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CHAR, I sold some on Monday with the news of Lukoil. Uncertainty is never a good thing in the stock market, particularly when it comes from halfway across the world. Sold some more today when CHAR came out with the PR that they were broadsided by Lukoils offer and didn't know about it until it came public on Monday. The problem with that is that CHAR's CEO is also the COO of Nelson. Unless he's turned off his cel phone and email and been constantly snorkeling in the Caribbean for the last two weeks, I don't see how he could not have known about the offer. I also emailed CHAR's IR dept today but no surprise, no response from there either.
While the stock is now by far the cheapest oil stock out there in terms of earnings, reserves, and prospects, I don't like the vibes I'm getting right now. Lukoil is stealing Nelson and maybe CHAR along with it while Conoco is more than happy to stay in the background and let the dirty russians take the heat. Lukoils acquisition of Nelson could stall, it appears they need 75% approval for it to happen and they have 65% now. If it fails, Char will likely shoot back up again. If it goes through, Char will continue to have a cloud hanging over them which is never a good thing either.
To buy or sell Char at these levels is the big question. If anyone is in the Caribbean, please be on the lookout for a guy with very wrinkled skin playing with the dolphins. His name is Gill (CEO of Char is Simon Gill), of course.
CHAR; Digitech thanks for posting highlights of the CC for Nelson/lukoil/Char and thanks for participating. I was unable to listen to it but I wonder if the following items came up:
1. Was anything said about what changes would be made to Nelson's mgmt structure assuming Lukoil takes over?
2. Lukoil wants the deal to close by Oct 12, less than 2 weeks away. Does managment really expect to get all the proxies for voting out to shareholders (and returned) in such a short period of time?
3. Did anyone ask about Conoco Philips involvement in this deal. I posted a message yesterday about Conoco which owns over 10% of Lukoil and the PR of their plans to do joint future acquisitions in Europe.
4. Did anyone ask how long Bermuda, Canadian, and Khazakhstan government approvals would likely take? It seems to me there is no way that the deal can ever close by Oct 12 just considering that government approvals are needed.
CHAR- Lukoil may be strapped for cash but they have found themselves a partner in Conoco Phillips, a major USA oil-gas co. In fact Conoco owns over 10% of Lukoil. Lukoil just put out a PR last Thursday saying that they and Conoco are looking to make joint acquisitions in europe but outside russia in the near future...hmmm..
MOSCOW, Sept 29 (Reuters) - Russia's largest oil producer, LUKOIL (LKOH.RTS: Quote, Profile, Research) , said on Thursday it would join up with U.S. oil firm ConocoPhillips (COP.N: Quote, Profile, Research) to buy assets outside Russia.
"We have set up a joint group with ConocoPhillips to buy new assets, including in Europe," Vice President Leonid Fedun said.
"In the nearest future you will hear about new acquisitions outside Russia."
Officials from the two companies have said LUKOIL and Conoco could make a joint bid for Russian oil firm YUKOS' stake in Lithuanian refiner Mazeikiu Nafta (MNF1L.VL: Quote, Profile, Research) .
Conoco was not immediately available for comment.
You guys are certainly entertaining as well as informative. Thanks for that and all the work you put into this. It is appreciated!
CHAR, Nelson owns 60% of CHAR and from what I can tell, their respective interests in CHAR's reserves are included in their own reserve totals.
Good question about why Lukoil couldn't steal the shares from CHAR stockholders if they want to assuming they buy Nelson. But I don't see that happening.
Lukoil can't force public stockholders to sell but they could delist char to the pink sheets which would not be good for us either. But, and it is a big BUT, Lukoil needs to maintain access to the world capital markets and at favorable rates. They announced that they are going to the world capital markets to come up with the funds to buy Nelson. If Lukoil screws the stockholders then banks and other sources of funds would likely have the same concerns about being paid back as well. Lukoils cost of funds would likely increase dramatically or disappear so they have a strong incentive to play ball fairly here with everyone.
Also CHAR has loans and funding needs itself. Lukoil's best interests as a majority stockholder in CHAR would be best served by making sure that CHAR maintains good and continued access to the capital markets as well. And that includes maintaining an active liquid market in Char stock.
