Kerms Korner / Tier II Portfolio Material Changes
Tier II Material Changes 022703
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Beginning Cash Component Amount $44,407.34
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Added the following companies to my model portfolios
Tier II
Real Resources
RER-T
Share Price
500 Shares @ $5.22
Total Investment $2,610.00
Latest News (022503) Real Resources Inc. Updates First Quarter Drilling Activities And Plans For 2003 newswire.ca Once here, you can backup to see all their releases.
Real Resources Inc. is a Calgary based oil and natural gas company active in the exploration, development and production of crude oil and natural gas in Western Canada. The Company has grown through exploration, development and strategic acquisitions. The company has an experienced management team, in place since 1977. They are primarily focused on crude oil production in southern Alberta and SE Saskatchewan. The company has a balanced risk approach with lower risk oil exploration offset by higher risk natural gas exploration.
Real grew both proved and established reserves in 2002, 50% over that of 2001. The replacement reserve ratio reflects a successful 2002. Estimated roved reserves replaced about 2-3/4 to 3X 2002 production.
Estimate production for 2002 is 5,200 boe/d and estimate 2003 is 7,000 boe/d. Liquids amount to 2/3 of the total estimate. The company plans to drill around 110 wells in 2003 – the same as in 2002.
Net asset value (PV15) is $5.28 – just about what the current share price is. Shares are selling at about 3.8 X 2002 cash flow and 2.6 X estimate annualized cash flow for 2003. 2003 CAPEX amounts to $45 million with estimated 2003 cash flow being $43 million. The company’s estimate debt position ending 2002 is $55.6 million and is forecasted to be 2 million additional.
Based upon new pool discoveries in 2002 and continued success with the drill bit – coupled with a current reasonable share price equal to net asset value and reasonable cash flow per share numbers, I feel investment into the company is well warranted for intermediate and longer term appreciation.
Number of shares outstanding is a FD 21.2 million and market capitalization is $111 million.
References:
SEDAR: sedar.com
Company Web-site realres.com
Midnight Oil & Gas Ltd.
MOG-T
Share Price
500 Shares @ $5.50
Total Investment $2,750.00
Latest News (022703) Midnight Oil & Gas Ltd. and Capture Energy Ltd. Announce Agreement for Midnight to Acquire Capture newswire.ca Once here, you can backup to see all their releases.
Midnight Oil & Gas Ltd. is a Calgary based oil and gas company. The corporation has enjoyed successful results by following a strategy of focusing a team of high end professionals in two multi-zone areas - West Central Alberta and the Peace River Arch. Their business plan is to pursue a risk balanced portfolio of acquisitions, together with exploration and development drilling programs, while building a high quality property base and a large natural gas prospect inventory.
Management drew my attention to this company. Midnight was formed as a result of a merger between Midnight and Foothills Oil & Gas Ltd. which closed in December of 2002. Current management assumed control at that point. This was a typical move of recent type transactions that have taken place over the past twelve months in the oil patch.
The management team of Midnight led by Mr. Fred Woods, President and Chief Executive Officer, Mr. Anthony Lambert, Vice President of Operations and Chief Operating Officer, Ms. Judy Stripling, Vice President of Finance and Chief Financial Officer, Mr. Richard Rowland, Senior Vice President, Dr. Tom Moslow, Vice President of Exploration, Mr. David West, Vice President of Engineering, and Mr. Andrew Weldon, Vice President of Land will assume their respective positions with the new merged company. These individuals, with the exception of Mr. Weldon, were former executives of Ulster Petroleums Ltd. and were instrumental in the growth of Ulster. From the period in mid-1992 to spring 2000, Ulster grew from 5,000 boe/day (6:1) to over 35,000 boe/day. During that time period the market capitalization grew from $100 million to over $900 million and the share price increased from $4.25 to $14.10 at the time of its sale to Anderson Exploration Ltd.
Ulster Petroleums was one of my first portfolio holdings and I felt it was a well run company.
The Board of Directors is comprised of Fred Woods and Anthony Lambert, the President and Chief Executive Officer and the Vice-President and Chief Operating Officer, respectively of Midnight, as well as the current directors of Midnight being Messrs. Cameron McVeigh, Douglas Dafoe and Paul Moynihan
Shares of the company commenced trading on the Toronto Stock Exchange on Feb 24, 2003. Effective February 5, 2003, Foothills Oil & Gas Ltd. changed its name to Midnight Oil & Gas Ltd. and the outstanding common shares of the Corporation were consolidated on a one (1) for eighteen (18) basis. Post- consolidation, Midnight had 14,832,038 common shares outstanding (basic) and 16,086,487 common shares outstanding on a fully diluted basis.
Their next step was the February 2003 acquisition of Capture Energy Ltd., a private company. The value of the Transaction, including debt and working capital deficit, was approximately $30 million.
Capture offers Midnight a substantial natural gas focused prospect inventory in a number of attractive multi-zone areas. Its main fields include Alexander and Paddle River in West Central Alberta and Sinclair in the Peace River Arch.
Fred Woods, President & CEO of Midnight stated that "the Capture assets are an excellent complement to the existing Midnight assets. Similarly to Midnight Capture is highly focused on natural gas in the multi-zone areas of West Central Alberta and the Peace River Arch. Capture's production is an established low decline production base supported by owned and operated infrastructure and a large undeveloped land base. The strengthened balance sheet of the combined companies allows Midnight to more aggressively exploit the tremendous upside of Capture's large prospect inventory and undeveloped lands. With the large tax pools and the attractive valuation metrics, Capture represents an excellent acquisition opportunity for Midnight". The combined production forecast for Midnight and Capture for 2003 is 14 MMcfpd and 375 bbls per day of light oil and natural gas liquids (2,700 boe/d at 6:1, 86% natural gas).
I am waiting for further CAPEX type information and will update the information upon receipt. For now, I am taking a small position in the company with heavy focus on management. As reflected in similar situations, shares should sell at a higher multiple compared to most other peer companies.
References:
SEDAR sedar.com
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Ending Cash Component Amount $39,047.34
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