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"VIEW really pushing SGLS hard"
Please pardon my ignorance, but what is "VIEW"? TIA
MM
Tracking intra-day volume spikes
Does anyone know of a way to be alerted to intra-day volume spikes? I'm interested in taking a look at any stock that suddenly sees a big intra-day volume increase....but haven't been able to find a way to do this.
TIA
MM
Tracking intra-day volume spikes
Does anyone know of a way to be alerted to intra-day volume spikes? I'm interested in taking a look at any stock that suddenly sees a big intra-day volume increase....but haven't been able to find a way to do this.
TIA
MM
GPP.V- I agree, Bob. Just a lot to like in this report I think. I own some GPP.V, and will likely be adding on weakness.
Start with this "Fourth quarter cash flow is estimated to be over $8 million or $0.32 per fully diluted share. " So they're cash flowing 1.28 per share annualized....versus a current price of about $4.05 U.S. That's something like 3.2 times cash flow.
Sweet, but it gets better.
Production was about 2700 BOEPD in Q4 2005. In 2006, it's going to AVERAGE 3500-4000 BOEPD (very strongly suggesting that exit production will be over 4000. And keep in mind that management here is known to underpromise and overdeliver).
This company is really, really cheap. And they're growing like wildfire- so the tiny multiple really isn't appropriate.
I also love how lean GPP is- fully diluted O/S is only around 26 million (and with flow rates like those described above, I don't expect to see much dilution here). So they're going to exit 2006 with production over 4000 BOEPD (maybe well over that level, if management overdelivers as usual) and o/s probably not too much greater than 26 million.
For comparison's sake, TGA's net production is projected to be less than 4000 BOEPD (I believe- hard to be sure, since TGA always gives gross numbers) and their market cap is about 3.5X larger (and they aren't growing nearly as fast)
MM
AEI correction
"we think there's the potential for 1 trillion barrels of oil in Egypt"
Typo alert: I'm sorry... he said 1 BILLION barrels.
MM
AEI presentation
http://www.siliconinvestor.com/readmsg.aspx?msgid=22159974
MM
AEI.TO
Does anyone follow AEI.TO (1.75 CAD)? I took a starter position yesterday.
Looks super cheap to me (2000 BOEPD versus fully diluted market cap of around $80 million CAD).
This interview blew me away.
http://www.ceocfointerviews.com/interviews/ArsenalEnergy3.htm
I thought the comments re Egypt were extremely bullish, and I love the production guidance of $4000 BOEPD by end of 2006.
And this one should become a story stock at some point this year, thanks to the massive potential of the Egypt project. If Egypt is what they think it is, AEI.TO will be a massive home run. But the stock should run on hype regardless imho.
Here are some posts worth reading on the company
http://www.siliconinvestor.com/readmsg.aspx?msgid=21888090
http://www.siliconinvestor.com/readmsg.aspx?msgid=21973028&srchtxt=aei
Not sure where this poster gets his 5000 BOEPD target from:
http://www.siliconinvestor.com/readmsg.aspx?msgid=21972026&srchtxt=aei
MM
EGY
Hopefully the post I'm replying to helped someone here.
MM
My pleasure, researcher. I'm also not sure how much farther the stock is likely to go on this run....and I'll most likely be looking to toss my trading shares fairly early on Monday for that reason (depending on the action, of course). It's very possible that ERS will continue to be very strong for as long as it is #1 on the list (though I'd expect a hard, consolidative shakeout or two along the way). But I'll personally be looking to book the easy trading gains here on Monday.
Aside from the fact that the stock is overbought and not cheap any more, I still remember how insiders absolutely unloaded on shareholders (which included me, much to my trauma at the time. lol) a few months ago, and I'm a bit wary of the possibility that they could do so again (though IBD volume would probably suck up a lot of the overhang even if that were to happen).
Ross
ERS/IBD
Congrats Bigpike, Echos, Researcher etc....ERS came in #1 on the IBD 100 list-so Monday should be interesting. Have a good weekend all.
MM
ERS/IBD
For any mo-mo players in the house....
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7082553&tid=ith&sid=7082...
ERS/IBD play
Hi guys. First post here. I'm not sure if you play IBD mo-mo here, but if you do this idea might interest you....
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7082553&tid=ith&sid=7082...
No problem, researcher. I think that they have an extremely good chance of coming in at #1 (assuming that they finish the week over 15, which is an assumption I'm very comfortable with at this point. The mo-mos have this one now, and I don't think they'll let it drop much tomorrow). If not, they should make the top 3 in any event...which will probably still be good for a nice pop.
MM
ERS/IBD
For reference, NGS debuted as #3 on the IBD list on August 12...and you can see what happened after that
http://finance.yahoo.com/q/hp?s=NGS&d=0&e=26&f=2006&g=d&a=9&b=23&c=2002&...
ERS/IBD
Researcher,
Sorry I didn't post this sooner (have been behind on posts). But, fwiw, I actually just bought a bunch of ERS for a 2 day "IBD trade". As long as the stock finishes the week over 15 (which seems almost certain at this point, imho) it should be #1 on the new top 100 IBD list, released Friday night. That's why it's running now.
Given its low float, I expect to see a very strong pop on Monday (most likely to the $17 level, at least, I think). If it follows the pattern of NGS (another low float play that IBD rocketed) we might see a strong pullback after that.....probably followed by another big move up as the mo-mos continue to juice it.
So I just bought a large trading stake at around 15.90. Will look to dump it early Monday, probably (or even toss some shares late tomorrow, if it runs wild on anticipation)...and then to buy the dips....
