.<font color=green>MKGP Due Diligence - I see we picked up more boardmarks on the board and I wanted to repost this DD to help any new visitors to get an idea as to what Maverick is about and the potential growth behind it.
To understand Maverick (MKGP) you must first understand how they are diversified and structured. The Financials and Press Releases by Maverick reveal they currently hold a 25% interest in two separate drilling programs in West Virginia, a 12.5% interest in an unidentified horizontal drilling program, and a 11.517% interest in a private Oil and Gas company called Z2, the owner of the lease referred to as the Big Foot Field. Along with the 11.517% interest in Z2, Maverick also holds an Option to increase this interest to 24.7% by July 17th, 2007 for a cost of $1,000,000. In addition to Maverick holding an interest in three separate drilling programs and one private company, what is also important to note is that Maverick is the paid
Operator of the Big Foot Field.
By searching the Nevada state records, you discover Maverick itself was once a private company. Maverick was incorporated on November 15th, 2000 which was well before it conducted a reverse merger with Pinnacle Group Unlimited in March of 2006. Because Maverick operated as a private company since November 2000, it is hard to determine the source of all their revenue because all we have been made aware of are the activities and developments that have taken place since the reverse merger. What you can tell about this profitable company is that they already have very strong financials for a Junior Oil and Gas Company and that from the recent PR’s we can also see the tremendous growth they should enjoy over the coming years. For the period ending September 30th 2006
1. Maverick saw an increase in Revenue of 25.6% from the previous Quarter.
2. Maverick saw an increase in Net Profit of 36.2% from the previous Quarter.
3. Maverick reduced Total Liabilities by 16.1% from the previous Quarter.
4. Maverick increased Stockholder Equity by 60.2% from the previous Quarter. Financial Data from Quarter Ending September 30th 2006
Stockholder Equity.....................$582,192 Financial Data from Quarter Ending June 30th 2006
Stockholder Equity.....................$363,340 http://www.pinksheets.com/quote/finance.jsp?symbol=MKGP West Virginia
Maverick owns a 25% interest in two drilling programs in West Virginia. During April 2006, Maverick released they had successfully drilled four new gas wells in West Virginia, unfortunately we don’t know how many wells may have existed before the reverse merger if any. What we do know from the 2006 PR is that Mavericks 25% interest in just these four wells together will generate $200,000 annually towards Maverick. Maverick also mentioned in the 2006 PR their intention to drill an additional 25 gas wells in which we could hear more on soon. If they were to be successful in drilling 25 more gas wells which all produced at the rate of the previous four, we could be looking at an additional $1,250,000 annual revenue from low cost gas wells. Keep in mind they hold 50 gas leases in West Virginia so there seems to be potential for even more wells to be drilled in the future. Horizontal Drilling Program
Maverick owns a 12.5% interest in an unidentified horizontal drilling program. This 12.5% has been a mystery thus far as Maverick has released very little information on this drilling program. Below I have copied the content from a PR Released during May 2006 which gives us about the only information we know about this 12.5% interest. From the wording of this PR, I believe we can safely assume their already existed wells on this mystery property and perhaps this is one of the sources of revenue we do not know the details or potential of since the 12.5% interest in this drilling program existed before the reverse merger. Because we know so little about this drilling program and it’s potential, perhaps we may be surprised sometime during 2007 as to how much potential growth this program may offer Maverick. Their does seem to be a lot of hidden potential here as 12.5% of 100 barrels per day at the current price of $55 per barrel would generate revenue towards Maverick of $250,938 per well. The big question here is how many wells are we talking about? ”Maverick Energy is pleased to announce that a rig has been moved on to the first lease of two Horizontal Drilling sites. Maverick will be utilizing its proprietary Horizontal Drilling technology to re-enter and drill horizontally on the first of two targeted locations. Maverick has a 12.5% working interest in these wells as well as a contract to drill two producing and one disposal well on the target leases. Once production is established, Maverick will become the operator of the wells. Based upon expected production from the targeted zones, production from each well could exceed 100 barrels of oil per day.” Z2 / The Big Foot Field
Maverick owns an 11.517% interest in privately held Z2, the owner of the Big Foot lease, with an option to increase this interest to 24.7% by July 17th. What is important to note here is that Maverick is the Operator of the Big Foot Field and gets paid for doing so.
The first thing to understand here is that Maverick holds an interest in Z2 and not in Big Foot. Well what does this mean? What this means is that Z2 pays to develop this property and not Maverick. Well what is the significance of that? The significance is that there is no risk to shareholders in the way of convertible debt and such to develop this particular field which will cost millions. The only cost to Maverick should only be what is spent to obtain additional interests in Z2.
Currently we have an 11.517% interest with an option to purchase an additional 13.184% in Z2 for $1,000,000. Because MKGP is already profitable, it is possible that Maverick may pay cash from operations to complete this option or they may elect to raise the money by the issuance of shares or even a combination of both methods. If Maverick was to do so by the issuance of shares at say the lower end of the most recent trading range or say 5 cents, the dilution for this transaction would be minimal at only 20 million shares.
