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Cumberland research report
you may have to register...
http://www.canaccord.com/files/Reports/ResearchReports/2003/CBD_09052003.pdf
okay, thanks... I expect 100BCF natgas withdrawal this week, which should be bullish for all natgas stocks... do not plan on selling any natgas stocks until robry natgas model turns down... best case, that is long enough for LT capgains in HPR, but maybe I will lighten up a few and keep a core position. thanks for the chart.
__________________
also, note this:
Nymex to raise natgas margins today
On Platt's website, under natural gas, the article states that all contracts will have the margin raised at Monday's close. It appeared to be around a 50% hike, and I'm sure it is to dampen speculation
http://www.platts.com./
why did you sell HPR??? chart please!
Exactly right, IMO. Most juniors still selling below $35 per reserve ounce..., have sold my majors now but juniors still appear undervalued relatively. I would suspect more majors buying juniors at $50+ per ounce (at their now high share price multiples) and then get that $200+ reserve ounce valuation on the increased ounces due to the acquisition...
Have not posted this yet, but Frank's link contains some of this data. Primary reason not posted is because most natgas companies only post their reserves as of 12/31 each year. Difficult to assess how much they have added to reserves since this is not public info.
Will complete this analysis when natgas companies release their 10-K's/annual reports with the relevant reserve data.
Here are my favorite natgas plays, in no particular order:
CHK
HPRIF / HPR
BEXP
DYOLF/DOL
HKRRF/HKR
CAZ.to (oil play)
Greenspan
Washington DC (Newshax wire) -- Earlier this morning in his weekly press address, Federal Reserve Chairman Alan Greesnspan gave a harrrowing glimpse into a potentially dark and uncertain future that startled everyone in attendance.
Without articulating any reasons, Greenspan stepped up to his podium, eschewed his customary greeting and weekly view on the economy, and immediately warned individual investors to shift their portfolios from "stocks, bonds, and precious metals," to the more base assets of "foodstuffs, ammo, and big dogs."
http://www.newshax.com/modules/news/article.php?storyid=200
good article, thanks...
how do you propose to go long the US$ without investing in equities? Short term bond funds, US Treasuries, or outright currency futures??
Management took 13% of placement...
http://www.sedar.com/csfsprod/data42/filings/00596054/00000001/s%3A%5CC4%5C922%5C000850%5C00922%5CSE...
thanks, as you likely recollect Martin Murenbeeld is one of my favorite analysts...
well, you were right, should have held on to those GBN trading shares at least one more day...!! NatGas stocks sure did not outperform GBN today, but 32% of my portfolio up another 12%.
Purchased a bunch of HKR.to / HKRRF today with the GBN (and some BEXP) proceeds, HKR was up a modest 6.7% but I only caught half the move as it looks like I drove the price up... Finished a market cap analysis per natgas reserve equivalent today for HPR, HKR, DOL, and DEF. Did not exactly turn out as expected, still rates DOL the best buy... The reserve growth rates of HPR & HKR are commanding quite the premium. In any event HKR finished their flow thru PP today at C$5.25, was able to buy at an 80.6% average discount from that price @ C$4.24. Seeing how HKR management took over 13% of the total offering, seemed a good natgas stock purchase (before I saw the GBN launch...)
natgas: from pulsewriter at CWEI board:
Why the Bulls Should be Stampeding – Part I
• Fundamentals Justify Recent Run-Up – and More
Not surprisingly, the futures market has continued to rally sharply in response to today’s larger-than-expected withdrawal number.<P>The January futures contract is currently up over 65 cents for the day and approximately $ 1.50/MMBTU for the week – a gain of over 30% during the past four trading sessions.<P>The conventional wisdom is to dismiss the current run-up as an aberration, not likely to be sustained.<P>Analysts point in particular to the massive net short speculative position held by certain large Funds heading into this week, which undoubtedly has played a significant role in accelerating this week’s gains.<P>But there are two more important factors that bear noting.<P>The first is the significance of today’s 59 BCf withdrawal.<P>The market itself probably hasn’t had time yet to fully digest the implications of this number. And it is, of course, always a mistake to put too much weight on the withdrawal figure for any one week, which always could be an anomaly.<P>To the extent the 59 BCf number turns out to be representative of future weeks, however, it is far more bullish than the market itself may recognize.<P>EIA projects that, in a November in which weather matches historical norms, roughly 78.5 BCf should be withdrawn from storage.<P>This November, we estimate that the total withdrawal from storage for the month (today’s report only extends through the 28th) will be approximately 75 BCf – i.e., with spitting distance of the norm.<P>As a result of spring-like conditions in many parts of the eastern U.S. in early and mid-November, however, the total heating load for the month, however, as measured in gas-weighted Heating Degree Days, was far below historical norms, with a total of only 527 HDD’s for the month – 62 HDD’s (or 10.5%) below the norm.<P>If temperatures had been closer to the norm, total natural gas consumption easily could have been 75 to 90 BCf higher.<P>If this had occurred, total withdrawals from storage might have been literally twice as high assuming that temperatures exactly matched historical norms.<P>On a weather-adjusted basis, therefore, especially after the first week of the month, withdrawals from storage far exceeded normal levels.<P>This should raises significant issues regarding just how rapidly storage is likely to be drawn down in future months and should be seen as a very bullish indicator.<P>As we’ll discuss in Part II, however, the single most important part of the story this week is what’s been happening in the cash market – which closed today at $ 5.74/MMBTU, up 88 cents from last week’s close.<P>Once the significance of this increase is better understood, this week’s run-up in the natural gas market shouldn’t be seen as a mystery at all and instead should be seen as a fairly accurate indicator of where the cash market is likely to be heading later this month.<P>
