.
One of the points of this story is that there is a high correlation between movement in oil stocks and gas stocks. The writer points out that ngas is a much smaller market than oil stocks and ngas was many times a by product of oil production. Therefore the two markets are tied together.
Whether this will change due the different demand/supply situations with oil and gas remains to be seen. It is a little frustrating to seen the ngas stocks move up or down because of something happening in oil. However the two markets have historically been tied together and it will probably take a lot to change that historical relationship. Old habits die hard.
Bobwins
Bobwins and all, found this from another site, forgive me if one of you posted it <g>; edit, looks like a pitch, but makes an interesting argument that gas is in a secular bullmarket
http://news.goldseek.com/Zealllc/1132937557.php
Yes, thanks Bobwins. I had done my own numbers because I wasn't sure if you were going to update for 4Q and I came out with a little more conservative CF per share at $.222 and same Net Income per share. Major differences was I think there will be lower production in 4Q given what was said by management about having only 1100 on as of late November and slightly higher share count, offset by lower operating costs because I assumed $8.30.
Anyway, a CF range of $.222 to $.285 at CF multiple of 5x is $4.44 to $5.70 Canadian, or approx. $3.80 to $4.85 US, which I think would we all be happy with. I think one of the reasons for the current low valuation is related to reserves, which Rival doesn't update quarterly. If Rival proves that reserves have been increasing with successful drilling, then I think we will get a more reasonable valuation. I don't consider this to be a high risk, because why would 2 high-level people come to a Junior like Rival and put in a lot of their own money if they weren't expecting growth in both production AND reserves.
Have a good weekend all.
One thing I have noticed is that Canadian companies don't appear to be benefitting as much from ngas prices. They appear to be getting less after the exchange than US counterparts. I will be watching Rival to see how it plays out in q4 since that's when the price spike should show up in the financials. Will be interesting to compare how Diaz and Sharon do, since their ngas revs are coming mostly from Texas. Obviously there could be an issue with btu content that is affecting the price but seems more pervasive than that. Maybe Canadian domestic markets are paying less than those crazy stupid Americanos.
Rival looks like the sure thing. Cze, Dzr and Shy haven't dropped the big numbers to the bottom line yet. I am hoping Xpd joins the group also. Looks similar to Shy in terms of rapid production increases. Supposed to end year at 500bpd from less than 200 at mid year. Bobwins
Thanks for redoing your numbers, Bobwins.
My numbers look very similar to yours except that yours are a little higher. I find with resource companies, there is always a little leakage. If we look at third quarter actuals, multiplying the average BOEs by the average price by the number of days gives a higher number than their reported revenues. I make the adjustment by multiplying by 85 days rather than say 91 days. I then used the 85 day figure for my projections. The change effects not only revenues but also most costs which are largely based on revenues or on the volume of BOEs. So the net effect is to reduce your numbers by about 7 % (i.e. (91-85)/91). But in either case, the projections are compelling.
It is also time in energy analyst country to redo projections for 06 and start forecasting metrics for 07. There are a number of energy analysts (organizations) in Canada that do this for institutional clients (such as Joseph Schachter, I do not know if he covers Rival) but from what I understand such predictions are yielding even more compelling reasons for investing in energy stocks. With Rivals announced capital budget for 2006 of $12 to $15 million, I suspect (that unless a lot of this goes into land acquisition, some of it will of course) that production will continue to grow at impressive rates for 2006. I further note that from Rival's website (page 3 of their March 05 corporate presentation) the estimated value per share of the company was $1.15 as of Dec 04. With prices and findings going up appreciably and the ceiling test now allowing for the commercial exploitation of far more acreage that value could easily be $2.00+ per share by now. So the company is still selling at less than its true book value. Such companies can easily sell for much more than their net asset value.
Ok, I spent a fair amount of time reviewing my numbers. I found that I came up with .069 and .16 in q3. My revised numbers for q4 are not that different from my original revised numbers. I came up with .11eps and .285cashflow.
I reviewed the company numbers and realized that I hadn't been counting the accrued future tax as part of cashflow but since they are not paying out the taxes, they have to be counted. That boosted cashflow up. However in doing my review, I used 1250boepd average for the qtr.
My reasoning is that they just issued the PR and they said they are currently at 1100 with 100 behind the pipe. That means not yet hooked up on 11/25/05, more than half way thru the qtr. So they might have trouble even averaging 1200 for the qtr. I also lowered my original $ per boe price. They are not getting as much for their ngas in Canada as we do in the US. I lowered my price per boe to C$67 on 115,000boe.
If they can hit .285, they should be at $4+ share price sometime in 2006. The average cashflow to price ratio for Canadian juniors is around 5+. Bobwins
taxes... This is from the SEDAR MD&A today.
