American Resources of Deleware (GASS) Message Board

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Gold/Mining/Energy : American Resources of Deleware (GASS)

GASS 7.960

+2.7%

Feb 6 9:30 AM EST

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To: tony mendoza who wrote (49)	4/14/1997 12:11:00 AM
From: Ed Ajootian	of 172

Tony, Great to hear that MoneyWorld is still slugging away for GASS. I haven't got mine yet. Do you get the feebie version or the $29.95 version? I just get the freebie. In dollar terms more of the newly added production for GASS is oil vs. gas. In the 10QSB they say that their ST 148 wells exited '96 producing 900 bbls. of oil a day and 7,100 mcf a day net to GASS. Their production costs in the Gulf Coast region were $.35 per mcfe in 1996. So this means with current commodity prices they should have produced about $1.4 mm of oil and about $1 mm of gas from ST 148 during the first quarter. I figure that 1st quarter commodity prices were similar to 3rd quarter '96 prices. So I took the above figures and added them to 3rd quarter GASS cash flow, after adjusting for the increased interest expense from the additional debt and the small amount of cash that came in that quarter from ST 148. This generates an expected 1st quarter cash flow of $2.6 mm!! Remember, they basically did not turn on the spiggot for ST 148 until after the 3rd quarter was over. Now comes the hard part --- what the hell do you divide it by? Per the 10KSB $2.3 mm of the $6 mm total convertible bonds had converted into the common by 3/1. That resulted in just under 7.6 mm shs. out as of that date. I took the conservative approach and figured that the remaining $3.7 mm of convertible bonds convert when the stock price is at its all time low, $2.25, meaning they convert at $1.69 (remember they convert at 75% of the stock price). This results in a total of 9.8 mm shares out. Amazingly, using the above figures you get a whopping $.27 per share cash flow for the 1st quarter! This means the stock is trading at a measly 2 x annual cash flow!! Mind-boggling to say the least, considering the market average is 6 x. Folks may read this and figure that my calcs. must be way off. I assure you they are not. In any event we will find out pretty soon, since 1st quarter numbers are due within a month, and my bet is that GASS will rush their's out sooner rather than later since they are going to be so good. Why is the stock price down where it is if the quarter is going to be this good? It is merely a function of this damn convertible bond bullshit and the related shorting going on by the bondholders in order to lock in their profits. The MoneyWorld hype has unfortunately not provided enough new money to come into the system in order to overcome the relentless and powerfull shorting of the bondholders. But my bet is that this nightmare will come to a speedy halt as soon as 1st quarter gets announced. Also, just to add some excitement they are drilling two big-potential wells in Mississippi, the results of which could get announced any day now. GASS only has a 3.5% working interest in each, but they are targeting such huge reserves that they still could impact the stock price.

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