I've also been trading the intra-day swings the last couple of days (scalping it for .20 hits), and will likely continue doing that.
MM
Can you provide a link to that post?
MM
PBG.TO/PBGEF
I copied the article below from another forum. I've taken a fairly large position in PBEGF lately (average cost around .25 above the current quote)
Good to hear the CEO sounding so confident about THAI:
"We're obviously highly confident it will work but I'll keep saying 'if' because that's the safe way to phrase it," Mr. Wright, 45, said in an interview.
"What we're talking about here a step change for the industry."
This is also interesting:
" It was also approved last week [dec 16] for a listing on the Oslo stock exchange and will begin trading there with an IPO in January -- a move Mr. Wright said stems from increased interest from fund managers and investors in Europe in the Whitesands project and its conventional Canadian assets and its Latin America unit."
Getting the Fire Flood Wright. Petrobank --
If Petrobank's CEO is on the money, his company is about to revolutionize the oilpatch
John Wright, CEO of Petrobank, says if the patented oil recovery technique works, it will be "a step change for the industry."
LAC LA BICHE, Alta. - John Wright has a theory about gravity and if it proves correct, the head of Petrobank Energy and Resources Ltd. says his company will "revolutionize" the oilsands business.
Any mention of gravity sounds pretty good after a rocky, hour-long flight north from Calgary to a tiny landing strip and a waiting bus. The drive along a series of slippery, ice-covered mud roadways to Petrobank's experimental pilot project called Whitesands lasts another 90 minutes.
Finally grounded and marching around a rectangle clearing cut into the wilds of northeastern Alberta, a group of analysts is getting a first look at the $35-million project's budding infrastructure. After the ride, no one dares complain about muddy boots.
This is a long way from mining country. That portion of the Athabasca oilsands deposits is 200 kilometres north around Fort McMurray, where oilsands are buried within metres of the surface and giant trucks and shovels dig it out and feed plants that process it into bitumen and synthetic oil.
Here, the prize lies hundreds of metres down and a cluster of thermal projects, some owned by the industry's heaviest hitters, run wells into the earth, soften up the oilsands with steam and pump it to the surface.
The Western Canadian oilpatch is keeping a close, if somewhat-skeptical, eye on Mr. Wright, a third-generation oilman who put together Petrobank's small but impressive management team five years ago.
Quite literally, the company is preparing to turn on the ignition at Whitesands, at which in the coming months its patented oil recovery technique will be tested.
"We're obviously highly confident it will work but I'll keep saying 'if' because that's the safe way to phrase it," Mr. Wright, 45, said in an interview.
"What we're talking about here a step change for the industry."
Petrobank's president and CEO made his first fortune from oil fields deep in the Amazon jungle as president and CEO of Pacalta, which was taken over in a $1-billion deal with EnCana Corp.'s predecessor, Alberta Energy Co., in 1999.
He hopes a good chunk of his second will come from oil buried deep beneath the Alberta muskeg.
But much of that will hinge on Petrobank's technology called toe-to-heel air injection, or THAI, which the company will roll out in February. It claims it can recover almost 80% of oil in place, compared with a 40% to 45% recovery rate using current commercial, in-situ drilling methods, including steam assisted gravity drainage, or SAGD. The other key is the THAI process uses nominal amounts of natural gas, the expensive fuel that SAGD projects burn to make steam.
The description of how a reservoir is prepared so THAI can go to work is a little unsettling.
The process involves pumping air through an injection well deep into the earth, which creates combustion in a volatile mix of oxygen and hydrocarbons.
A moving front of burning oil -- and gases that can reach 600 C -- advances through the deep oil formation at a rate of about a half-metre per day, pushed forward by air pressure building behind.
At the front of the pocket, heavier oil molecules and sand bake into into a coke, which fuels the fiery mass. Lighter oil molecules separate and sink, which is where Petrobank's drilling patent -- and gravity -- come into play. The prized lighter oil pools toward a horizontal production well drilled beneath the moving pocket, and ultimately it is siphoned through the production well to the surface. The two wells -- injector and producer -- sit about 500 metres apart.
The initial stage of the process, known as fire flood, is not new. Others, including industry stalwarts BP Canada, PanCanadian, Alberta Energy Co., Dome Petroleum and Petro-Canada tested the technique as far back as the 1950s but abandoned it.
According to Mr. Wright, who counts himself among the pioneers of horizontal drilling methods used so prominently today by the area's SAGD projects, those early testers used vertical injectors and production wells, and had difficulty containing air and managing pressure.
He says THAI would eliminate so-called air breakthrough and better utilize the forces of gravity.
"What we've done is flip this thing on its side," he said.
"Think of a bathtub full of ice cubes. If you put a blow torch on the side and then hang a garden hose at the top to suck the water out, you're not going to get much.
"But if you run a drain right along the bottom, all the ice melts, the water flows to the bottom and comes out.
"You can see why gravity really helps."
So does air.
Only about 10% of Alberta's oilsands are buried close enough to the surface to mine, which is how the process works at the Syncrude joint-venture and how Suncor Energy Inc., and Shell Canada Ltd. produces most of their oil in Alberta.
The rest has to be produced thermally and to date, such projects have been using huge quantities of natural gas to make steam, which ratchets operating costs so high some projects have questionable economics. A slew of companies, such as OPTI and Nexen Inc., whose Long Lake oilsands project is only a few kilometres north of Whitesands, are working hard to develop alternative fuels.
