Double Eagle Petroleum ---Oil & Gas Orphan That Gets No Respect
“We believe that Double Eagle is currently at the starting point of a multi-year growth phase, with 2009 production expected to be nearly 10 times fiscal ‘05 levels. This growth will come entirely through an existing pipeline of drilling opportunities. Success on the company’s high-risk deep exploratory tests this year would offer additional upside.” Zacks September 2006
Double Eagle Petroleum Co. (NASDAQ (Small Cap Market) Symbol DBLE), an independent oil and natural gas company, engages in the exploration, exploitation, development, and production of natural gas and crude oil primarily in the Rocky Mountain basins of the western United States.
DBLE explores and develops the Green River basin in southwestern Wyoming; the Wind River basin in central Wyoming; and Christmas Meadows area in northeastern Utah. As of December 31, 2005, the Company’s estimated proved reserves were 49.2 billion cubic feet of gas equivalent. As of December 31, 2005, the Company owned interests in a total of 626 producing wells.
The Company has an interest in 504,899 gross acres (217,410 net), of which 413,153 gross acres (212,630 net) are undeveloped. Double Eagle Petroleum was founded in 1972 and is headquartered in Casper, Wyoming. There are only 8,628,604 shares outstanding. The 55 year old CEO is the only 5% shareholder in the Company.
INVESTMENT THESIS:
A) Bargain Purchase:
DBLE Market Price per share $ 21.34
PV-10 Proven and Probable Reserve per share ($21.59)
PV-10 of Possible Reserves from CBM property per share ($42.20)
Christmas Meadows—The DBLE Lottery Ticket ( $ 0 )
Other undeveloped not included in Possible ($ 0 )
The market price of DBLE shares is less than the proven and probable reserves of the company at December 31, 2005.
DBLE’s Market Cap is $ 184.4 million. PV-10 Value of Proven and Probable Reserves is $186.3 million at December 31, 2005.
Another way to summarize:
DBLE’s stock is selling at no more than reserve value of proven (49.2 billion cubic feet of gas equivalent) and probable reserves (29.7 billion cubic feet of gas equivalent), and that’s using just $2.56 for proven gas equivalent reserves and $2.01 for probable gas equivalent reserves.
Here’s what you are getting free:
One) 153,899,862 mcf or 153.9 billion cubic feet of gas equivalent in possible reserves valued at PV-10 of $ 364,093,900, which are ALL Coalbed Methane ““CBM”) locations on the Atlantic Rim (35% of proven reserves come from the Atlantic Rim and 39% of probable reserves come from Atlantic Rim !!!!!) waiting to get drilled after EIS approval early 2007. Note: These are CBM properties with substantially less risk and much higher probability of success. The $ 364.0 million is TWICE the current market cap of DBLE !! TWICE.
Two) A free lottery ticket for the highly prospective Christmas Meadows (Uinta Mountains of northeast Utah) prospect for free. The 15,750 foot well spud September 9, 2006 and is expected to take 100 days to drill. The Christmas Meadows prospect could be anywhere between 1-3 trillion cubic feet (“TCF”) of natural gas (possibly some oil?). Each TCF is worth approximately $ 1 Billion of market cap and DBLE has an interest of approximately 30%. DBLE has a tiny market cap of $ 184.4 million. The Christmas Meadows property is began drilling September 9, 2006. A field trip was held last week. See summary below. This wildcat well may be one of the largest potential targets in the lower 48 drilled in 2006. This well took over 10 years for permitting…… DBLE has owned since 1984!
B) CEO Possible Exit Strategy:
The CEO President and Chairman, Stephen H. Hollis, who is 55, is the largest DBLE shareholder with 720,200 shares or 8.3% of the outstanding shares. IMHO Mr. Hollis who is very conservative and one of the best geologists in the country is building DBLE to sell to a major. He has never been thrilled being a public company and has believed that the stock is very undervalued. Part of this is his own fault in that the Company does no promotion in the past and even has an outdated website. Mr. Hollis is as tight with the dollar as they come. They wonder why they have gotten little attention for their outstanding performance. He makes a very modest salary at DBLE.
C) Recent changes to enhance DBLE value:
One) Within the last month the Company for the first time in its corporate history hired a person to handle investor relations. He has much experience and in fact, John was my source for my stock selection of American Gas & Oil which I acquired at average of $ 72 share in 2004 (http://finance.yahoo.com/q/bc?s=AEZ&t=5y ).