Re: Street Insight Post -- Part I
by: pulsewriter 12/04/03 06:38 pm
Msg: 22604 of 22616
I just finished writing it. It won't be published until tomorrow morning, but I'll post it now. It's long enough so that I think I'll need to break it in half (brevity is clearly not my strength). Here's the first half of part II:
Why the Bulls Should be Stampeding – Part II
• Keep Your Eye on the Cash Price
As indicated in Part I, on a weather-adjusted basis, the November withdrawal from storage is far larger than can be explained based upon heating load alone.<P>This raises significant issues regarding how rapidly supplies are deteriorating and whether current storage gives us as much of a safety margin as many have claimed.<P>Perhaps the most striking development this week, however, is how rapidly the cash price has exploded.<P>Throughout November, the cash price showed surprising strength, seldom dropping below $ 4.35/MMBTU despite near spring-like weather at several points during the month and storage nearly full to the brim.<P>As recently as the Tuesday before Thanksgiving, however, the cash price was still hovering right around $ 4.50/MMBTU.<P>Further, many Wall Street analysts – and the “smart money” represented by the Funds – were quite outspoken in stating that this price level wouldn’t last for long.<P>Instead, several well-respected analysts and one of the more colorful Fund managers in the country in an appearance on Kudlow & Cramer confidently predicted that, with storage facilities close to over-flowing, prices would soon collapse, plummeting all of the way down to the mid-$ 3.00/MMBTU range.<P>And the Funds didn’t hesitate to put their money on the line to back their views; indeed, as recently as Monday of this week they still held a net short position of almost 50,000 contracts (a position that, to the extent the Funds still hold it today, would have incurred a $ 650 million loss over the past 4 days).<P>So, with this background, what actually happened when the first short burst of winter-like weather arrived on Tuesday of this week?<P>The answer, in short, is that despite near-record amounts of natural gas heading into December and widespread predictions that prices would soon fall to the mid- $ 3 level, it took ALL OF THREE DAYS OF WINTER-LIKE WEATHER in the northeast (i.e., the very first taste of winter-like conditions) for the cash price to EXPLODE.
Here's the rest (which I actually had to cut off before it really was finished because I couldn't fit it into StreetInsight's space limits!):
The cash price today at Henry Hub reportedly traded as high as $ 5.975/MMBTU – after all of three days of cold weather! – and closed at $ 5.74/MMBTU, almost $ 1.50/MMBTU over the close just 10 days ago.<P>Why did this happen?<P>The reasons are laid out in a Strategy Session piece I posted on Street Insight last month.<P>Fundamentally, while Wall Street hasn’t caught up yet with what’s occurring, the natural gas market that exists today is fundamentally different than the market that existed 2 or 3 years ago or even last winter.<P>Virtually all of the slack is gone; the market is wound as tight as a drum.<P>Even a modest increase in demand is likely to lead to a very steep increase in price.<P>As recently as the winter of 2000/2001, there still were a large number of industrial boilers that could switch back and forth between oil and natural gas, and a significant number of industrial users who were likely to cut back their operations significantly as soon as prices rose. For the most part, Natural Gas Liquids also were being extracted from the gas stream to be sold as liquids, rather than left in the pipes to be sold as gas.<P>As a result, when demand started to increase and prices began to rise, demand could quickly be cut back, freeing-up additional supplies and bringing the market back into balance.<P>Today most of this flexibility is gone. The number of switchable boilers is a small fraction of what it used to be. The most price sensitive load has left the market. Most of the load that remains is fully hedged and indifferent to price.<P>Further, local gas companies recognize after last winter that they need to be far more cautious in withdrawing gas from storage, especially early in the winter.<P>The steep increase in the cash price we saw this week, therefore, may only be the beginning – especially with sustained cold weather forecast for later this month and today’s futures prices may soon look modest.
natgas: Robry graphs updated...
http://amarks.homestead.com/RobryNGModel.html
GBN: neither do I, but I purchased trading shares and GBN alone makes up over 32% of my combined trading & IRA portfolio. That's right, this single stock makes up 32% of my portfolio -- and that is after I sold a few... I still own some GBN at US$.32 per share, and my average cost is under $1. When I purchase GBN trading shares, I fully intend to trade them, have more than enough exposure already AND natgas is where I need to be moving some money into...