A history of the Big Foot Field was described during a 2006 interview that was conducted with CEO James McCabe. Mr. McCabe stated in this interview the Oil Field was previously owned by Royal Dutch Shell. Shell shut down the field during the late 80’s during a time where oil had dropped down to a cost of $10 - $12 a barrel which made the field no longer cost effective to operate. At the time Shell shut down the field, the existing wells were producing at a combined rate of almost 1,000 barrels per day through water injection.
Maverick is aggressively
developing this field as we speak. Maverick is performing both workovers of existing wells along with drilling new proven undeveloped wells. First I will discuss the workovers and then I will move onto the proven undeveloped wells. Big Foot Workovers
Currently Maverick is performing a workover program of the existing wells with the goal to bring the existing wells back to the rate of production just before Shell had shut down the field. Maverick issued a PR on January 17th, 2007 which told us the progress of the workovers and projected that upon the completion of 22 workovers they anticipated the field to increase production by 20% or a rate of 300 barrels a day. The PR also stated there were 240 revenue producing wells in this field. If that is the case, then the existing 240 wells were previously producing approximately 250 barrels a day before any workovers had been completed. From the information that has been revealed so far, I will show below what I expect we will see if Maverick is to complete a workover on the remaining 218 wells.
250 barrels per day / 240 existing revenue producing wells = 1.042 barrels per day per well
If 22 workovers is to produce a 20% increase from 250 barrels per day to 300 barrels per day then -
50 bbl's / 22 wells equals an average increase in production from each workover well of 2.273 barrels per day
2.273 increase per well + previous 1.042 bbl's per day = 3.315 average bbl's per day per workover well.
240 workovers x 3.315 barrels per day = 796 barrels per day
796 barrels per day x $55 a barrel x 365 days in a year = $15,979,700
This rate is not quite the rate Shell was producing but there does remain the 60 wells that are not producing and perhaps a workover is all that is needed to bring those wells online? What makes these low production rate wells significant is that there is not the associated cost of drilling these wells which generally would cost in excess of one million per well. The other thing that makes them significant is that there are so many of them which together could generate a total of $15,979,700 annually.
Now the $15,979,700 does not go directly to Maverick but to Z2. The significance to Maverick is that they are being paid to conduct the workovers, there is no cost or risk to Maverick shareholders, and we receive 11.517% of Z2’s net earnings or 24.7% after completion of the option. No matter how you look at it, our interest in Z2 and as the operator of Big Foot is all profitable.
A recent report produced by MicroCap Reports had used what they stated as a conservative figure to determine how much Maverick would generate through Z2. MicroCap Reports speculated 50% of the revenue generated at Big Foot would be retained as net earnings. If that is the case then –
$15,979,700 future potential x 50% = $7,989,850 net earning for Z2 of which Mavericks portion would be at 11.517% $920,191 annually or at 24.7% $1,973,493 annually. This should be pure profit to Maverick with no costs associated. Big Foot PUD’s
Though I have shown the value in the workovers, these existing wells were already depleted by Shell many years ago. What is of more significance and value is the 200 PUD’s (Proven Undeveloped Properties). Maverick has told us that the Big Foot lease also contains 200 PUD’s and MicroCap Reports also recently told us the company plans to drill two new wells each month.
Today on February 16th, 2007 we were informed by a PR that the first two wells together will produce a total of 47 barrels of oil per day which gives us an average of 23.5 barrels per day per well. These 200 PUD’s at an average of 2 new wells per month give Maverick tremendous upside growth value going forward. If they are to successfully drill all 200 of these wells in say over the course of the next 10 or 12 years, Z2 could be looking at a revenue stream of $94,352,500 annually only from these PUD’s based off $55 per barrel.
By using the speculative figures from MicroCaps as we did earlier on the workovers, we can speculate what this may mean to Maverick in the future and once again I will remind you that this is at no cost and no risk to shareholders and actually Maverick gets paid to drill these wells.
$94,352,500 annually x 50% = $47,176,250 net earning for Z2 of which Mavericks portion would be at 11.517% $5,433,289 annually or at 24.7% if they exercise the option $11,652,433 annually. This should be pure profit to Maverick with no costs associated. I can’t emphasize enough the significance here in the fact that this is not revenue generated minus cost associated, this would be pure net profit towards Maverick with no cost associated. Big Foot Gas
The last thing I will mention about the Big Foot Field is the gas. On Jan 19th Maverick announced that they would be bringing online a gas gathering system. They stated that they anticipated 300MCF – 500MCF per day. What I don’t know is if the gas is coming from all the wells or just the two recent PUD’s. I suspect that Shell had already harvested all the gas from the preexisting wells so I suspect the gas is coming only from the two new wells. If that is the case then Maverick could be looking at a significant addition to the revenue it will generate through it’s ownership of Z2 as each of the 200 wells is drilled.
I hope all of this information is helpful for everyone to see the value in Maverick going forward right now. I believe Maverick has tremendous growth opportunities at a limited cost. In my opinion this is a long term investment only because it appears Maverick will continue to see extensive growth both in net profit and revenue each year which should continue to increase the value of the stock each year. Keep in mind that for the most part much of this is speculative, some of these projected figures may increase or decrease in the future as the company releases more detailed information. With the information available at this time, I have done the best I can to help us all get a glimpse of where this company may be heading.