I'm not a Canadian tax expert but it looks like Rival still has some tax credits available from it's non profitable period. They are accruing taxes for the day when they will start paying. Cashflow is unaffected by this accounting move. Bobwins
Income Taxes
Capital taxes for the September 2005 quarter were virtually unchanged compared with the same quarter in 2004. For the nine months capital taxes were 64 percent lower due to a credit from a prior over-accrual of Saskatchewan resource surcharge. The Company is not currently taxable except for
capital taxes.
The Company has provided $398,000 for future income taxes in the September quarter and $609,000 for the first nine months of 2005, compared with nil for 2004. Higher taxable income in the September 2005 quarter led to an increased provision compared with the second quarter of 2005.
In 2004 no provision was made as a future tax asset still existed at that time.
Can anyone explain the Canadian tax situation to me? I noticed Rival accrued $398K in 3Q05 for "Future Income Taxes" and that the balance sheet has $957K of long-term liability for future income tax, insinuating that it does not have to be paid for over one year. Do Canadians not have to pay their taxes for over a year? - If so, maybe I should move to Canada.
bigpike.....I didn't defame Dorothy and Toto. There was no talk of getting sent back to Kansas as punishment for crimes against humanity like Lentinman. There was no talk of the stories I had heard about Dorothy and the evil monkeys or even the dancing brooms. Animal bestiality and other deviant behavior was left entirely off limits.
I simply tried to enhance my image by comparing myself to that Great and Wonderful Wizard of OZ. As an aside, I do a pretty mean version of the nasal, whiny, high pitched singing of....
"Oh we off to see the Wizard, the Wonderful Wizard of Oz....If ever a whever a Wiz there was, The Wizard of Oz is one because, because, because, because...BECAUSE! "
I leave the rest to your imagination because that's when us Wizards do our best work. When the victims, I mean the audience, uses their imagination, Wizards can be magical. Stay tuned for my next forecast. It will be a lot like waiting for the Tooth Fairy but without the pillows and the quarter, mainly just Wishin' and Hopin'!!! Bobwins
Had a great laugh!! All my best. Nuts
Bobwins, first you insult Santa, and now Toto and Dorothy?
What next, defame the Tooth Fairy <gg>?
They posted their SEDAR filing so I will take a look. Are you insinuating that even though I was close to eps forecast, it was really just a lot of luck that I came close????
LOL! Damn, every time I pull the Wizard of Oz act some smart ass pulls back the curtain!!!!
Ok, I will gather my dignity and retire to my research center to contemplate my next REVISED Rival forecast. Stay tuned and leave the goddamned curtains alone!!!
Bobwins
Re Your Projections
Think you have to redo your numbers on Rival. Remember they had a cash flow of 16 cents in latest quarter on average production of 914 BOE per day. They are now at 1200 BOE per day (1100 exit plus 100 in pipe). On straight extrapolation, next quarter's cash flow per share would be = 21 cents (i.e. 1200/914 x 16). But I expect higher average production than 1200, higher selling prices and further operating cost, general and administration and transportation savings. Remember the operating and transportation costs per barrel dropped significantly in the quarter as did the G&A per barrel. I'm going to guess a cash flow per share of 26 cents for the quarter. If you relook at your numbers for the quarter just passed I think you will see that you highballed the production amount but underestimated cost savings, which tended to balance eah other out. Think it would be worthwhile to update your 4th quarter numbers (don't want you selling out prematurely after all your hard work). If I'm right about 26 cents cash flow next quarter, this stock can easily double from it's current price. I may be greedy but I'm holding for $4 a share.
bunky, Sorry for the late reply. They are at C$.32 after q3. A repeat of q3 would give them .48. I came up with .19 for q4 cashflow so .32 +.19 is .51. My q4 estimate is based on 1250boepd average so they need to find something this qtr and hook it up soon enough to increase the average from their q3 exit of 1100 to 1250. They had 100 behind the pipe so a late discovery of 200 bpd might scoot it up high enough.
All in all, it looks like QIS might be a bit optimistic.
Still 5 X .51 is C$2.55, a long ways from current price of C$1.65. I predict price will slowly creep up until we get the next operations update that talks about the winter program and any success they have had there.
Good luck, Bobwins
BW, nice estimate, it is nice to be a shareholder with so much potential over the winter.
Mat
nuts, you bought where I did. Was afraid of over paying but it looks as though a couple cents won't matter in a few months.