GBN: "All morning it's been the only green figure"
yep, still looking good and still is by far my largest position, but KGI.to is the star today...
natgas to $6 before gold to $500..., well before schedule, let's see if it can hold over $6...
also, good Simmons article...
http://www.simmonsco-intl.com/files/Natural%20Gas%20Summit.pdf
NatGas - 59 bullish
Working gas in storage was 3,095 Bcf as of Friday, November 28, 2003, according to EIA estimates. This represents a net decline of 59 Bcf from the previous week. Stocks were 139 Bcf higher than last year at this time and 117 Bcf above the 5-year average of 2,978 Bcf. In the East Region, stocks were 25 Bcf above the 5-year average following net withdrawals of 35 Bcf. Stocks in the Producing Region were 76 Bcf above the 5-year average of 812 Bcf after a net withdrawal of 15 Bcf. Stocks in the West Region were 15 Bcf above the 5-year average after a net drawdown of 9 Bcf. At 3,095 Bcf, total working gas is within the 5-year historical range.
On target for possible -100 next week per Robry, that should wake some folks up...
sold a few of my GBN trading shares @ $2.43
duh, guess I should look at the date...
somehow missed that post...
is PD a new recommendation of yours, or did I miss it...?
looked over their RBC slide presentation..., liked what I saw, especially slide, entitled Precision Comparative Valuation using Simmons & Co...
natgas: Puncturing Natural Gas Myths -- Part III
http://www.energypulse.net/centers/article/article_print.cfm?a_id=558
Rand: http://www.mips1.net/MGGold.nsf/Current/4225685F0043D1B242256DF100595C40?OpenDocument
JOHANNESBURG – South Africa’s mining companies continued their white-knuckle ride into the red today as the rand soared to its highest level in almost four years.
During early trade in Johannesburg, the currency traded at high as R6.07 to the dollar, its highest level in 47 months, before it settled to R6.15/$ at the close of the market. The currency’s move gave resource investors cause to consider lowering earnings forecasts still further and pushed resources index down three percent.
Gold producers lost 2.9 percent after the gold price sunk below R80,000/kg, that despite the dollar price of gold trading near its highest point in seven years. The margin squeeze, which has led to a spate of profit warnings from commodity producers and other exporters, has kick-started a review process of marginal and loss making mines.
Although major mining companies have stopped short of cutting jobs for the time being, a stronger rand would almost certainly lead to a flood of retrenchments as managers try to cauterise the unprofitable work areas at their operations.
AngloGold chief executive’s May comment that “Cowboy’s don’t cry” still holds true for the group’s management, which has costs well below the current price. At the last quarter, its South African operations boasted the best cash costs of its Johannesburg-based peers, at R61,000/kg. Even at stronger rand prices, AngloGold’s offshore assets produce gold at levels that would help shield its local mines.
Harmony Gold and Gold Fields, however, have paper-thin margins that must be bringing tears to management’s eyes. Harmony’s South African operations have cash costs of close to R77,000/kg, while Gold Fields local mines are faring marginally better at R73,000/kg.
“At these (rand) levels, the operations are under serious pressure. There are shafts and working areas that are not profitable and which are in the process of being reviewed,” said Willie Jacobsz, a Gold Fields spokesman. Similar reviews are taking place on mines across the commodity spectrum, with Kumba Resources, De Beers and Durban Roodepoort Deep already cutting staff to lower costs.
Bernard Swanepoel, the chief executive of Harmony Gold, says the local gold industry has effectively stalled at the current exchange rate. “At these exchange rates the South African gold industry ceases to be profitable on a total cost basis. We make about enough money to stand still and any industry that is standing still, is busy dying,” he says.
Swanepoel says each of Harmony’s business units has restructured operations to weather the strong rand. Remaining profitable at a cash operating level is the top priority and something he believes the South African operations will achieve.
“The company has the ability to survive in the short term by mining higher grade area, but if this is around in the longer term we could see some serious damage for the whole industry,” he says.
Ever the opportunist, Swanepoel says the company is ideally positioned to make an acquisition, given that the group still has around R2 billion in cash. His sentiment has an unlikely echo in DRD, the most marginal of the large South African gold producers. Ilja Graulich, a spokesman for DRD, says the group’s South African mines will break even at a gold price of R80,000/kg.
“We will use the strong rand to make offshore acquisitions,” says Graulich. He added that the group’s current Australasian portfolio was contributing R200 million in free cash flow to the group, which would act as a buffer against the strong rand. If the rand remained strong, he said, DRD would look to mine higher grades at its mines and increase the yields on its local operations.
natgas: Robry
Gas flows for last week were consistent with a withdrawal of 55 BCF, which would be bullish against the baseline (50 BCF injection on 137 demand-days).
Flows suggested 69% of operators increased withdrawals over the previous week, 22% decreased withdrawals, and 9% were unchanged. Flows also suggested 84% had net withdrawals for the week, while 16% had net injections.
Among the various model components/methodologies, Capacity postings project a 56 BCF draw, while downstream postings suggested a 47 BCF draw, and the dailies a 51 BCF draw.
The longer-range model remains behind the baseline shift- saying a withdrawal of 42 BCF would be on trend with the past 10 weeks.