John has followed DBLE for many many years.
John Campbell Investor Relations Double Eagle Petroleum Tel 303-794-8445 email jcampbell@eagle-eagle.net
Two) In June 2006 DBLE hired a new CFO who was with Western Gas Reserves which went from $ 40 million to $ 1 billion of market cap while he was an officer. The new CFO has recently acquired 5,500 DBLE shares paying as high as $ 20.25 share: biz.yahoo.com
Three) Effective August 1, 2006, DBLE entered into a new $50 million revolving line of credit collateralized by oil and gas producing properties, replacing the existing revolving line of credit. The new line of credit bears interest at the prime rate published in the Wall Street Journal, less 1.125%, with an initial borrowing base of $25 million and all outstanding balances on the line of credit mature on July 31, 2010.
Four) During 2005, DBLE invested $12.4 million in capital expenditures related to exploration and development, $5.4 million in pipeline construction, and $0.46 million on acquiring new leases. For 2006, has budgeted approximately $24.0 million for ongoing development and exploration programs. Thus DBLE is doubling their exploration and development expenditures.
Five) 7) Zacks Equity Research Analyst Initiating DBLE as a Buy
”We are initiating coverage on Double Eagle Petroleum (DBLE) with a Buy recommendation and a 12-month price target of $28. The company’s Rockies-focused natural gas-heavy asset base offers a balanced mix of low-risk development drilling opportunities and high-risk/high-reward exploration prospects.
We believe that Double Eagle is currently at the starting point of a multi-year growth phase, with 2009 production expected to be nearly 10 times fiscal ‘05 levels. This growth will come entirely through an existing pipeline of drilling opportunities. Success on the company’s high-risk deep exploratory tests this year would offer additional upside.” END
Why would the CEO be frustrated with DBLE’s rather flat two year stock performance ??? —I have owned for entire time! :
finance.yahoo.com
Because:
1) Revenue and cash flow have more than tripled since 2003.
2) One year 2004 Versus 2005 Sales up 56.4% Cash Flow up 14.0% Book Value up 18% Proved Reserves up 34% PV-10 up 85%
2005 512% Production Replacement !
4-Year Weighted Average Production Replacement 503%
3) Five years % change per year Sales up 41.5% Cash Flow up 54.5% Book Value up 27%
4) The Company believes its Eastern Washakle Coal Bed and South Fillmore natural gas projects hold considerable development drilling potential in coming years.
5) DBLE finding costs have gone from $ 1.15 per MCFE in 2002 to $ .66 per MCFE in 2005
6) Drilling Performance. From January 1, 2003 through December 31, 2005, DBLE participated in the drilling of 252 gross wells comprised of 66 exploratory wells with one dry hole, 176 development wells with no dry holes, 9 water injection wells and one monitoring well. Of the 66 exploratory tests drilled during the three year period, 61 of the test wells were coal bed wells that were drilled in pod groups of 24 wells, 24 wells and 13 wells, respectively. During the same period, DBLE added estimated proved reserves of 38.3 Bcfe at an average finding costs of $0.70 per Mcfe. DBLE’s average annual production replacement was 543 % during this three-year period, and our production has grown from an average daily rate of 3.9 MMcfe per day in 2003 to 8.4 MMcfe per day in 2005. Production in December 2005 averaged 7.2 MMcfe per day.
7) In 2005, added 15.7 Bcfe of proved reserves and produced 3.1 Bcfe. DBLE’s year-end proved reserves increased 34% to 49.2 Bcfe at December 31, 2005 from 36.6 Bcfe at December 31, 2004.
8) DBLE replaced over 500% of our production in 2005 at a finding and development cost of $0.66 per Mcfe without acquiring existing reserves from third parties.
9) Oil and gas sales increased 56.4% to $20.5 million in 2005 from $13.1 million in 2004. Higher prices accounted for 63% of the increase, and higher production volumes accounted for the remaining 37% increase.
10) Production increased 15% to 3.1 Bcfe in 2005 from 2.7 Bcfe in 2004. The increase is primarily attributable to increases in the coal bed natural gas production at the Cow Creek field and production increases from the Mesa field on the Pinedale Anticline.
11) Income from operations increased 33% to $6.0 million in 2005 from $4.5 million in 2004. However, the additional $1.6 million of deferred income taxes recognized in 2005 resulted in a 1.6% decrease in net income.