CHAR: Crunching the numbers: What is the value of CHAR assuming that is valued on the same basis as Nelson is?
Lukoil has offered $2 Billion for Nelson. Based on reserves, that works out to $12.60/bbl of proven reserves, $7.90/bbl of proven and probable reserves and $3.15/bbl of proven+probable+possible reserves (numbers calculated from info in Nelson's annual report and PRs)
Based on Nelson's last quarters numbers which are then annualized, Lukoil would be paying:
4X sales
21X net profits
9x book value
Converting to Char's most recent reported numbers:
Based on 26.5 mil bbls proven reserves, Char is worth $8.78/share
Based on 37.4Mil bbls proven and probable reserves, Char is worth $7.76/ sh
Based on 79.9 mil bbls proven+probable+possible reserves, Char is worth $6.62 share.
Based on 4x annualized second quarter sales, Char is worth $13.90/ share.
Based on 21X net profits, Char is worth $13.60/ share.
(17c/qrtrx4=68cx21= $13.60
Finally, based on book value, Char has a relative value of $1.72x 9=$15.48
Based on all of the above valuation parameters CHAR is undervalued compared to the price offered for Nelson. In some cases it is very undervalued and well worth the risk, IMO.
CHAR- This is a new PR from nelson's website which makes the terms of the deal to be bought out by Lukoil less of a sure thing than the other PR posted. Also the deal is contingent on Lukoil obtaining financing to fund the deal.
NELSON RESOURCES ENTERS INTO
NEGOTIATIONS WITH LUKOIL
Nelson Resources Limited of Bermuda (TSX/AIM: NLG) (Nelson) today announced that it has entered into an agreement to negotiate with Lukoil Overseas Holding Ltd. (Lukoil) concerning a proposal received from Lukoil to acquire 100% of the fully diluted common shares of Nelson for US$2,000,000,000 in cash, which based on currency exchange rates as of September 29, 2005, equates to a per share value of approximately GBP1.24 ( GBP/US$1.7618) and CDN$2.57 (CDN$/US$1.1725) .
A special committee of Nelson’s board of directors was established to review, with the assistance of independent counsel, this proposal and to protect shareholder interests, particularly minority interests, in this process. A financial advisor has been retained to render an opinion to the special committee with respect to the fairness of the consideration offered under the transaction to the shareholders. The special committee has been particularly focussed on ensuring that any offer would be made for 100% of the shares of Nelson.
Lukoil’s proposal is subject to a number of customary conditions including support agreements with Nelson’s principal shareholders owning in aggregate approximately 57% of outstanding shares, government and regulatory approvals, and negotiation and execution of definitive transaction agreements with customary provisions for transactions of this nature, including a 3% break fee. The parties have agreed to negotiate the definitive agreements by October 12, 2005. Nelson’s obligation to proceed is subject to receiving the opinion of its financial advisor that the consideration under the offer is fair to the shareholders from a financial point of view.
There can be no assurance that a transaction will proceed or be successfully completed. Details of the terms of any final proposal will be disclosed upon signing of definitive agreements.
Nick Zana, Nelson’s CEO and Chairman, noted that, “It is our goal to ensure that minority shareholders are treated fairly and are afforded the opportunity to participate along with and on the same basis as the majority shareholders in this transaction.”
Nelson Resources Limited is an oil exploration and production company with operations in the Republic of Kazakhstan. The Company established its presence in the Kazakhstan oil sector in 2000 and its management team, comprising of both international and Kazakh executives, has extensive experience of the Kazakh operating environment.
The Company’s shares are listed on the Toronto Stock Exchange and Alternative Investment Market (AIM) of the London Stock Exchange with approximately 912 million shares authorized on a fully diluted basis.
Here's a report indicating that gulf coast oil rig damage is worse than earlier reports indicated:
http://news.ft.com/cms/s/034a384e-2f8a-11da-8b51-00000e2511c8.html
BTYH-The worst thing about the accounting oversights being pointed out is that both the CEO and CFO are CPAs. According to the CEO's resume he was once with a big accounting firm as well.
http://www.stockguru.com/profiles/btyh/management.aspx
Exchange rate: In the case of CFK, they sell their products in Canada but I believe they buy many of their inventories from USA companies. Question is, would that be a net positive, negative or neutral as the US dollar drops vs the Canadian$?