Whitesands project manager Chris Bloomer, who rose up the ranks with Shell Canada, said some SAGD projects are hard-pressed to turn a profit when natural gas prices climb above US$6 to $7 per thousands British thermal units. The commodity has traded above $US10 for most of the past 12 months.
It's an opportune time for Whitesands to reach startup.
"We will have to use a nominal amount of gas to make a small amount of steam, which is needed to heat the reservoir prior to the fire flood. We have to soften things up a little at first so the process can start," said Mr. Bloomer.
The Whitesands leases hold an estimated 1.3-billion barrels of oil.
As a pilot project, Petrobank will operate only three production wells.
The three-month steam injection cycle Mr. Bloomer spoke of will begin in late-February and by May, the company will have set fire to the formation 400-metres down. Maximum production from three wells could grow to 600 barrels a day by the end of 2006.
Petrobank, which will exit the year producing about 4,000 barrels of oil equivalent a day from holdings in Colombia and Western Canada, trades on the Toronto Stock Exchange. It was also approved last week [dec 16] for a listing on the Oslo stock exchange and will begin trading there with an IPO in January -- a move Mr. Wright said stems from increased interest from fund managers and investors in Europe in the Whitesands project and its conventional Canadian assets and its Latin America unit.
Mr. Bloomer said the company could quickly move towards drilling more wells and turn Whitesands into a commercial project. But before that happens, questions will need to be answered.
Analyst Chris Theal of Calgary brokerage Tristone Capital Corp. was among the guests touring Whitesands.
He said it will take well into 2007 or possibly longer to evaluate THAI's commercial potential.
"I think you've got to caution on what the timeline is here," Mr. Theal said. "You're going to have to see some production history, and so is the company. It's going to have to work for a period of time, with no air breakthrough. A lot of companies tried fire flood and failed.
"But if this works, it doubles the recovery factor and virtually eliminates natural gas. That would be a breakthrough."
Mr. Wright, meanwhile, believes the THAI technology, which he and a former Petrobank board member purchased from the Alberta Research Council, will virtually replace SAGD.
And he said Petrobank would farm out the technology to rival producers.
"If there is a better, cheaper way to do it, without burning all that natural gas, how would you explain to shareholders why you are not using it?" he said.
- - -
PETROBANK ENERGY AND RESOURCES LTD.
Ticker: PBG/TSX
Close: $8.99, down 3 cents
Volume: 27,792
Avg. 6-month vol: 301,422
Rank in FP 50: N/A
EGY overview
I posted the write-up below to the valueinvestorsclub.com (http://www.valueinvestorsclub.com) this morning, pre-market. For disclosure purposes, I hold a small position. Also note that I consider EGY to be more of a long term play (though I think that analyst coverage could be a nice near-term catalyst)
Vaalco Energy is a rare case of undiscovered value in the energy sector, and is
valued at an extreme discount to both proven reserves and current operating
performance. At the current run rate based on third quarter results recently released, it has
a p/e of about 4.5 and checks in with an enterprise value of only 1.9 times EBITDA.
Not only are the company's current operating results compelling, but the stock
also trades at a discount to reserve valuations and the next drilling prospect (Avouma)
will bring approximately 50% more production online in the next 12 months. Couple
EGY's attractive current valuation with the fact that the next drilling prospect has
already been successfully tested with an exploration well, and you have a recipe
for a low risk, high reward investment in
Vaalco.
INTRODUCTION
The Company operates the Etame field on behalf of a consortium of five companies
offshore of the Republic of Gabon (West Africa). The Phase 1 development of the field
occurred in 2002 and consisted of completing three wells producing into an FPSO.
Phase 2 development commenced in 2004 with two wells planned, one of which has already
been drilled and completed. The second well of the Phase 2 development was drilled
during the middle of 2005. The Company’s subsidiary, VAALCO Gabon Etame, Inc.
operates and owns a 28.07% interest in the Etame Field. After completion of the first
Phase 2 wells, the Etame field is currently producing at approximately 18,500 BOPD.
Almost all of the Company’s oil production is located offshore of Gabon and the
Company produces into a 1.1 million barrel FPSO and sells cargos to Shell Western Supply
and Trading, Limited at spot market prices.
EGY's attractive valuation is partially the result of an overreaction to a
September 12, 2005 news item and the fact that the market had to absorb roughly 65% of the
outstanding shares of the company in a relatively short time period earlier in
2005.
On September 12th, the company announced that it had to cut back production levels
after the addition of the new well brought online in Q3. “The higher initial
production levels experienced with the addition of the Etame 6H well resulted in pressure
interference with nearby wells and some declines in their productivity. Rather than
risk local pressure decline, and possible damage to the reservoir, the Etame ET-3H
well will be shut in. By resetting production the consortium expects improved
aquifer support and stable production.” This development didn't change reserves in place
or materially affect the long-term prospects of the company. Even after shutting in
3H, the addition of the new well still raised net production
levels.
“In connection with a merger with 1818 Oil Corp. in 1998, the Company issued to
the 1818 Fund II, L.P. (the “1818 Fund”) Common Stock and Preferred Stock which votes
as a class with the Common Stock on an as converted basis, representing
approximately 65% of the outstanding voting power of the Company on an as converted basis.” In
late 2004 and early 2005, the 1818 Fund decided to wind down its operations and
liquidate. The Fund sold its entire 35,898,695 stake of EGY common stock in a series of
block trades in March 2005. The shares sold by the Fund represented approximately
63.9% of Vaalco’s outstanding common. All these shares had to be absorbed by the
market in a relatively short time period, and now we have a good balance of ownership
with no party owning more than 10% of the
company.