Bought some more this morning in the 1.55 (Canadian) range. Looks like the most undervalued junior Canadian oil and gas play. By my calculations the 4th quarter should be unbelieveable. With 16 cents cash flow per share reported, at $1.55 Rival is selling for 2.4 times cash flow. But by may calcs that cash flow could easily rise by 50 % + in forth quarter. With 1100 boe per day current end of quarter production and 100 behind pipe (and probably already on stream), 1200 boe versus average 3rd quarter production of 914, works out to a 31 % increase in production without any new well successes. They can possibly bring on an additional 100 to 200 boe by the time they next report. Prices for natural gas will also be up for the forth quarter (probably 10 % or more).
With operating costs falling per boe as production volume increases, netbacks are soaring. My guess is they will report 23 cents of cash flow per share in the forth quarter giving them a P/CF ratio of 1.68. But of even more importance is the reserves total. Both Diaz and Choice reported new reserve calculations (based primarily on increases in product prices) and both rose substantially on the news. I haven't seen anything from Rival recently on reserve valuations but higher model prices and their drilling successes should increase the value of their reserves very significantly (more than for Choice or Diaz) and thus the net asset value per share of those reserves will appreciate significantly.
Rival's price should rise significantly from here either because investors begin to realize how undervalued it is or because a big player will try to take it out. I should also add that temperatures are a lot colder today in Central Canada and expected to stay well below average for the next 10 days, that will help energy futures.
Nice forecast Bob! eom
I didnt get my fill yesterday at 1.15, dang it.
CrocHntr, I think I got pretty lucky. They were pretty good about disclosing interim production and you can track ngas prices pretty well so I'm glad it was close and cashflow was better by .02 than I would have guessed. Things look ontrack. Q4 should be more fun. Bobwins
Well, Bobwins, it looks like you were dead on with your eps estimate (your Q3 estimate .069 verses .07 in Rival's PR). As expected, Rival is now over 1,100 boe/d with an expectation to exceed the year-end estimates of 1,200 boe/d (with 100 boe/d behind pipe and 7 additional wells still to drill before YE). I haven't had a chance to crunch any numbers (until I can get my hands on the Sedar filings), but on first glance, I didn't see any major surprises. What is your take?
I'll share a more detailed analysis once I can look at the Sedar filings and do an Q3 annualized computation.
Rival is going to present at Junior Oil and Gas Investment Forum on Nov. 22-24th.
http://www.enercomm.com/OilGasPresentation.htm
I'm hoping that excellent Q3 results come in before this presentation.
Mike
BOBWINS...
QIS CAPITAL research report of 9/16/05: last page ...they estimate c/f of 0.55 if RIVAL exits q4 with 1200boepd...do you concur with that... with c/f x5 would mean pps of $2.75ca. here's hoping you do...lot of confidence in your estimates...thanks again
charlie/b
Reviewed my numbers after viewing a recent presentation by Rival at QIS conference. Too optimistic about production. Lowered q4 estimated production to 1250 boepd and lowered avg price to C$70. Lowered q4 eps to .11. Bobwins
65% ngas. Killam wells being drilled now are oil so they may change the mix since last qtr. They are adding ngas as well so may be close to same. Bobwins
For a delayed quote (20 minutes) go to yahoo (RGY.V) or globeinvestor(RGY), quote of course in Canadian currency. I deal with scotiamcleod here in Canada for my live quotes.
here is a quote 15-20 minute delay
it is also in the ifromation on the top of this board
http://www.stockhouse.ca/comp_info.asp?symbol=RGY&table=LIST&conversion=1&advanced=1&...
nuts... don't have same situation with Choice. They didn't give much info about increases in last qtrly report on Sedar. Rival basically told us ahead of time what was going to happen.
Rival has unique confluence of big increase in production from 789avg in q2 to 950 in q3(my estimate)and then up to 1200-1300 area for q4 based on wells they have already hit.
That big increase percentage wise plus the huge price increases in both oil and gas are going to result in spectacular increases in cashflow for such a small company.
Don't know if they can continue this streak into 2006 but Killam wells they are drilling now could add another 200-400bpd if they are successful. Bobwins
Nuts,
Where do you go for a quote?
I have to wait till 5.30 before Ameritrade gives it to me.
Shows $1.45 now.
Thanks
Talked with George Ziroff, CFO, Rival Energy this morning. He said I was probably too high on my eps for q3 of .069. Said they normally use cashflow since the juniors reinvest so much and the depletion changes with every well they might hit.
Asked about pricing, he said their price pretty much tracks WTI in C$. No heavy oil or sulphur problems.
Said getting from 789avg production in q2 to 1000 noted in qtrly report was 2 Killam wells that took it to 1000boepd in July. Then 2 Robsart ngas wells were connected in August for about 100boepd.
Currently they are drilling two more Killam wells. They have one oil well in Bellshill to drill and a gas well near Leach?
Then late q4 or early q1 they will drill 2 more Robsart gas wells.
