Copied this interesting post from HotStocked.com, thought I would share it.
EAGLE1
Guest
Posted: Mon Feb 21 Post subject: Dune Energy ( DUNR ) Facts and Projections
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I have been ask here and on other message boards to comment and give my thoughts on Dune Energy. Let me give you a breif introduction about myself. I have held executive positions with several different energy companies, I currently serve on the board of directors of a well known regional bank and two well known energy companies. I have been involved in investing at a high level most of my adult life. I want to share with you my thoughts on and how I view Dune Energy.
First, I bought a nice position when Dune was delisted from the exchange for a price of .08. I had followed this company for some time and also knew of the potential projects that were lined up. The risk reward for SPECULATION was perfect ,as I saw it. I also had a feeling ( from my knowledge of e&p joint ventures) that some high impact deals were in place. Just a few months later my thoughts and suspicions were confirmed and verified. Joint ventures at Garden Island Bay, Leeville and Bateman lake were announced. Iam very aware of the debt levels that the company has and that is why I still say this is a speculative investment to this point, ( but one I feel very comfortable in making. ) Here is why:
The number one reason that the company is not making money is the interest that it is paying on the 300 million notes at 10.5 percent. that adds up to 31.5 million in interest payments alone. The company had made a determination to sell the Barnett shale properties and concentrate on the bayou properties when they realized what they had bought in the Goldking deal, so revenue dropped from 147.2 million to 64.9 million and the markets crashed through that period. It put Dune in a bad position.
Now the good news! Dune has some very exciting properties to develop, game changer ,company maker properties with big reserve , big return possibilities with joint ventures in place. Lets just look at the near term picture and be optimistic that the plan comes together, I mean being a speculator / investor thats what concerns us the most... Can this ship be saved and what is the new course??? Right??
Dune currently has about 7 million barrels of crude if all goes well, best case they could exit 2011 with close to 70 million barrels. That is quite an upgrade. Their revenue will jump from 64 million to around 83 million till the end of this year. Looking ahead with just the projects online for this year , best case projection of 5,000 barrels a day at 90.00 a barrel, that puts next years revenue at 164,250,000.00 an increase of 2.5 times that of last year. I know at some point there will most likely be an issue of new shares, most likely around 25 - 30 million new shares at around 3.00 - 4.00 per share and the share total with the new shares would still not be out of line with most E & P companies, examples Brigham Exploration, Energy XXI, Kodiak oil and gas, Abraxas Pete etc. That will eliminate 90 - 100 million in debt and with the increased revenue the rest of the debt load can be serviced, very little doubt in my mind. I want to also point out that the other joint ventures will proceed at very little cost to Dune and revenues will continue to escalate if the projects can be developed. I do want to point out that they all have the potential to be high impact projects and production should be able to be increased another 1,000 - 1,500 barrels per day in 2012, which would yeild revenues for the year at and around the 200,000,000 million mark. I do not have rose colored glasses on and I know things can happen, all Iam saying is...I like the chances this company has, I love the properties ( most companies would kill for these high impact plays. ) I also like how they are fighting off the wall. There have been several very shrewd moves here made by Dunes management that the market has not noticed. I still say it is a great case for speculation, but it could turn into a long term holder as well. Things today are a little brighter than a year ago and if these projects are brought online, the balance sheet will get restructured and the company will prosper. Take it to the bank!