CURRENT FINANCIALS
In Q3 2005, Vaalco earned $11.9 million or $0.20 per diluted share on $26.2
million in revenue. The company generated $22.9 million in EBITDA, and ended the quarter
with essentially no debt and $45 million of cash in the bank. The company's
enterprise value based on the diluted share count currently stands at only $166
million.
After bringing the new well online at the beginning of August, the higher
production levels for August and September brought Q3 to a total quarterly production and
revenue base about equal to the current run rate of 18,500 BOPD. Production in future
quarters should be similar to Q3 until the new Avouma field is brought online late
in 2006.
Judging EGY’s financial ratios versus its peers over the trailing twelve months,
Vaalco has a PE of only 8 versus an industry average of 16, and a price to sales of
2.8 versus an industry average of 3.5. EGY’s annualized PE based on Q3 earnings
currently stands at 4.5, while its annualized price to sales ratio is 2.1.
EGY is also one of the least expensive energy stocks on a cash flow basis. Cash
flow from operations came in at $17.75 million in Q3, and has totaled $34.69 million
for the first three quarters of the year. I expect 2006 cash flow to be at least $60
million. On this basis, EGY trades at roughly 3.5 times forward cash flow, while
peers on average are trading at about 5.5 times forward cash flow.
LONG TERM DEBT
As of September 30, 2005, the Company had a term loan with the International
Finance Corporation (“IFC”), a subsidiary of the World Bank, in the amount of $2.0
million. In June 2005, the Company executed a loan agreement for a $30.0 million
revolving credit facility secured by the assets of the Company’s Gabon subsidiary.
While the company expects cash on hand and current cash flow to be sufficient to
fund capex over the next 2 years, the facility may be utilized to finance a portion
of the Avouma and Ebouri development activities if they find projects outside of the
Etame concession to pursue (note that all of the “announced” development activities
for 2006 and 2007 lie within the “Etame” permit). The facility goes through June
2008 at which point it can be extended, or converted to a term loan. It is anticipated
that this facility will become effective during the fourth quarter of 2005 after
requisite loan registration filings with the Gabon government are completed. This
facility will replace the existing term credit facility, which will be repaid (the
balance is currently less than $1 million
outstanding).
PROVEN RESERVE VALUATION
As of December 31, 2004, the company's last annual report indicated that the
“Standardized measure of discounted future net cash flows at 10% showed the present value
of oil reserves to be $123.3 million based on year end oil prices. As of the end
of 2004, in Gabon, the price was $40.28 per barrel representing a $0.19 discount to
the spot price of Dated Brent Crude at December 31, 2004. In Texas the price was
$42.76 per barrel of oil."
It goes without saying that since the company’s average sale price was $58.75 per
barrel during the third quarter of 2005, the reserves have room for upward valuation
adjustments. Based on current commodity prices, an upward adjustment of about 25%
to reserve valuations would be conservative and prudent when considering the fact
that oil prices are nearly 50% higher than they were at the beginning of 2005. After
replacing the net property and equipment line on the balance sheet with a more
realistic valuation of reserves, Vaalco’s tangible assets alone are worth approximately
$20 million more than the company’s entire enterprise
value.
In addition, the market is placing zero value on the reserves of future drilling
projects, which have a potential for a profound impact on reserve valuations.
Approximately 2.5 million barrels of proved developed reserves were added just on
completion of the Etame-6H well alone as noted in the press release from August 1st,
2005.
The Company maintains a policy of not booking proved reserves on discoveries until
such time as a development plan has been prepared for the discovery. Additionally,
the development plan is required to have the approval of the Company’s partners
with respect to the discovery. Furthermore, if a government agreement that the
reserves are commercial is required to develop the field, this approval must have been
received prior to booking any reserves. For the Ebouri discovery, because of the
decision to participate in a seismic shoot over Ebouri and other areas in the northern
part of the Etame Block, the Company did not request any approvals for the development
of the Ebouri discovery from its partners or the government, pending seismic
results. Therefore, the Company had not booked any reserves for the Ebouri discovery when
reserves were last reported, on December 31, 2004. The Company has likewise not
booked any reserves associated with the North Tchibala discovery on the Etame
block.
Note that based on the map of the existing planned drilling locations, North
Tchibala lies directly between two proven locations- Etame and Avouma (approximately 5
miles from each). And the Ebouri discovery is only about 5 miles northeast of the
main Etame field. There are numerous other leads within Vaalco’s existing permit
boundary, and the odds of substantial future upward adjustments to reserve valuations
remain high.
Judged against three of the company's peers (other AMEX listed small cap stocks
with 100% of their oil production off shore) – TGA, TMY, and CNR-EGY boasts very
attractive valuations to tangible assets. Applying the same methodology above
(increasing proven reserves by 25%) we see that EGY checks in at an EV to tangible assets
ratio of only .90 versus a ratio of 1.5 for TMY, 1.9 for TGA, and 4.2 for CNR. These
are all conservative estimates because 2005 reserve additions are not included.
However, EGY stands out by any measure.
FUTURE DRILLING PROJECTS
The next series of wells will be drilled in the Avouma prospect in mid 2006. This
is a high reward, low risk project as the Avouma exploration well tested 6600
barrels per day on a half inch choke. There will be 2 initial wells tied into this
platform, and both are expected to be producing at rates similar to the exploration well.
