A. Wayne,
What is there to make UP rebound during the winter months?
In the past its price has dropped during the winter months and picked up again after the new drilling season started.
However, with drilling results like those just announced, even a new drilling season may not be able to perk up the price.
The question here for those of us suckers who bought at C$4 or C$5 is: Are the prospects for our money growing better with UP than with any other co.? If not, then it would be better to take even that paltry C$1/share and put it to use elsewhere.
To me, in the oil and gas sector Key West Energy (the outfit that Colt joined after it split with UP), or even Hurricane Hydrocarbons, look like they have better chances than UP.
One can get a share of Key West for about the same price as one would sell a share of UP. Key West has no debt, $10M in the cash kitty, a rapidly increasing cash flow and even profits. Key West currently is sinking wells that return their cost in one year. Its management has a record of taking their previous endeavor from 10 cents/share to $9.80/share (where they sold out).
The name of the game in investing is THE MANAGEMENT. In UP we have a managment that wants the co. incorporated under even looser rules than British Columbia allows and wants to reduce the number of directors to a total of 3. Usually you don't do that unless you are contemplating actions that directors on a less-handpicked and less-manageable board might not approve.
UP's mgmt. has managed to temporarily reduce its insurmountable debt by selling off 2/3 share of its prime prospect, leaving it holding mainly large percentage interests in a lot of sagebrush leases. It also has done some insider deals that may cost it dearly. It has reported positive cash flow because its partners were paying UP's share of drilling and completion costs. But the cash flow was less than what UP's share of costs would have been, so when it soon starts paying its share, it will have NEGATIVE cash flow again (even after giving up 2/3 of its prime prospect). That means debt---lots of debt unless revenues suddenly increase dramatically.
So anybody who stays in UP here is betting that it soon is going to hit a lot of very prolific wells--something it has done with only 1 well (Mesa 15-8) so far as I know.
What are the odds? How do they compare with the odds for a company like Key West with a mgmt. that doesn't talk about "trillions of cubic feet" but knows how to steadily build a company without incurring a mountain of debt?
Hope you had a great holiday season.
Hickory |