As with last week, high margin of error on the gas-flow model due to switchover. (The gas flow model has historically had a very difficult time at switchover (to withdrawals)- the time of year when pipelines sometimes divert scheduled injections and withdrawals to/from linepack (rather than burn compressor fuel to inject one week only to withdraw the next); and no-notice activities become more irradic and unpredictable).
NEXT WEEKS EIA REPORT: Gas flows suggest 47 BCF pulled thus far (through Tuesday Night), puting us on track for perhaps an 80-100 BCF pull.
-Robry825
au great message with correct link:
http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=19554672
check out Dec 3rd at 1:30PM
http://www.firstcallevents.com/service/6596_Agenda2.html
GBN 3Q 2003 Analysis
Options:
2.697M shares expire prior to Dec 30, 03
1.374M shares have been exercised subsequent to 3Q03
Thus, only 1.3M option shares remain to be exercised, 51% have already been exercised.
Warrants (excluding Hecla):
7.919M shares expire prior to Apr 04
2.048M shares have been exercised subsequent to 3Q03 per financials
Thus, 25.8% have been exercised, and 5.871M remain.
However, per discussion today, it is my understanding over the past few days an additional 4.171M warrants have been exercised, including all of the SouthGold April 04 warrants, due to acceleration clause. Accordingly, only 1.7M warrants remain, 78.5% have already been exercised…
Bottom line, of the 10.6M total warrant and option shares expiring before April 04, only 3M remain. Over 70% have now been exercised, so there is very little overhang left. Further, my understanding is many of the 1.7M remaining warrant holders are predisposed to keep their shares, and if so, none of these will be sold into the market. Thus, my opinion is that the heretofore substantial warrant and option share overhang is now behind us…
Cash & Working Capital:
GBN lists $28.5M in cash but this apparently somehow includes $16M relating to the share issuance to SouthGold . Better to use working capital, which decreased from $13.16M to $11.36M during the quarter. However, given the warrant and options exercised above, $9M has been added to the coffers since Sept 30. Accordingly, current working capital should now be over $20M, before GFL payment. Another $5.4M proceeds will be received from the remaining options and warrants before Jan 30, 04.
GFL Payment:
SouthGold does not own the Burnstone property outright, but rather held options to buy the Burnstone Property. On October 10, GBN exercised SouthGold’s option for the GFL portion of the property (apparently comprising most all of Areas 1, 2, & 3) for US$5.7M=C$7.4M.
Year End Cash Balance Projection & Future Placement Analysis
Net, net cash balance should be around C$18M at year end 2003 before 4Q expenses of say C$4M, so estimate year end cash balance of C$14M at year end. This is a fairly healthy year end cash balance, so GBN will not be compelled to issue another PP at a lowball price, can likely wait for a share price exceeding US$3 per share given that POG and HUI cooperate… Given C$130M Burnstone #1 capex and 66:34 debt to equity financing, GBN will need C$40M for Burnstone financing. At current C$3.00 share price, another PP of 14.4M shares will need to done in 2004. This amounts to 12.6% further dilution, but that should be the final PP GBN ever needs, IMO. Starting in 2005, GBN should be receiving US$32M annual operating cash flow from HL/Ivanhoe joint venture. This internal cash flow should more than cover any additional financing needs.
Conclusion:
The current option and warrant overhang is likely behind us, given continued strength in POG and HUI, GBN should continue to outperform the HUI in 2004, in my opinion.
____________________________
http://www.sedar.com/csfsprod/data42/filings/00595675/00000001/m%3A%5CBETTYC%5CSEDARFile%5CGBG%5CQ3%...
____________________________
Additional Info on Burnstone Property from 20-F
Great Basin entered into an option agreement date November 5, 2002 ("the Agreement") to purchase, in two interdependent-stages, up to 100% of Southgold Exploration (Proprietary) Limited ("Southgold"), a privately held South African corporation that holds rights to purchase the Burnstone property.
Mineral Rights Holdings
Property holdings encompass 26,470 hectares, situated on portions of 16 farms. The mineral rights under option by Southgold are: 13,568 ha (51.3%) held by GFL Mining Services Ltd ("Gold Fields"); 7,288 ha (27.5%) held by Reitbult Estate Holdings (Pty) Ltd ("Reitbult Estates"); 2,744 ha (10.5% held by PUMA Gold (Proprietary) Limited ("PUMA"); 1,365 ha 5.2%) held by Taurus Mining & Prospecting (Pty) Ltd ("Taurus"); and 1,473 ha (5.5%) held by several private owners.
yep HPR looking good, thanks for that pick...
Forget Norway, try E-BAY !!
http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=2360857192&category=1607
COTS: you need to also review combined futures and options
http://www.321gold.com/cot_gold.html
paints a little different picture, given options expiration...
Beware: Anooraq (ARQ-TSXV)
Anytime LOM (Loewen Ondaatje McCutcheon Ltd) comes out with a new analyst report on a Hunter-Dickinson company, it pays to be wary... LOM has traditionally been the go to company for Hunter Dickinson Private Placements. When LOM issues a new report, often a PP is not far behind...
purchased GBN trading shares @ $2.29
1) Should have 3Q 03 financials with press release within 24 hours.