The platform for the field is currently being built, and drilling will commence
next year. Management expects a gross production rate of 10,000 to 12,000 BOPD from
this field by the end of 2006, which would translate into 2800 to 3370 BOPD net
production owned by EGY (approximately a 50% increase to current production levels). The
reserve pool of this field is independent of the existing Etame production field
and will not affect current flow rates.
Management is also optimistic about the Ebouri prospect (which is about 5 miles
northeast of the existing production field) and may announce platform development and
drilling plans for that prospect in the coming months. Ebouri could come online in
early 2007 and also add significantly to reserves and production
rates.
Capex for any of the fields within the existing Etame permit will be limited to
only the platform for each field and a pipeline to the FPSO. With the relatively
close proximity to the existing oil storage location, the existing FPSO will be used for
oil storage for each of these future prospects. Therefore, the production cost per
barrel will go down after the Avouma field is
producing.
Management is also presently evaluating at least two opportunities for reserve
growth “through the drill bit” outside of the existing Etame permit. Management
understands that in the current competitive energy environment a small company like Vaalco
can’t compete by buying reserves, but rather that exploration is necessary. The
company desires to be the operator of any new field, and also desires to retain an
ownership position of 50% to 100% of any upcoming prospects. EGY has an exceptional
balance sheet, exceptional cash flows, and a large untapped credit line by which to
grow the company’s reserves substantially through the drill bit. Management desires
to stay relatively debt free. However they are willing to use the credit line if the
right opportunities present themselves.
OTHER DEVELOPMENTS
The company has also realized this year that it needs to increase awareness and
knowledge of the company on Wall Street. In the Q3 conference call, management stated
that three analysts are currently in the process of picking up coverage of the
company. Management also stated that they are looking to hire a professional IR firm to
assist with shareholder relations.
Catalysts:
Increasing production by 50% over the next 12 months.
Decrease in the company’s production cost per barrel in Gabon upon bringing Avouma
field online.
Analyst coverage by three new firms and hiring professional IR.
Upward revisions to proven reserve valuations.
Continued solid operational performance and gradual valuation ratio increase
in-line with peer valuations.
Announcement of drilling plans for Ebouri and other prospects outside the Etame
permit.
EGY overview.
I posted this write-up to the valueinvestorsclub.com (http://www.valueinvestorsclub.com) this morning, pre-market. For disclosure purposes, I hold a small position. Also note that I consider EGY to be more of a long term play (though I think that analyst coverage could be a nice near-term catalyst)
Vaalco Energy is a rare case of undiscovered value in the energy sector, and is
valued at an extreme discount to both proven reserves and current operating
performance. At the current run rate based on third quarter results recently released, it has
a p/e of about 4.5 and checks in with an enterprise value of only 1.9 times EBITDA.
Not only are the company's current operating results compelling, but the stock
also trades at a discount to reserve valuations and the next drilling prospect (Avouma)
will bring approximately 50% more production online in the next 12 months. Couple
EGY's attractive current valuation with the fact that the next drilling prospect has
already been successfully tested with an exploration well, and you have a recipe
for a low risk, high reward investment in
Vaalco.
INTRODUCTION
The Company operates the Etame field on behalf of a consortium of five companies
offshore of the Republic of Gabon (West Africa). The Phase 1 development of the field
occurred in 2002 and consisted of completing three wells producing into an FPSO.
Phase 2 development commenced in 2004 with two wells planned, one of which has already
been drilled and completed. The second well of the Phase 2 development was drilled
during the middle of 2005. The Company’s subsidiary, VAALCO Gabon Etame, Inc.
operates and owns a 28.07% interest in the Etame Field. After completion of the first
Phase 2 wells, the Etame field is currently producing at approximately 18,500 BOPD.
Almost all of the Company’s oil production is located offshore of Gabon and the
Company produces into a 1.1 million barrel FPSO and sells cargos to Shell Western Supply
and Trading, Limited at spot market prices.
EGY's attractive valuation is partially the result of an overreaction to a
September 12, 2005 news item and the fact that the market had to absorb roughly 65% of the
outstanding shares of the company in a relatively short time period earlier in
2005.
On September 12th, the company announced that it had to cut back production levels
after the addition of the new well brought online in Q3. “The higher initial
production levels experienced with the addition of the Etame 6H well resulted in pressure
interference with nearby wells and some declines in their productivity. Rather than
risk local pressure decline, and possible damage to the reservoir, the Etame ET-3H
well will be shut in. By resetting production the consortium expects improved
aquifer support and stable production.” This development didn't change reserves in place
or materially affect the long-term prospects of the company. Even after shutting in
3H, the addition of the new well still raised net production
levels.
“In connection with a merger with 1818 Oil Corp. in 1998, the Company issued to
the 1818 Fund II, L.P. (the “1818 Fund”) Common Stock and Preferred Stock which votes
as a class with the Common Stock on an as converted basis, representing
approximately 65% of the outstanding voting power of the Company on an as converted basis.” In
late 2004 and early 2005, the 1818 Fund decided to wind down its operations and
liquidate. The Fund sold its entire 35,898,695 stake of EGY common stock in a series of
block trades in March 2005. The shares sold by the Fund represented approximately
63.9% of Vaalco’s outstanding common. All these shares had to be absorbed by the
market in a relatively short time period, and now we have a good balance of ownership
with no party owning more than 10% of the
company.
CURRENT FINANCIALS
In Q3 2005, Vaalco earned $11.9 million or $0.20 per diluted share on $26.2
million in revenue. The company generated $22.9 million in EBITDA, and ended the quarter
with essentially no debt and $45 million of cash in the bank. The company's
enterprise value based on the diluted share count currently stands at only $166
million.
