TVOC.OB Just Reported Q1 EPS of .20 ($4.00 Stock)
I rarely post here, so my pounding the table, will mean little to you. But I will pound away nonetheless on TVOC. The company just reported .20 EPS for the quarter, which makes it the cheapest, publically-traded, domestic oil company. My analysis is below.
Company Name: Texas Vanguard Oil Company
Ticker: TVOC.OB
Last Closing Price: $ 4.00
Market Cap: $ 5.6million (1.4 Million Shares Out)
Company Background:
Texas Vanguard (TVOC.OB, $4.50) is a junior oil & gas company with interests in Texas, New Mexico, and Wyoming. The Company was formed in 1979 and has been a public company since 1980. Texas Vanguard has a low cost structure and only has two full time employees. The CEO is William G. Watson (age 56) and has served in his role since 2002. Prior to joining the Company, Watson was an independent geological consultant for 15 years.
The company is a very low-float, undervalued player (as measured by earnings, cash flow, cash on hand & reserves) in the domestic O&G sector. TVOC employs a very conservative growth strategy, which includes:
1) purchasing increasing interests in current producing wells (vs. acquisition of unproven properties);
2) purchasing new interests at a low cost & with a short payback period; and
3) spreading risk out among many oil & gas wells (the company has 23 different oil and gas wells in which it participates).
Texas Vanguard is virtually unknown to the investing public. TVOC has no website presence, issues no press releases, and through the course of web searches, there has been no profile write-ups on the Company. As a result, Texas Vanguard has not had the same price appreciation experienced by other domestic oil & gas producers and remains significantly undervalued compared to its peers.
Due Diligence:
Due to higher oil prices and modest production increases, Texas Vanguard has experienced a significant earnings trajectory over the past three years. The following table shows highlights this year over year increase in revenues, net earnings, and shareholder equity:
2004 2003 2002
Revenue $5,422,624 4,366,554 3,557,542
Net Earnings 853,980 692,971 -143,900
EPS 0.6 0.49 -0.1
Shareholder Equity 3,390,630 2,536,650 1,843,679
It is noteworthy, that earnings per share in Q3'04 were 0.27/share and reflected revenue from a re-entry of an existing well. Q4'04 earnings were down $200,000 or .15/share due to higher well maintenance activity in the quarter as well as expenses associated with their 10K audit.
In 2004, the company averaged 373 BOE/d (equally split between oil & gas). This is up from 353 BOE/d in 2003. Texas Vanguard has proven reserves of 1.93 Million BOEs (broken out into 934,000 barrels of Oil & 5,975,000 MCF gas). On a market cap/proven reserve basis, the Company's evaluation is just $3.26/proven BOE. In comparison to other oil and gas companies traded on the OTCBB, Aspen Exploration (ASPN.ob) has an approximate Market cap/Proven Reserve = $42/BOE and BSIC's Market Cap/Proven Reserve = $29.6/BOE (based upon last 10K).
The Balance Sheet
The Balance Sheet for Texas Vanguard is very strong. The company currently has $5.1M in cash or $3.64/share (vs. $4.50 share price). In 2004, cash from operations was $975,000; on a per share basis, this represents $.70/share. Working capital of $4.3M (or $3.08/share) represents a 5:1 ratio of current assets to liabilities. Texas Vanguard has $3.0M in long-term debt (excluding current portion) at prime plus 0.5%; this line of credit matures on December 15, 2006.
This is a very low float company with only 1.4 million shares outstanding (full diluted). There is no warrants or other toxic financing deals and the total number of shares outstanding has remained constant for the last 3 years (the share count actually decreased by 277 during this period).
Downsides/Risk
+ In 2004, the Company had the lowest oil & gas reserve purchases for the last 3 years ($120K for 2004 vs $707K for 2003 and $307K for 2002). Consequently, proven reserves decreased by 144,000 BOEs (from a total of 2.078M BOEs). As noted above, Texas Vanguard employs a very rigorous policy for purchasing O&G interests at a discount. A quote from the 10K "The Company anticipates continued investments in proven oil and gas properties in 2005 when they can be purchased at prices that will provide a short payback period." The continued success for the company will have to be based upon a relaxation of this policy. Otherwise, growth may be slowed and dependant upon future oil price appreciation.
With only 1.4M shares outstanding, this is a very illiquid stock (as would be expected). In conversations with the company, there are no immediate plans for paying a stock dividend or to merge/acquire another company. However, this could change when the stock price goes up up.
There are no PR/IR activities. Unless this changes, share price will have to be driven by pure fundamentals. This has hurt the stock price over the last 6 months, when the stock was trading around $2.50/share
AI