Said recent hires of a VP Exploration and Land Manager have helped. They brought connections that will get Rival some smaller farm in deals that they would not have known about. He said costs are going up as day rates for rigs rise and all services are more expensive as well as land deals.
I commented that their guidance for C$.34 cashflow for 2005 looked low given current prices and he agreed. Bobwins
Christmas - gosh Bobwins, we put a couple of postings with no real new info on the board and Rival takes off like a rocket (last trade 1.90) - how many people read these boards anyway? Have you thought about doing a similar analysis for CZE, if so don't post it until I double up, ok?
Oops, forgot about the PIPE. Sorry. Should have increased to 20 million outstanding. Shouldn't make a big difference.
Bobwins
Bobwins - Thanks for the update. Did you consider the new shares that Rival issued in the PIPE associated with the new executives or did you assume that the recent large open market transactions were the Company buying back shares to offset the PIPE issuance? Thanks in advance - I'm excited about the opportunity facing this stock as well.
Bobwins - Thanks for updating your projections. More Canadian investors look at operating cash flows than earnings in determining valuations. Using your forth quarter earnings before future taxes and adding back depreciation and amortization gives a cash flow for the quarter of 30 cents or $1.20 annualized. A 4 multiple on cash flow per share is considered very attractive. In previous hay days for junior oil and gas companies, the cash flow multiple was in the 6 to 10 range; the seniors always bear much higher multiples. Given Rival's generally shallow wells with large decline rates a 3 multiple might be more appropriate but also ultra conservative. Assuming some softening in prices from forth quarter levels an annualized $1.00 of cash flow at the then existing production rates would again be conservative. So 3 times a dollar gives a current conservative value (price) of $3 per share. At $1.65 or thereabouts, a doubling of stock price by the end of 05 seems very plausible, and as we have seen with ASPN and CHAR, once these juniors start going, they go far beyond any conservative estimates. Using a more optimistic scenario (gas prices rise over the winter, investors are prepared to pay a higher multiple for cash flows, Rival has exploration success in its new higher impact areas etc.) a price of $5 to $8 a share is not to be ruled out. Balance this against the downside risk? What risk might that be? Think I'll add even more next week. And by the way I love the stock price chart. Thanks once again for your hard work in finding this undervalued company.
when do earnings come out/report?
Keith
nuts... reviewed my notes and prices for q3 came in higher than my original estimates. However I want to talk to someone at Rival before upping my forecast. I have a feeling that they may not be getting spot prices for either their oil or gas. Q2 prices seemed low considering they are quoting C$. So I will call on Monday and see what they say and then update my forecast.
Still feel very good about Rival. Have been adding lately myself. Bobwins
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RIVAL ENERGY Q2 Q3revised Q4revised Gross Revs 3,443,770 5,883,500 7,705,000 Royalties 633,247 1,176,700 1,580,000 Accretion 48,062 0 0 Gross Margin 2,858,585 4,706,800 6,125,000 Operating Costs 713,659 1,176,700 977,500 Transport,tariff 96,728 125,000 151,800 G&A 230,422 250,000 300,000 Interest 77,121 80,000 80,000 Depletion,Deprec 925,000 1,242,000 1,530,650 Accretion 13,445 0 0 Stock Comp Exp 12,364 12,364 140,000 Total Expenses 2,068,739 2,886,064 3,177,950 Inc BF Tax 789,846 1,820,736 2,945,050 Future Tax 211,000 491,599 1,736,262 Net profit 580,624 1,329,137 2,208,788 EPS C$.03 C$.0695 C$.112 Cashflow C$.09 C$.16 C$.285 Price/boe C$47 C$67.30 C$67 Total Production 0 87,400 115,000 Diluted shares 19,121,000 19,121,000 19,703,880EARNINGS http://biz.yahoo.com/ccn/050829/1eca0d1221000caa7bca6ffc66e3c5e2.html?.v=1 http://biz.yahoo.com/ccn/051122/200511220298311001.html?.v=1 http://www.stockhouse.ca/pfolio.asp?page=displaynews&symbol=V.RGY&newsid=3801021&fromale... RESEARCH http://www.sedar.com/csfsprod/data60/filings/00827520/00000001/i%3A%5CHLW%5CSedar%5C27897%5CMDAQ2200.... Home Page http://www.rivalenergy.com/ Share Structure Company announced a secondary to insiders in the following PR: http://biz.yahoo.com/ccn/050913/c0e70a38d4d3013dac3a22663d0807ad.html?.v=1 After the secondary, there will be 19,845,000shares with 3.3 million or 17% owned by insiders. QUOTES http://www.stockhouse.com/comp_info.asp?symbol=RGY&table=LIST&conversion=1&advanced=1&am.... Analyst Report http://www.qiscapital.com/images/RRRGY0605.pdf
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