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Gold/Mining/Energy : Canadian Oil & Gas Companies
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To: Kerm Yerman who wrote (5297)8/6/1998 10:58:00 AM
From: Friend  Read Replies (1) of 24922
 
KERM/ Portfolio Revisions

Hi Kerm, I saw that you bought some more shares of a few companies and I was interested in knowing your reasoning behind your purchase.

I was looking at a couple of them myself recently, specifically Crestar and Vermillion, and chose not to buy. The reason I left Crestar was becuase of the high debt. Debt/CF (Q1 annualized) is greater than three. My thinking was that this adds alot of financial risk and a combination of high debt burden and reducing cashflows is not a good combination. Also, it does not look like cashflow from operations will be sufficient to cover their capital expenditure forecast. Given their current cashflow forecast, historic f&d cost and production rates, my calculations were that their reserve replacement ratio will be less than one for 1998. That's why I didn't buy CRS.

VRM looked interesting from a fundamental perspective, but the technicals didn't look good. Given my poor fundamental analysis skills in this industry (I'm just a beginner when it comes to analysing oil and gas stocks!), I decided to trust the technicals thinking the market must know something that I don't.

Anyways, was curious to know your reasoning behind the purchases so that I can improve my own analysis skills and to help me know what to look for. Maybe I'm focusing on the wrong characteristics regarding a company. I learn alot from your responses (and those of others on this post)and hopefully as I continue to learn more, maybe one day I'll be able to contribute more to this discussion forum!
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