Off the top of my head, it seems that since it now takes fewer canadian dollars to buy american products, it would also have an overall positive effect, at least assuming that their sales prices remain constant in Canadian $$.
I looked into a tankless water heater myself a year or so ago. While I liked the idea of not wasting energy, my plumber talked me out of it. The tankless HWH cannot provide enough water to handle more than one user at a time. If two people are taking showers at the same time, or if the dishwasher or clothes washer is running while you take a shower, there would not be enough hot water to handle it. Also he pointed out that they use more power when they are in use, so a new electric feed would need to be brought in and of course there also needs to be room on the service panel as well. This refers to electric HWHs; I don't have gas available, so that was not an option.
Hurricane Rita, considering that properties to the west of it get hit harder than those to the east of it, it looks like the hurricane hit a bullseye if it wanted to cause maximum damage to oil rigs.
http://gom.rigzone.com/rita.asp
In other words, China will likely be making offers to pay US$$ for more energy stocks. I have some CHAR I'd probably let them have for $15/share. Or EGY at $10 or...
Sold my shares of SVL. Too many of their properties are in Texas and are near the path of the hurricane. Whether the flooding is covered or not, I expect they will see cancellations and a big drop off in sales after this event. Profits could easily swing to losses. Bottom line- I think there are better opportunities elsewhere.
http://www.silverleafresorts.com/inside_rest.jsp
CFK- Blow-out quarter coming??!!
Here's a website that shows the number of drilling rigs operating in Western Canada on a weekly basis:
http://www.caodc.ca/rigcounts.htm#anndrill
The number of rigs operating in the current quarter July to the present has averaged 521.
That is UP 90% from the previous quarter and UP 35% from the same period one year ago.
Probably needless to say, but I expect CFK, which supplies materials to many of the drilling rigs up there, to report some terrific #s for the current quarter when they come out.
CHAR. Must be a mistake on the Sept 21 date for reporting since the next reporting quarter doesn't even end until Sept 30. I'd like for the price to have more time to churn upwards in anticipation of strong earnings anyway.
GPOR.ob- I am surprised by the lack of interest in the market to GPOR's recent PR guiding to substantially higher production, pricing and profits through next year.
Another thing to like about this one is the reserve data from their last 10K. The net after tax PV10 value of PROVEN reserves after all costs is $300 Million or roughly what the current market cap of the company is. Note: the PV10 value is the current value of all estimated future profits discounted by 10% per year. However that PV10 value is based on $40 oil and $6.18 nat gas. If one updates it using $60 oil and $9 gas, the PV10 value rises to about $520 mil which is way above the current mkt cap. Most small oil companies that I have looked at have mkt caps that are well above the estimated value of their reserves.
With a forward PE of 6-7 based on guidance and a market cap well under PV10 value, this one seems like a good value here despite its run-up.
GPOR, Wade, I'm interested in seeing what #s Bobwins comes up with on this one as well. Based on their guidance, I'm projecting that GPOR will earn 14c in Q3 up from 9c last qrtr.
Earnings should really take off next year with the expiration of their $39.70 hedge at the end of this year. It's more difficult to predict #s for 2006 because they don't provide Cost estimates other than SGA and lease costs. Still, even if their production costs increase by 20%/ bbl compared to this year, I still come up with $1.46 in estimated earnings for 2006!
I'm surprised there has not been more activity on this one today, since the guidance came out after the close on Friday. Only 15K shares traded so far today and a good sized chunk of that comes from me.
Congrats to CWS9 for widening his lead over Mr. Sheep who still remains in second place.
Just a thought here, if Mr. Sheep overcomes the odds and actually wins this contest, what will his prize be?
A bale of hay for winning the most hay, perhaps.
; )
MVK- This is one I like in the oil service sector. It is not a small cap but it is certainly a value stock with a trailing PE of under 8 and a forward PE of less than 7 with rapidly growing sales.