2) Expecting RBC Analyst Report, they visited Burnstone mine 3 weeks ago and report is due...
3) Expect comments on new Burnstone drilling and possibly some scoping study comments.
4) The majority of the Dec 30 2003 management options have yet to be exercised per SEDI, now why is that? Could it be that GBN management will be generating a torrent of news relating to items 1-3 above to get the share price higher before exercise...? That's my opinion.
Quarterly report out...
http://www.sedar.com/csfsprod/data41/filings/00594235/00000001/s%3A%5Calamos%5C093003bc.pdf
2.) Operations:
Salamandra Project:
Activities in the mine have been largely on schedule. The consulting firm, M3 Engineering, continued with their feasibility work during the quarter under review. The design and costing of various components are underway and the mineable quantities of ore and waste are being calculated under different possible working conditions. A number of metallurgical tests were started on sulfide ore that was mined from the underground workings. The objective is to determine the optimum crushing size for different grades of ore. A bulk test to confirm the column test results is being planned. A bypass was finished on the road connecting the town of Sahuaripa and the village of Mulatos.
An underground mining contractor was chosen to mine several thousand tonnes of ore for the upcoming bulk leaching test. A diamond-drilling contractor was chosen to commence drilling a series of holes from the underground workings. Sufficient water to support a very large operation was found and the necessary permitting from the Federal authorities is being sought. The ability to store and use explosives was obtained. US$452K was spent on the project as follows: property and other taxes amounted to $150K; access roads work spent $83K; drilling $35K; metallurgical/ testing $25K; permits $13K; transportation $12K; exploration $11K; ejido / social costs $12K; and mine office administration $33K. These expenses are comparatively higher than previous periods to reflect the higher volume of activities as the project moves along towards a production decision.
Ejido:
Judgment of the lawsuits between the Company and the Ejido was received and, unfortunately, the judge ruled that the last two yearly land rental payments were reduced by incorrect procedures. The Company is appealing this ruling. These land owners have received no money over the past two years and although they turned down one offer to settle, there is some hope a reasonable arrangement can be reached without waiting for the ruling on the appeal.
Dynamic Oil & Gas, Inc.: Third Quarter Interim Report and Outlook for Fiscal 2003
Monday December 1, 9:07 am ET
http://biz.yahoo.com/bw/031201/15299_1.html
VANCOUVER, British Columbia--(BUSINESS WIRE)--Dec. 1, 2003--DYNAMIC OIL & GAS, INC. is pleased to report operational and financial highlights for the three and nine-month periods ending September 30, 2003 ("2003-Q3" and "2003-Nine"), compared with the three and nine-month periods ending September 30, 2002 ("2002-Q3" and "2002-Nine").
Summary Highlights
In this quarter and compared to the same calendar quarter last year, we:
Increased our daily average production by 19% to 3,831 boe per day - a quarterly historical record;
Increased our gross revenues by 87% to $12.0 million;
Increased cash flow from operations by 61% to $4.9 million; and
Increased net earnings by 97% to $1.0 million.
Also during this quarter and compared to the same quarter last year, we realized the following changes in our weighted average prices:
A 66% increase in natural gas to $5.80 per mcf;
A 39% increase in natural gas liquids to $26.17 per barrel; and
A 5% decrease in crude oil to $40.53 per barrel.
On July 7, 2003, we repurchased for an aggregate price of $6.5 million, certain gross overriding royalty interests that previously burdened our total current and future corporate production by 3%. The aggregate price was paid by the issuance of 1,050,666 common shares and the payment of $1.0 million in cash. For comparison purposes, previous royalties paid pursuant to these interests were:
During the period January 1 to July 7, 2003 - $0.8 million; and
During the period January 1 to September 30, 2002 - $0.7 million.
At the close of this quarter, our:
Committed cash resources of $10.5 million for capital and exploration expense spending represented 32% of our $33.0 million 2003 budget. On a year-to-date basis, we committed cash resources of $21.3 million or 65% of our 2003 budget; and
Daily production exit rate was 3,679 boe per day. Our exit rate target for December 2003 is 5,200 boe per day, subject to the following:
new natural gas production expected at Cypress/Chowade in northeast B.C., pending completion of pipelining and availability of third-party processing; and
new crude oil production expected at St. Albert, Alberta, pending successful outcomes of up-hole completions in two separate well-bores and one, new deep- drilling event.
Operational Highlights
(Units as stated) 2003-Q3 2002-Q3 2003-Nine 2002-Nine
---------------------------------------------------------------------
---------------------------------------------------------------------
Daily average production
rates
Natural gas (mcf/d) 14,292 14,148 12,726 15,168
Natural gas liquids
(bbls/d)(1) 707 677 641 741
Crude oil (bbls/d) 742 192 731 152
All products (boe/d)(1) 3,831 3,227 3,493 3,421
Total production (mboe)(1) 353 297 954 934
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) bbls/d = barrels per day; boe/d = barrels of oil equivalent
(6 mcf = 1 bbl); mboe = thousand barrels of oil equivalent.
