I don’t disagree on most of your points (truth is I don’t disagree with any) however as in your email we are starting to see a possible light at the end of the tunnel (one must remain cautions lights are mechanical and could burnout any time lol)
But strictly speculatively speaking (from report):
HTOG
Only a small fraction of the acquired acreage has been explored and developed; the Company is currently producing around 500 MCF per day in Kansas. Going forward, UPDA believes it could easily quadruple production volume in 2008 but exploring its remaining land leases in Kansas and sustain triple-digit produc¬tion growth in 2009 and 2010.
Robust revenue growth
Following a series of completed acquisitions and joint ventures, UPDA has begun generating meaningful revenues, mainly from its energy trading business. Revenues increased to $21 million in the first nine months of 2007 from $0.3 million in the same period last year. Revenue growth reflects contributions from Continen¬tal Fuels, Catlin and Heartland Oil & Gas.
The Geer Tank Trucks, Inc. purchase and Heartland’s expanded exploration and production activities should enable UPDA to increase pro-forma revenues to $140 million in 2008 and $170-200 million in 2009
UPDA’s energy trading business
The Company’s trading business generated revenues approaching $12 million in the third quarter of 2007. Going forward, the acquisition of Geer Tank Trucks is likely to add approximately $50 million to annualized revenues. This acquisition, combined with the Company’s marketing and facility expansion initiatives, will likely push 2008 pro forma revenues to a $120 million range.
Multiplying our 2008 revenue estimate by the peer group 1.0 times Price/Sales multiple we derive a $120 million value for UPDA’s energy trading business.
UPDA’s oil and gas exploration business
At year-end 2006, UPDA had proven reserves of ap¬proximately 16,000 barrels of oil (MBD) and 110 million cubic feet (MMCF) of natural gas. Through the April 2007 purchase of a majority interest in Heartland Oil and Gas Corporation, UPDA gains drilling access to more than one million acres in the gas-prolific Chero¬kee Basin and Forest City Basin in Kansas. The majority of this acreage has yet to be explored and developed.
The reserve potential for both the Cherokee Basin and the Forest City Basin is enormous. The Petroleum Tech¬nology Transfer Council (1999) estimates nearly 10 tril¬lion cubic feet of natural gas in eastern Kansas alone, while the Forest City Basin is believed to contain ap¬proximately one trillion cubic feet of natural gas.
Going forward, additional drilling and connecting vent¬ing wells to gas pipelines could easily push produc¬tion capacity to 2,000 MCF per day in 2008 and 4,000 MCF per day in 2009. Considering also the significant production increases targeted for the Palo Pinto wells in Texas, these estimates could prove conservative. At production levels of 4,000 MCF/day, oil and gas explo¬ration revenues could approach $10.1 million by 2009.
Multiplying our 2009 revenue estimate by the peer group 4.1 times Price/Sales multiple and discounting the result by a 12% weighted average cost of capital, we derive a $37 million value for UPDA’s oil and gas exploration and production business.
UPDA valuation
UPDA’s value is the $157 million sum of the fair values of its oil and gas trading and exploration businesses. Also taking into account the Company’s 87% ownership interest in its largest subsidiaries, we derive a $0.16 price target for UPDA shares.
Accordingly, we are initiating coverage of Universal Property Development and Acquisition Corporation with a Speculative Buy rating and a $0.16 price target. However, we strongly advise investors to consider the risk fac¬tors mentioned below since the Company faces many challenges in attaining its production targets.
Bad part:
Need for additional financing
Since UPDA begun its oil and natural gas operations, it has reported operating and net losses. Although the Company anticipates rising revenues in 2008, the Company currently must rely on external financing to fund its ongoing operations. Additional equity sales dilute the ownership interest of existing shareholders and more loans could constrain the Company’s operations by increasing debt service requirements.
I’m not over joyed either following this stock for a few years and selling it by shit luck at .14. What does keep me watching is I believe they have some interesting assets and potential growth areas. Can they bring these companies to profit??? That’s the million dollar question
As you know they have
(321,592) paper dept
I must admit it’s getting close and interesting!
For the record I’m not positive or neg. I’m on the fence (I’ve owned this stock before, may again), but as some here I know the past very well.
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