80% of MVK's sales are to the energy industry. MVK manufactures OCTG (oil country tubular goods) primarily well casings and pipelines to oil and gas companies. They are currently selling them as fast as they can make them and pricing is also very strong. In spite of strong sales growth, their profits are down and their stock price has gone nowhere in the last year. Most of their recent earnings shortfalls have been caused by their use of FIFO accounting for raw material (steel) costs. The price of steel doubled early this year and that became their cost basis for much of their sales last quarter. Steel prices have fallen substantially since and so their profit margins should greatly increase going forward.
MVK is nearly doubling their output capacity this year to meet the strong demand for OCTG. Sales and profits should show continued large increases. I also believe that anal-ysts have underestimated revs and profits for 2006. They project a revenue increase of only 3% next year with earnings of $4.90. Even that would be a forward PE of a little over six at MVK's current price. I expect they will earn at least $6. At a PE of 10, they should be a double of the current price.
One caveat is that the COO resigned last month. However, company execs just reiterated their earnings projections of 90c in Q3 and 1.25 in Q4 in a conference call last week so I don't believe that more bad news is coming.
Do your own DD but I believe that this is another gem in the rough that will be polished over the coming year.
svlf. I remember this one from a few years ago as SVR. It had liquidity problems back then as it sold timeshares and carried a ton of paper on the financing for them. It appears to have an off-balance sheet company carrying the paper now (not sure what all that does for them).
It also had a negative cash flow last qrtr of $6.2 Mil.
http://finance.yahoo.com/q/cf?s=SVLF.OB
I only wish companies like XOM would also remember it is the stockholders money when they hand out those lucrative compensation plans to their executives. It looks like the CEO of XOM was paid a salary of $7.5Mil last year plus $43 mil worth of options on top of that. Makes the $2mil in donations look rather paltry in comparison.
Please also ban Tatrader from further posting while you are at it, Bobwins. This is a great board now but all boards tend to fall to the lowest common denominator.
Len, In regard to IDWS, the journalist comments pretty much confirms my suspicions. Once again, if it looks too good to be true it usually turns out to be that way with a little digging. Not to say that it couldn't take off if enough people fall for it.
BTW, it felt like christmas in summertime. I found some CXTI sitting in in a little used account this morning. I only had a partial fill way back when I thought I had sold it all. Hit the sell button just in time to beat the big downdraft today.
IDWS, Noticed this pinkie has a forward of PE of 1 based on mgmt projections. Hmmmm, that sure sounds interesting... But then I couldn't find any numbers for O/S, Balance sheet or income statement. Then I noticed that they are covered by a big Wall Street firm. Or is it?, it looks like its an mis-spelling to a big wall street firm. Here's an excerpt from their PR:
Patrick Downs, CEO, of IDS stated, ``After consulting with several financial advisors we have chosen Salamon Brothers to advise IDS on several fronts. IDS firmly believes the current stock price does not reflect the true value of our technology and assets and we are confident Salamon Brothers with their extensive Wall Street connections will be able to assist us in achieving true shareholder value.''
Either I never heard of "Salamon" Brothers or somebody can't spell.
GMOS, The million $$ question here is will the sales jump last more than a few months with the new superstore? Retail is a tough sector, most stocks in it are stuck with low PEs. For an extreme example of retail's ups and downs, I remember when the first Krispy Kreme store opened in my area. There were lines of people waiting to get in that circled the block. Today the lines are gone, KKD's bubble is deflated and its stock is at 10% of its former value. To be fair, KKD also had other problems as well. GMOS financials are hardly stellar though. Current liabilities roughly equal current assets. Tangible BV is also virtually nil.
Place your bets.
BTW, My contrarian AAII index (the best time to buy is when the masses are feeling pessimistic) is heading back into "time to buy" territory again.
http://tal.marketgauge.com/dvmgPro/charts/CAAIISR.HTM
Then again, Len, if you had just picked the boards favs instead of 85% cash since the contest started you'd be one happy sheriff....And if you had just picked all the stocks in your China list you'd probably be bouncing off the walls with glee right now.
Sure wish I had bought more ROBE and hadn't sold my CXTI last friday, too.