Financial Highlights
($ 000's unless otherwise stated)
2003-Q3 2002-Q3 2003-Nine 2002-Nine
---------------------------------------------------------------------
---------------------------------------------------------------------
Gross revenues 11,980 6,418 37,212 20,220
Net earnings (loss) 965 491 5,759 (376)
Net earnings (loss)
per share ($/share) 0.04 0.02 0.27 (0.02)
Cash flow from
operations(1) 4,866 3,031 16,891 7,744
Cash flow from operations
per share ($/share)(1) 0.22 0.15 0.80 0.38
Capital expenditures 10,489 2,109 21,341 4,036
Net debt(2) 16,552 12,739 16,552 12,739
Net debt to cash flow
annualized (times)(3) 0.9:1 1.1:1 0.7:1 1.2:1
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) Cash flow from operations is a non-GAAP measure that does not
have standardized meaning as prescribed by GAAP and therefore may
or may not be comparable to similar measures presented by other
companies. We consider it a key measure as it demonstrates our
ability to generate the cash flow necessary to fund future growth
through capital investment and to repay debt.
($ 000's) 2003-Q3 2002-Q3 2003-Nine 2002-Nine
---------------------------------------------------------------------
Cash provided by
operating activities
(GAAP) 7,447 794 18,109 8,354
Changes in non-cash
working capital
affecting operating
activities (GAAP) (2,581) 2,237 (1,217) (610)
---------------------------------------------------------------------
Cash flow from operations
(non-GAAP) 4,866 3,031 16,891 7,744
---------------------------------------------------------------------
---------------------------------------------------------------------
(2) Net debt is working capital. We have no long-term debt.
(3) Net debt divided by cash flow from operations annualized.
Annualized numbers are presented by multiplying the three-month or
nine-month numbers by four or four-thirds, respectively. This
method, however, does not reflect actual results for the
applicable extrapolated period and as such may differ from the
results achieved by this calculation.
Comparison of Significant Variances: 2003-Q3 vs 2002-Q3
Capital Expenditures - in 2003-Q3 we invested $13.7 million. Included in that amount, $9.7 million was for the July 7, 2003 repurchase of certain gross overriding royalty interests that burdened our total current and future corporate production by 3%. The carrying value of the repurchase is comprised of the aggregate repurchase price of $6.5 million that we paid for the royalty interests (see Summary Highlights), plus the cost of related future income taxes of $3.2 million as is required under Canadian GAAP.
Of the $4.0 million remainder, 58% was spent on our St. Albert and Wimborne properties in central Alberta, and 42% was spent on our Orion and Cypress/Chowade properties in northeastern British Columbia.
In 2002-Q3 we invested $2.1 million, 76% at St. Albert and Halkirk in Alberta, and 24% at Orion and Cypress/Chowade in British Columbia.
Cash Flow from Operations (non-GAAP) - increased by a net of $1.8 million or 61%, to $4.9 million. This was the net result of a $3.4 million increase due mainly to higher realized weighted average prices for natural gas and natural gas liquids; a $2.1 million increase due to a 286% increase in crude oil production; and a decrease of $3.7 million due mainly to increases in royalties and current income tax expense ($2.3 million and $1.0 million, respectively).
Net Earnings - increased by a net $0.5 million or 97%, to $1.0 million. This increase was the net result of the same factors that affected our cash flow from operations referred to above, accompanied by an increase of $1.8 million in amortization and depletion expense and a decrease of $0.5 million in future income tax expense.
Daily Average Production Rate - increased by a net 604 boe/d or 19%, to 3,831 boe/d. Of this net increase, natural gas increased by 24 boe/d or 1%, to 2,382 boe/d (14,292 mcf/d), natural gas liquids increased by 30 boe/d or 4%, to 707 boe/d, while crude oil increased by 550 boe/d or 286%, to 742 boe/d. The main reasons for the net increase were:
At St. Albert, daily average rates of natural gas and natural gas liquids decreased by 146 boe/d or 6%, to 2,405 boe/d (14,430 mcf/d) due mainly to a natural decline in reservoir pressures. Daily rates of crude oil increased by 550 boe/d or 288%, to 741 boe/d due to three new oil wells that were either not yet discovered or not yet in full production in 2002-Q3;
At Cypress/Chowade, daily average rates increased by 260 boe/d (1,560 mcf/d) from two wells that were not yet discovered in 2002-Q3. As at the end of 2002-Q3 we had three standing natural gas wells awaiting tie-in, pending completion of pipelining and availability of third-party processing.
Weighted Average Commodity Prices - natural gas prices increased by 66% to $5.80/mcf, natural gas liquids by 39% to $26.17/bbl, while crude oil decreased by 5% to $40.53/bbl.
Royalties, Mineral Taxes and Alberta Royalty Tax Credits - increased by $2.3 million or 218%, to $3.3 million. Unit royalties expense increased by a net $5.85 ($6.38/boe less $0.53/boe) or 168%, to $9.34/boe. The $6.38/boe increase was primarily due to: higher commodity prices ($3.80/boe); royalty obligations associated with production from two new St. Albert oil wells ($1.88/boe); and a non-repetitive crown royalty adjustment in 2002-Q3 ($0.70/boe). The $0.53/boe decrease was due to the July 7, 2003 repurchase of gross overriding royalty interests that previously burdened our total current and future corporate production by 3%.