After bringing the new well online at the beginning of August, the higher
production levels for August and September brought Q3 to a total quarterly production and
revenue base about equal to the current run rate of 18,500 BOPD. Production in future
quarters should be similar to Q3 until the new Avouma field is brought online late
in 2006.
Judging EGY’s financial ratios versus its peers over the trailing twelve months,
Vaalco has a PE of only 8 versus an industry average of 16, and a price to sales of
2.8 versus an industry average of 3.5. EGY’s annualized PE based on Q3 earnings
currently stands at 4.5, while its annualized price to sales ratio is 2.1.
EGY is also one of the least expensive energy stocks on a cash flow basis. Cash
flow from operations came in at $17.75 million in Q3, and has totaled $34.69 million
for the first three quarters of the year. I expect 2006 cash flow to be at least $60
million. On this basis, EGY trades at roughly 3.5 times forward cash flow, while
peers on average are trading at about 5.5 times forward cash flow.
LONG TERM DEBT
As of September 30, 2005, the Company had a term loan with the International
Finance Corporation (“IFC”), a subsidiary of the World Bank, in the amount of $2.0
million. In June 2005, the Company executed a loan agreement for a $30.0 million
revolving credit facility secured by the assets of the Company’s Gabon subsidiary.
While the company expects cash on hand and current cash flow to be sufficient to
fund capex over the next 2 years, the facility may be utilized to finance a portion
of the Avouma and Ebouri development activities if they find projects outside of the
Etame concession to pursue (note that all of the “announced” development activities
for 2006 and 2007 lie within the “Etame” permit). The facility goes through June
2008 at which point it can be extended, or converted to a term loan. It is anticipated
that this facility will become effective during the fourth quarter of 2005 after
requisite loan registration filings with the Gabon government are completed. This
facility will replace the existing term credit facility, which will be repaid (the
balance is currently less than $1 million
outstanding).
PROVEN RESERVE VALUATION
As of December 31, 2004, the company's last annual report indicated that the
“Standardized measure of discounted future net cash flows at 10% showed the present value
of oil reserves to be $123.3 million based on year end oil prices. As of the end
of 2004, in Gabon, the price was $40.28 per barrel representing a $0.19 discount to
the spot price of Dated Brent Crude at December 31, 2004. In Texas the price was
$42.76 per barrel of oil."
It goes without saying that since the company’s average sale price was $58.75 per
barrel during the third quarter of 2005, the reserves have room for upward valuation
adjustments. Based on current commodity prices, an upward adjustment of about 25%
to reserve valuations would be conservative and prudent when considering the fact
that oil prices are nearly 50% higher than they were at the beginning of 2005. After
replacing the net property and equipment line on the balance sheet with a more
realistic valuation of reserves, Vaalco’s tangible assets alone are worth approximately
$20 million more than the company’s entire enterprise
value.
In addition, the market is placing zero value on the reserves of future drilling
projects, which have a potential for a profound impact on reserve valuations.
Approximately 2.5 million barrels of proved developed reserves were added just on
completion of the Etame-6H well alone as noted in the press release from August 1st,
2005.
The Company maintains a policy of not booking proved reserves on discoveries until
such time as a development plan has been prepared for the discovery. Additionally,
the development plan is required to have the approval of the Company’s partners
with respect to the discovery. Furthermore, if a government agreement that the
reserves are commercial is required to develop the field, this approval must have been
received prior to booking any reserves. For the Ebouri discovery, because of the
decision to participate in a seismic shoot over Ebouri and other areas in the northern
part of the Etame Block, the Company did not request any approvals for the development
of the Ebouri discovery from its partners or the government, pending seismic
results. Therefore, the Company had not booked any reserves for the Ebouri discovery when
reserves were last reported, on December 31, 2004. The Company has likewise not
booked any reserves associated with the North Tchibala discovery on the Etame
block.
Note that based on the map of the existing planned drilling locations, North
Tchibala lies directly between two proven locations- Etame and Avouma (approximately 5
miles from each). And the Ebouri discovery is only about 5 miles northeast of the
main Etame field. There are numerous other leads within Vaalco’s existing permit
boundary, and the odds of substantial future upward adjustments to reserve valuations
remain high.
Judged against three of the company's peers (other AMEX listed small cap stocks
with 100% of their oil production off shore) – TGA, TMY, and CNR-EGY boasts very
attractive valuations to tangible assets. Applying the same methodology above
(increasing proven reserves by 25%) we see that EGY checks in at an EV to tangible assets
ratio of only .90 versus a ratio of 1.5 for TMY, 1.9 for TGA, and 4.2 for CNR. These
are all conservative estimates because 2005 reserve additions are not included.
However, EGY stands out by any measure.
FUTURE DRILLING PROJECTS
The next series of wells will be drilled in the Avouma prospect in mid 2006. This
is a high reward, low risk project as the Avouma exploration well tested 6600
barrels per day on a half inch choke. There will be 2 initial wells tied into this
platform, and both are expected to be producing at rates similar to the exploration well.
The platform for the field is currently being built, and drilling will commence
next year. Management expects a gross production rate of 10,000 to 12,000 BOPD from
this field by the end of 2006, which would translate into 2800 to 3370 BOPD net
production owned by EGY (approximately a 50% increase to current production levels). The
reserve pool of this field is independent of the existing Etame production field
and will not affect current flow rates.
