Dolphy,
As a long time shareholder maybe I can provide some insight.
The reality is the company is not marketing to the retail investor. The are talking with the institutional side. They presented at the floor of the Nasdaq, and have been at conferences in Denver and Houston over the past 6 months. They have visited New York, Chicago, Toronto..etc...major capital market centres. When the C02 agreement with Kinder Morgan was announced 1.1 million shares traded a day later in one trade. That is the effect a larger institution can have. There was some momentum following that announcement, but production which was over 500 barrels a day and then there were some issues and production dropped to 250 a day in May. At that level the cashflow is at a break even or worse stage. The issues were straightened out. It is these types of scenarios of uncertainty where an investor can make out huge.
The production in the last two weeks of June was 530 bopd. There was a gas well that tested 160 bopd equivelent. This is set to be brought on-line in the next 10 days. If production in July tops 600 bopd with the gas well you have production over 700 perhaps closer to 800 bopd. You have to fundamentally undertand what this means by doing some due dilligience. It's all in the financials and discussion. The lifting costs at crossroads are less than 5 dollars a barrel, which means netbacks per barrel of oil are between 40 and 50. These are very large netbacks. At 700 bopd equivelent the company is generating more than 500K of cashflow per month. This should be enought to support debt. The company in this news release indicated they are in the process of trying to aquire debt.
You need to go the website and go through the oilfield presentation.(www.enhancedoilres.com) For every 500k spent on an infill well they expect 30 to 40 barrels a day of increased production. These are rates of returns of better than 60% return on capital. If the company can get 10 million dollars of debt financing they will be able to drill 10 to 15 infill wells and have the required capital to drill the necessary wells at their CO2/helium asset. That would put production over 1100 to 1200 barrels a day. At that level you are generating close to 1 million dollars of cash. With that capital they will continue to drill infill wells generating strong steady growth until they execute the C02 agreement with Kinder Morgan and apply C02 to the oil fields to further expand oil field productivity. The outlook is 2500 barrels a day by the middle of 2012. The C02 injection begins and then you are looking at 6000 bopd by 2014, 10000 bopd by 2016.
The institutional side isn't going to speculate. They are waiting for increased production and more importantly for the company to get the money and start the business model. Production numbers should come out next week. If they top 585 which was the companies previous high you should see some movement..if they top 650 you better act as you won't see these prices long. If the 600-650 number comes, and the company announces the gas well commencing next week which adds another 120+ bopd equivelent then watch out because the financing could come pretty quickly.
The financing is simple...its a function of assets and cash flow to service the debt. The companies oil field assets have a proven PV10 numbers of 64 million.....these are bankable numbers presented by a third party engineering firm. 10 million dollars of borrowing represent a fraction of those bankable assets. The production numbers are the thing to watch....I'd be paying close attention to those numbers due out next week.
The reality is the company is again producing positive cash flow, it has zero debt and is trading at .20 cents on the dollar in terms of book value. It trades less than .50 cents on the dollar just on the oilfield side. I'm not sure what kind of discount you are looking for, but an 80% discount is pretty good value! If production gets to the 1100 to 1200 dollar range, I can't see this being below a buck.
AI