Production Costs - increased by $0.2 million or 11%, to $2.1 million. Unit production costs decreased by a net of $0.42 or 7%, to $5.92/boe mainly due to the elimination of monthly processing charges for St. Albert facilities acquired pursuant to a sales and leaseback agreement.
Amortization and Depletion Expense (A&D) - increased by $1.8 million or 118%, to $3.4 million. Unit A&D costs increased by a net of $4.38/boe or 83%, to $9.68/boe mainly due to: an increase in depletion at St. Albert due to higher capital-to-reserve ratios for recent crude oil discoveries and natural gas optimizations ($2.05/boe); an increase due to additional depletion related to the July 7, 2003 repurchase of gross overriding royalty interests that previously burdened our total current and future corporate production by 3% ($2.00/boe); and an increase due to amortization of a higher leasehold base ($0.44/boe).
Exploration Expenses - increased by $0.1 million or 13%, to $0.6 million. Unit exploration expenses decreased by a net of $0.09 or 5%, to $1.60/boe. Current quarter drilling expense includes the cost of one unsuccessful drilling attempt at Halkirk, Alberta.
General and Administrative Expenses (G&A) - increased by $0.2 million or 41%, to $0.8 million. Unit G&A costs increased by a net $0.36 or 19%, to $2.29/boe. Cost increases of $0.51/boe were spent in various areas: new staff hires; geophysical and mapping software usage; corporate insurance; computer networking charges; and gas marketing advice. Cost decreases of $0.15/boe were due to our earning more overhead credits associated with the operation of properties.
Comparison of Significant Variances: 2003-Nine vs 2002-Nine
Capital Expenditures - in 2003-Nine we invested $24.5 million, $9.7 million of which was for the July 7, 2003 gross overriding royalty repurchase (see Capital Expenditures comment above). Of the $14.8 million remainder, 48% was spent on our properties at St. Albert, Halkirk and Wimborne, Alberta, and 52% was spent at Orion and Cypress/Chowade, British Columbia.
In 2002-Nine we invested $4.0 million, 83% at St. Albert, Alberta, and the balance at Orion and Cypress/Chowade, British Columbia.
Cash Flow from Operations (non-GAAP) - increased by a net $9.1 million or 118%, to $16.9 million. This was the net result of: higher weighted average prices realized in all commodities ($15.6 million); a decrease due to lower volume sales of natural gas and natural gas liquids ($5.5 million); an increase due to higher volume sales of crude oil ($6.9 million); an increase in royalties expense ($6.0 million); and an increase in current income tax expense ($1.6 million).
Net Earnings - increased by a net $6.1 million to $5.8 million from a deficit of $0.4 million. This increase was the net result of the same factors that affected our cash flow from operations referred to above, accompanied by: an increase in amortization and depletion expense ($1.9 million); an increase in future income tax expense ($1.7 million); and a decrease in exploration expenses ($0.6 million).
Other Significant Items
Liquidity and Capital Resources - during 2003-Q3, our capital resources consisted of the following: cash flow from operations; cash provided by the exercise of stock options; common stock issued to repurchase certain gross overriding royalty interests (see Summary Highlights); and available bank lines of credit. Net debt increased by $0.7 million in 2003-Q3 compared to 2002-Q3, as our capital expenditures and exploration expenses exceeded cash flow from operations.
Outlook - Our exit rate target for December 2003 is 5,200 boe/d, reflecting anticipated growth over our 2003-Q3 daily average of 3,831 boe/d. This growth is expected to be 15% crude oil and 85% natural gas. New crude oil production is expected to come from St. Albert and is subject to the successful outcomes of up-hole completions in two separate well-bores and one, new drilling event scheduled in the fourth quarter of 2003. New natural gas production is expected to come mainly from Cypress/Chowade in northeast B.C. and is subject to the completion of pipelining and availability of third-party processing.
The two up-hole oil completions have tested crude oil and associated gas in the Nisku D-2 formation. The wells were tied-in and initial production tests began in late November 2003. The new well targeting the Leduc D-3 oil formation in the 'north' pool, was spudded in mid-November and has now reached target depth. A service rig is being moved on to the location to penetrate the top of the reef and test for oil potential. If successful, the Company expects to increase oil production, add new reserves and replace oil production from two existing Leduc D-3 wells in the 'south' pool that declined in 2003-Q3. Two additional north pool wells, originally scheduled for 2003 and delayed to allow for community consultation, have been rescheduled for 2004.
Also at St. Albert, efforts to optimize natural gas recovery from the low-pressure Ostracod zone have been successful. Two wells were drilled using under-balanced drilling techniques in 2003-Q2 and tied-in during 2003-Q3. These wells are presently producing, allowing us to better manage the recovery rates of remaining Ostracod reserves.