Management is also optimistic about the Ebouri prospect (which is about 5 miles
northeast of the existing production field) and may announce platform development and
drilling plans for that prospect in the coming months. Ebouri could come online in
early 2007 and also add significantly to reserves and production
rates.
Capex for any of the fields within the existing Etame permit will be limited to
only the platform for each field and a pipeline to the FPSO. With the relatively
close proximity to the existing oil storage location, the existing FPSO will be used for
oil storage for each of these future prospects. Therefore, the production cost per
barrel will go down after the Avouma field is
producing.
Management is also presently evaluating at least two opportunities for reserve
growth “through the drill bit” outside of the existing Etame permit. Management
understands that in the current competitive energy environment a small company like Vaalco
can’t compete by buying reserves, but rather that exploration is necessary. The
company desires to be the operator of any new field, and also desires to retain an
ownership position of 50% to 100% of any upcoming prospects. EGY has an exceptional
balance sheet, exceptional cash flows, and a large untapped credit line by which to
grow the company’s reserves substantially through the drill bit. Management desires
to stay relatively debt free. However they are willing to use the credit line if the
right opportunities present themselves.
OTHER DEVELOPMENTS
The company has also realized this year that it needs to increase awareness and
knowledge of the company on Wall Street. In the Q3 conference call, management stated
that three analysts are currently in the process of picking up coverage of the
company. Management also stated that they are looking to hire a professional IR firm to
assist with shareholder relations.
Catalysts:
Increasing production by 50% over the next 12 months.
Decrease in the company’s production cost per barrel in Gabon upon bringing Avouma
field online.
Analyst coverage by three new firms and hiring professional IR.
Upward revisions to proven reserve valuations.
Continued solid operational performance and gradual valuation ratio increase
in-line with peer valuations.
Announcement of drilling plans for Ebouri and other prospects outside the Etame
permit.
Buzz/newsletter,
Really enjoyed the sample newsletter, Buzz. Just one question-will your real time entries and exits be e-mailed to subscribers?
It's better than nothing to post them at the website. But not that much better for me personally....because I work during the day, and can't hang out at the website. But I can react to e-mails while still doing the dayjob. So I'm hoping that real time entries and exits will be e-mailed.
Meister
Bob/EGY
EGY was pumped by a stock picking service today, Bob- thestreet.com's "stocks under $10". Hence the rally on big volume. The pump hit at 12:02- if you look at a daily chart, you'll see the correlation.
Meister
Bob/TGA-
Interesting that you were thinking of selling TGA. I was actually very close to buying before today's move (held off because I didn't want to chase.) I'm hearing that road shows are set for the end of the month (http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1607135078&tid=tga&sid=1.... ),
and this has been a bullish catalyst for the stock in the past.
Meister
OT- HWeb/ VMC e-mails
LOL. Yeah, I hear ya Hank. But I'm not able to receive VMC e-mails for some unknown reason (I'm on the mailing list, and my spam filter isn't the problem). If anyone has a solution to that problem, I'd be very interested to hear it.
Meister
abh3vt/SVLF
You said "Im more concerned about the artificially low cost of goods sold expense"
What makes you think that cogs is artificially low?
Meister
HWeb/ SVLF
I agree. Just added at 1.72.
Meister
LOL. Yeah, tell me about it. But I actually can't watch Cramer, because of the day job. So I'm looking for other sources of pop. Even penny pumpers are okay, as long as they can move the market.
Lebez seems to have a following. But the problem with his alerts is that he sends them after hours, and then his picks gap up 12,000%. LOL
I'm looking for services with big pop that send their alerts intra-day.
Meister
OT- Newsletters and trading services with clout
Can anyone direct me to any newsletters and/or trading services with large enough followings to move markets? I like to play the volatility caused by these services' alerts.
So far, I've been impressed with Changewave's clout. I'm sure that there are others that are similarly "actionable", but could use help identifying them.
I'm particularly partial to services that send out real time alerts.
TIA
Meister
OT- Newsletters and trading services with clout
Can anyone direct me to any newsletters and/or trading services with large enough followings to move markets? I like to play the volatility caused by these services' alerts.
So far, I've been impressed with Changewave's clout. I'm sure that there are others that are similarly "actionable", but could use help identifying them.
I'm particularly partial to services that send out real time alerts.
TIA
Meister
SVLF SEC filing re AMEX listing
http://www.sec.gov/Archives/edgar/data/1033032/000095013405017707/d28782e8va12b.htm
Buzz/SVLF
First, the disclosure- I'm in between 1.78 and 1.79.
Now to the cash flow issue...I see positive cash flow from continuing operations of 1,980,000 for the first 6 months of this year. http://www.sec.gov/Archives/edgar/data/1033032/000095013405015862/d27971e10vq.htm
Where do you see negative cash flow?
I'm probably missing something- so want to get straightened out on this issue...
Meister
I'm in SVLF as well. Thanks for the lead.
Here's one of the few substantive posts on the company I've seen outside of this board
http://www.investorshub.com/boards/read_msg.asp?message_id=7739142
I haven't delved into the comments re negative cash flow. If anyone already has a grasp on that issue, please share.
Meister
SVLF- AMEX play
Anyone playing this?
http://www.investorshub.com/boards/read_msg.asp?message_id=7737157
Stanu/ IBD list
Stanu,
Do you know whether that IBD list was updated today? Or how often it's updated?
Meister
FPPC
Thought I'd share a write-up I put together on FPPC for a private group of investors. FPPC is one of my largest holdings, from the low/mid $2 range. It's certainly not as cheap as it was a few months ago, but it's still the best value among microcap O&G plays and a likely long term winner imho.