ALY, 10-bagger: When the offering was originally announced in June, it was to be 2.5Mil shares for Energy Spectrum and 1.5 Mil shares for ALY. Now it is going as 4 Mil shares for Energy Spectrum and other non-management shareholders and 1 mil shares for ALY. Obviously some others contacted ALY desiring to participate and also sell their shares in the offering since it was announced last June. I would rather have those shares go in this offering than have them doled out in the retail market over the coming weeks, which would have created continued price pressure. New shares being sold by ALY have dropped from 1.5 Mil to 1 Mil but remember that the price has also nearly doubled since June as well (it was in the low 5s back then.)
I expect some weakness tomorrow but I expect this stock in the hot sector to recover in short time as well. Thanks again for pointing it out.
Here's a link to the original announcement:
http://biz.yahoo.com/prnews/050609/dath021.html?.v=12
UNAM $9.50... Sleepy little insurance stock with operations in CA that continues to grow profits. Just announced Q2 at 30c vs 22c. BV at $8.23
CHAR, I'm predicting 14c eps for the qrtr. But I'm looking for a PR that will have positive comments about new wells, higher production and an operational rail-line in place by years end to get the oil to market at top dollar instead of the low prices they are stuck with now. Those can light the fuse under this one.
Guy, It sounds like you're going on a vacation. I hope its a relaxing and enjoyable one. Nice to get away from the "biggest casino in the world" for awhile. I guarantee it will be happy to take your new bets when you return.
I am curious, you didn't mention whether you sold your CHAR. Did you? Despite the runup, I think we'll be happy campers when we see the earnings and PR for that one. We'll all soon know.
OTC, re: NKBS, I think the thing hurting it today is the fact that earnings for Q3 are estimated at 1c and Q4 is at 26c (in the CC). I don't understand the big variance. I didn't hear it brought up in the Q and A part of the CC either. Does anyone see why the big diff?
Wade, I just took profits on AFPC. So now they probably will have a blow out qrtr and I'll be kicking myself on Monday.
I'm wondering if anyone has done or is aware of any empirical studies on when is the best time to sell in relation to earnings announcements (speaking of stocks in general, not AFPC). My hunch is that overall the best time to sell is just ahead of earnings
VPHM is also a tough one for me to figure out here.
On the plus side, Vancocin orders and profits are very strong plus the company has interests in several more drugs that I expect will enhance their bottom line down the road.
On the negative side, Vancocin has no patent protection anymore and as the demand and profits increase the company is more and more likely to see some competition down the road. Also I don't like their 25 year capitalization of the cost of it. Negative tangible BV and a rather rich premium of P/S ratio also has me concerned.
Bottom line: I'm still long but I also have recently cashed in about 2/3 of my shares. While I still consider that the company has a slight positive risk/ reward ratio, I am seeking better opportunities elsewhere. Still it has the ingredients to catch the market's fancy and could continue to catapult far above present levels. The "value" investor in me has pulled my reins in however.
THANKS MSGI for pointing this one out back when it was in in the low single digits!
GMAI, In a growing economy, collectibles are strong. This one also had a ton of shorts pile up on it, so it likely will continue to benefit from them unwinding to cut their losses.
I think this one has further to go.
Guy, ARD's huge reserves are what initially attracted me to it. They have an active drilling program to bring more of those reserves online. Net income tripled vs a year ago. This quote by the CEO in today's PR makes the coming 6 months sound very promising:
Arena's Chief Executive Officer Tim Rochford stated, "As proud and excited as we are regarding the results of the second quarter, we are just now beginning to see the production results of our developmental drilling and re-stimulation work on our Fuhrman-Mascho property. We believe that the drilling activity and infrastructure improvements we began in the second quarter will have a very positive effect on the second half results."
CHAR...I'm thinking the time it takes to double again might be cut in half. Huge reserves and strong earnings ahead.
JOB..Just reported 5c earnings for the quarter vs. a small loss a year ago. Here is a stock trading at 1.31 with nearly $1/ sh in cash and no debt. This latest news should get it moving.
TGB. I think its a mistake to use last qrtrs #s to calculate costs of production. The mine was newly opened in that qrtr and they had problems with ground hardness, weather conditions, and oxidation. Those problems have apparently been dealt with to get the kind of volume out of the ground that they just announced. I think TGB will beat 7c and likely will make about 10c.
How about selling me some more of those $1.09 shares?