At Cypress/Chowade in northeastern B.C., Dynamic and partners drilled and completed their sixth successful natural gas well late in 2003-Q3. Of the first five, one is producing through third-party facilities and four are in the process of being completed, tested and tied in. Based on earlier seismic, several new exploration and development locations in the area have been defined. In November 2003, Dynamic conducted further proprietary 2D seismic on 100% farm-in lands that were recently-acquired at Chowade.
Two new zones have been recently completed in two of the five earlier wells. From each of these zones, natural gas has flowed in excess of 3.5 mmcf/d on extended production tests. Dynamic and partner are aggressively pursuing the construction of a pipeline connection to Duke Energy's Sikhanni gas plant. Completion is expected in early 2004.
At Cypress/Chowade, our drilling plans for the remainder of 2003 include three wells, two of which are currently drilling. One of the wells is a $4.0 million deep-gas test in which the Company has a 20% interest before payout and a 28% interest after payout. The well is expected to reach target depth early in January 2004. Of the remaining two wells, (Dynamic 30%), one is an exploration well expected to reach target depth in December 2003 and the other is a development outpost well expected to spud before year end.
In 2003-Q3, our 2003 drilling program was revised from 14 wells to ten. One well was cancelled and three were shifted forward to early 2004. Our six-well re-entry program, originally budgeted in 2003, has been completed. We expect to remain close to our 2003 capital and exploration expense budget of $33.0 million due to replacement of four exploration wells with two higher-cost ones in northeast B.C.
Additional reader information - this news release includes comparative operational and financial information for our 2003-Q3 and 2003-Nine. Because of the summary nature of this news release, readers should access our 2003-Q3 interim report at our corporate website for further details: www.dynamicoil.com or at the regulatory filings website: www.sedar.com.
DYNAMIC OIL & GAS, INC. is a Canadian based energy company engaged in the production and exploration of Western Canada's natural gas and oil reserves. The Company owns working interests in producing and early-stage exploration properties in central Alberta, southwestern and northeastern British Columbia.
On Behalf of the Board of Directors,
Wayne J. Babcock
President & CEO
nspolar: thanks for the charts and comments, much appreciated
Yes, that extra 5 new drill hole comment also caught my eye... This increases drill holes from 11 to 16 the way I read it...
FWIW, here is map of some of the new holes, believe the first 4, believe you should read in conjunction with the 10/7 press release, excerpts below:
Comments on new drilling from 10/7/03 press release:
"Recently completed detailed surface and underground alteration and structural mapping indicate that structural control is the dominant control of high-grade mineralization within the deposit. The structural zones had not been previously identified, and have not been the focus of any previous drilling campaign. Gold-bearing structural zones are predominantly northwest-oriented with steep southwesterly dips. Structural zones are marked by vuggy silica alteration and oxidized sheeted fracture zones which contain very high-grade gold concentrations. Previous drill holes were drilled predominantly sub-parallel to the structural trend, and only occasionally entered the zones at oblique angles, with grades of resulting intercepts ranging up to 40 g/t gold. The underground workings allow for a drill direction perpendicular to the trend and dip of the zones so that a true idea of width and grade can be ascertained."
_____
My amateurish interpretation of above map, note the northwest direction of the new drill program...
new analyst report:
http://members.shaw.ca/dsk.consulting/KLGPorph.pdf
sirrah666: in regard to your comment:
"can put off production phase beyond the span of Millar's life plans"
My understanding is Alamos should begin production no later than first half of 2005, personally I believe that 1Q 2005 can be met. My understanding is AGI has already begun some stripping prior to completion of the new 1Q 2004 feasibility study, which is indicative of their confidence in this study being favorable. Per RBC report page 1: "We estimate that a mine at Mulatos could produce an average of over 100,000 ounces of gold per year for slightly more than 12 years and we expect production to begin in mid-2005 following a one year construction period."
Thus, your comment that production may be beyond the span of Millar's life seems inaccurate. Water rights and ejidos issues still need to be resolved which could cause project delay beyond this 1Q05 projection...
Your comment: "Mr. Millar treated Mulatos more as a personal and self satisfying challenge than business" is interesting and could be accurate. What is the basis of this observation?
Thanks for your posts and views, look forward to reading more of your comments on AGI.
sirrah666, thanks for your post...
Sure would appreciate learning how someone in Poland keeps apprised on AGI, i.e. do you call the company, call a Canadian broker, or some other means...?
Thanks!
I for one will miss having a cheapskate like me (aka Chester Millar), on the board of directors... It would have been better if he could have swallowed his pride? (for lack of a better word?) and simply gone along with the other directors.
The jury is still out whether Chester's or other board members' approach will be best, although as stated, I favor additional exploration and the larger mine plan... AGI will miss his name recognition and prior track record which will likely make fund raising on favorable terms a bit more difficult. To be fair, however, McCluskey was doing most of the fundraising but having the Millar name behind you had to help his efforts...
Put me in the camp of disappointed that Chester decided to resign rather than to simply remain outvoted... Always good to have differing views on the board of directors, IMO. Best of all worlds would have been for Chester to resign as Chairman of the Board but remain as a director...
just my opinion...