____________________________________________________________
Fieldpoint Petroleum is an unhedged, U.S.-based oil and natural gas play which is undervalued, poised for an improved listing, and essentially gives investors significant exposure to one of the sector's most promising natural gas prospects "for free."
FPPC has shown impressive EPS growth over the last year. The company earned .07 in 2004 and should earn at least .15 in 2005, for a year-over-year growth rate of more than 100%. The company earned a record .04 in Q2 this year (getting only about $45 for their oil and $5 for their natural gas, far below what they should receive going forward given current commodity prices and the fact that they are unhedged) and I expect their baseline run rate going forward to be at least .04 per quarter (quite possibly higher), just on the strength of current production. In addition, the company is currently drilling a promising well in New Mexico which, if successful, would further increase the company's production and EPS.
FPPC has the most impressive reserves in its peer group, and its reserves are primarily high quality light sweet oil. As of December 31, 2004, it had proven producing reserves of 880,991 barrels of oil and 1,413,232 million cubic feet of gas (this is equivalent to roughly 1.1 Million BOE of proven producing reserves). Those reserves would be expected to last for over 14 years based on last quarter's run rate. For context, microcap peers BSIC and PYOL have reserve run rates of 9 years and 5.8 years, respectively.
FPPC is a very well managed company. The company's CEO Ray Reaves has never diluted shareholders, takes a reasonable salary, and has been a buyer of FPPC stock on the open market in quantities significant in relation to his salary (despite being the company's largest shareholder, by far). Reaves own 37% of the company himself and FPPC insiders collectively own roughly 53% of the company's o/s.
FPPC also has a pristine balance sheet, with no net debt after backing out cash.
PALO DURO BASIN PROPERTY
The company currently holds 3325 net acres in the Palo Duro Basin ("PDB"), which (according to geologists and analysts close to the story) shares many geologic characteristics with the Barnett shale in the Fort Worth Basin, a multi trillion cubic foot natural gas discovery and the largest producing gas field in the state of Texas.
The Barnett field averages 640 BCF of recoverable gas per square mile (640 feet) and total recoverable reserves are estimated to be 25 TCF+. Successful wells drilled in this region have been long lived, estimated at 20-30 years. Most importantly, drilling in the Barnett region has produced very high success rates (close to 100%).
Management believes that the company's 3325 net acres is enough for a 20 to 30 well drilling program, which could have a considerable, incremental effect on reserves, production and earnings. In fact, just one well coming in at 1500 MCFPD (which management believes is a reasonable expectation, based on the above metrics) would double the company's total net production.
Based on Barnett shale-like reserves of 150 gross BCF per square mile, and assuming a 10% recovery rate and 20% royalty structure, FPPC's 3325 net acreage could potentially yield as much as 60 BCF in new reserves. The current market value of these reserves would be at least $120 million.....versus FPPC's market cap of about $24 million.
Assuming production of 1500 MCFPD and a selling price of just $5 MCF (an extremely conservative projection in the current pricing environment) each successful PDB well's annual production would add about .05 to the company's annual earnings.
The company is in the process of permitting their new Palo Duro Basin property for an upcoming internally funded drilling campaign. They have recently announced their intention to begin drilling their PDB properties by Q2 2006, though I believe that this drilling campaign could kick off sooner than that, subject to favorable results by other operators in the area and rig availability.
FPPC is the only public microcap company with holdings in the PBD that has positive earnings TTM. FPPC investors get a company that is reasonably valued based on current production, while also getting exposure to the extraordinarily promising PD prospect "for free".
AMEX CATALYST
CEO Reaves has made it very clear that the company would like to secure an AMEX listing as soon as possible. The company has long qualified for an AMEX listing in every respect except that the stock price hasn't consistently exceeded $3. I believe that FPPC is likely to secure an AMEX listing after the stock closes at or above $3 consistently for roughly 2 weeks (as of this writing, the stock has closed at or above $3 for 5 consecutive sessions)
I expect an AMEX listing to significantly increase the company's level of exposure, resulting in an increased stock price.
Len/Brinker
You seem to give Brinker's opinion a lot of weight, Len. If that is so, I'm curious to know how long you've followed his calls and the source of your faith in them. His work does seem good-but I haven't tracked it for very long. So I'd like to take your experience into account with respect to judging his credibility.
Meister
Cleverrox/FPPC,
I have it on very good authority that FPPC management is 100% focused on making AMEX as soon as possible. I will therefore be very surprised if the company doesn't achieve/announce an AMEX listing if the stock price closes above $3 for each of the next 6 sessions (which I personally expect to happen, as I said).
Meister
FPPC/Stockmann/rruf. I think that FPPC is poised for the next leg up. I believe that the company will be eligible for AMEX if/when they trade above $3 for 10 consecutive sessions. 2 down so far, and 8 to go....
I expect to see the stock trade up very substantially after the AMEX listing happens. Anyone who doubts it should take a look at the charts of TMY, EGY and TGA after they moved to a major listing.....and FPPC has a vastly smaller float than any of those stocks had when they moved to AMEX, which makes it prone to very big runs.....
Of course, there's no guarantee that FPPC will close over $3 for 10 straight sessions on its current run. I personally believe that it will happen, because I'd imagine that relatively few FPPC longs want to bail out now, with the improved listing within spitting distance. And I think that FPPC longs will probably look to support the stock if it comes close to breaking back through the $3 barrier (this isn't very hard to do, as FPPC isn't overly liquid).
Disclaimor: FPPC is one of my largest holdings.
Meister