Osage Exploration and Development Inc (OEDVQ)

[Ed Ajootian]

This is a microcap E&P that is virtually a pure play in the Mississippian Nemaha Ridge play (they also have a small legacy interest in an oil pipeline and oilfield in Colombia). A long-time large investor recently blew out a bunch of his stock which has created a tremendous buying opportunity IMO. Peter Hoffman filed an amended Sched. 13D with the SEC on Friday saying that he had reduced his holdings to 5.3% of the total outstanding stock by dumping about 433K shares between 2/22/13 and 4/15/13. During that period the stock tanked by about 26%. The last time that Hoffman filed a Sched 13D, reporting the sale of 653K shs. between 9/10/12 and 11/9/12, the stock also dropped during that period, by about 24%. In the ensuing 3 months it then appreciated by about 113%. Not sure whether the next 3 months will be as great as that but I believe the chances of healthy stock price appreciation are quite high.

See a recent analyst report on OEDV by Barrington Research at (see post at SIBBR for upload link, http://www.siliconinvestor.com/readmsg.aspx?msgid=28865385 ) . This report shows a 12-month target of $2 and a 24 -month target of $4 on the stock. The analyst is calling for Osage's US production to increase from 241 boed to 440 boed between 1Q and 2Q. My hunch is that the 440 boed figure for 2Q might be a tad high. But then he is calling for production to increase to "only" 640 boed for 3Q, and I believe he is significantly low there, given the ramp up in drilling that is taking place currently. I believe production for 3Q will be a lot closer to 750 boepd.

Even if you just take Barrington's overly conservative 640 boepd figure for 3Q, that results in EBITDA for the quarter of $3.2M. That level of EBITDA should be more than enough to support a conventional reserve-based loan of well in excess of the $20M facility that they now have with Apollo, thus allowing them to refinance their current loan when it first becomes redeemable on Nov. 1. So the current 18% interest rate that they are paying Apollo, which may be spooking a lot of investors, is very likely to be history in 6 months, to be replaced with a loan bearing a rate closer to 5%.

In spite of the fact that the stock skyrocketed 12% today, most likely in response to Hoffman's 13D filing that got made late Friday afternoon, I believe its largest gains remain ahead of it.