Rory, thought you may be interested to hear that I'm back in the TTPT saddle. Are you still following it?
As they say, the trend is your friend. The million shares that traded in the last few days, which powered the stock up significantly, cannot be ignored. Someone with very deep pockets obviously wants to own a chunk of this company. It would not surprise me if it was someone who bought in one or more of the private offerings in recent months, and when Howard finally turned off the spigot and told them the game is over and he's not gonna issue any more stock, they had no choice but to start buying it on the open market.
I would not be surprised if we see a Schedule 13g filing in the near future identifying an investor that has obtained a 5% interest in this turkey. If so this would explain the torrent of buying, since you only have so many days after you go over 5% to file, and you know the market will proably respond favorably to the fiing so you go nutty buying all you can before the filing. With 77.5 M shares out (6.5 M post split) all you have to do is buy 4 M shares (0.33 M post split) and you get over 5%.
I believe the announcement of Marathon Oil (MRO) last Tuesday, (see biz.yahoo.com where they made an offer to buy a US-based privately held company (which I will refer to by the initials since I can't even spell the name), KMOC, for $275 M, is what finally turned the light on to investors regarding the Russian oil play in general. The MRO deal is significant in several respects. First of all, Shell, the owner of 45% of RMOC, has a right of first refusal on the other 55% which they have until May 6th to exercise. It will be very interesting to see if Shell exercises this right. I know that Shell is very committed to the Russian/Kazahkstan region and wants to buy there, not sell. If Shell exercises, then MRO will have to look elsewhere for a vehicle by which to get into the Russian oil action. In any event, there will be one less vehicle available by which a North American company can get into the Russian oil action once this deal closes.
Second of all, the fact that a multibillion $$$ market cap company such as MRO would bother to buy a puny quarter billion $ company tells you that the opportunities to get into the Russian oil scene must be severely limited, and also tells you that they are probably not gonna just stop at buying KMOC and are gonna wanna try to buy other companies going forward to beef it up so it can then have a meaningful contribution to the growth of MRO.
The KMOC deal is also interesting since it provides some metrics by which to measure Teton. I spoke with an industry executive the other day who was familiar with KMOC and he said they produce about 15,000 bopd, 5,000 exported, and also have some fields way out in the hinterlands that are undeveloped. So putting aside the undeveloped stuff for the time being, that would tell you this company is about twice the size of Goloil (the Russian company that Teton owns 35% of. So $275M divided by 2, @ 35% = $48 M or $7.40/share (post split) for a take-out value for Teton.
The above figure is also obtainable by using my old buddy Chuck Strain's rule of thumb approach to valuing breakup value for oil & gas companies. Take the year-end reserves and you see that the 19.8 mmbo of Teton's proven reserves had a value of about $34 M, which works out to $1.70 per barrel of oil in the ground. Now extrapolate that to their probable and possible reserves, discounting probable by 50% and possible by 75%. Do that for Teton and presto, you get about $7/share in value.
Am I saying Teton should be valued at $7 today? Not really, but I think its safe to say they should be valued a lot closer to that figure than they are presently.
So now the question is when to jump on this bandwagon, if you haven't done so already. If the stock follows the laws of gravity, it should slip back a few notches in the first few days after the reverse. But I would be very surprised to see it close under $4 for more than 2 days in a row, especially with any accompanying volume to speak of. This is because the $4 mark ($.33 pre-split) is now a rock-solid support point on the stock chart. It was a resistance point when the stock tanked down to this price a week or so ago, on massive volume (about 800K shares I believe). But then over the last coupla days that resistance point got taken out by the million shares of buying, with the stock ultimately closing at $4.44 ($.37 pre-split). Prior resistance points, once breached, become support points.
Howard is presenting at the IPAA Oil & Gas Symposium in NYC this week, the biggest hype show of them all. The timing could not be better. A lot of analysts are looking for new companies to write up, given the high interest in energy stocks now. They usually prefer new blood vs. going back to the same tired old names of the past. Up until now, those analysts would not even consider Teton because it wasn't on an exchange.
I asked Howard why he's not doing a webcast of his presentation like most of the other presenting company's are. He said he's worried about SEC disclosure rules. I believe he has it backwards -- the risks of violating Reg FD increase by not doing the webcast, because then if the stock skyrockets after the presentation the slobs that weren't there could say they didn't get an equal chance at hearing what he said. If he webcasts it, and does a press release prior to such webcast saying that he will webcast it (see, e.g. EPL or PLLL news), then whatever he says at the presentation is protected from being challenged by any Reg FD violations.
Given my recent track record I'm through trying to call the daily ups & downs of this turkey, but will merely disclose what my current sentiments are. The only reason I'm not raising it to a long-term Strong Buy is that I am not yet comfortable that the management team currently in place can take this company to the next level.
Howard is a good man and I have no doubt that he will find another great oil field for Teton but whether he's capable of being CEO of a $100M + oil company is frankly open to question. Based on the debacles last year with the huge unexpected financing charges the abilities of his CFO are suspect. Maybe Howard realizes he needs some more firepower in the corporate office and hopefully his ego will not get in the way of his best judgement with regard to these matters.
Good luck to all Teton fans. If nothing else the next few weeks should be pretty exciting!
(Voluntary Disclosure: Position- Long; ST Rating- Strong Buy; LT Rating- Buy) |