12) Net cash provided by operating activities increased 39%, to $10.3 million in 2005 from $7.4 million in 2004.
Other Attributes
On September 29, 2006 DBLE was included in Value Line Small Cap Coverage.
DBLE is profitable and has a very strong balance sheet with little long term debt.
EPS $ .14 2003 $ .47 2004 $ .46 2005 ROE 2004 16.2% 13.3% 2005
At June 30, 2006 Total Assets were $ 46.9 million. Long term Debt of $ 3.19 million and shareholder’s equity of $ 31.53 million.
8,628,604 shares outstanding (8.85M fully diluted) and is thinly traded. Float 7.76 million Insiders 13.77%
Short Interest-186,576 2.1% of the outstanding shares—small.
Institutional Ownership 19% (19 different institutions)
DBLE is a stock owned primarily by individuals.
finance.yahoo.com
DBLE Key Statistics finance.yahoo.com
On Friday, October 13, 2006 with a stock price of $ 21.34 the company had a market cap of $ 184.36 million.
Reserves—Reviewed by Netherland, Sewell & Associates:
Natural gas reserves constitute approximately 96% of our total estimated proved reserves as of December 31, 2005.
Proven PV-10 $
Proven Reserves:
As of December 31, 2005, DBLE’s estimated proved reserves totaled 47.2 Bcf of natural gas and .329 MMBbl of oil, or a total of 49.2 Bcfe, with natural gas constituting 96% and oil constituting 4%. Note: 35% Atlantic Rim (Coalbed Methane) 55% Pindale Anticline 10% Other
These estimated reserves had a before income tax PV-10 value of approximately $126.8 million.
Probable Reserves:
As of December 31, 2005, DBLE’s estimated probable reserves totaled 28.89 Bcf of natural gas and .138 MMBbl of oil, or a total of 29.7 Bcfe, with natural gas constituting 97% and oil constituting 3%. Note: 61% Pinedale Anticline 39% Atlantic Rim Coalbed Methane.
These estimated reserves had a before income tax PV-10 value of approximately $ 59.973 million.
Possible Reserves:
As of December 31, 2005, DBLE’s estimated possible reserves totaled 153.899 Bcf of natural gas and no oil.
These estimated reserves had a before income tax PV-10 value of approximately $ 364.09 million.
Note: 100% Atlantic Rim—Coalbed Methane
At December 31, 2005, DBLE had 14 full-time employees.
Stephen H. Hollis largest DBLE shareholder 720,200 shares 8.3% of the outstanding shares
Stephen H. Hollis, Age 55, has served as the President and Chief Executive Officer of the Company since January 1994 and previously served as a Vice-President of the Company from December 1989 through January 1994. Mr. Hollis has served as a Director of the Company since December 1989. Mr. Hollis has served as the Vice President of Hollis Oil & Gas Co., a small oil and gas company, of which he owns 51% beneficial interest, since January 1994 and served as the President of Hollis Oil & Gas Co. from June 1986 through January 1994. Mr. Hollis was a geologist for an affiliate of United Nuclear Corporation from 1974 to 1977 and a consulting geologist from 1977 to 1979. In 1979, Mr. Hollis joined Marathon Oil Company and held various positions until 1986, when he founded Hollis Oil & Gas Co. Mr. Hollis is a past President of the Wyoming Geological Association and past President of the Rocky Mountain Section of the AAPG. Mr. Hollis received a B.A. Degree in Geology from the University of Pennsylvania in 1972 and a Masters Degree in Geology from Bryn Mawr College in 1974.
Stephen H. Hollis Salary $ 175,000 2005 $ 135,000 2004 $ 108,000 Bonuses $ 40,000 2005 $35,000 2004 $ 68,592 2003
The Lottery Ticket Christmas Meadows
Christmas Meadows is a structural dome in the southwest corner of the prolific Green River Basin, in Summit County, Utah. The dome is overlain by the Wyoming Overthrust Belt and the North Flank Thrust of the Uinta Mountains. In 2005, after nearly ten years of addressing various regulatory hurdles in this environmentally sensitive area, DBLE and their partner, John Lockridge, began preparing this prospect for drilling. Dirt work was completed and 34 inch conductor pipe was set at a depth of 235 feet. Unit Drilling Company Rig #233 has been signed up to move in to drill this 16,000 foot test on June 1, 2006. Partners have been signed up, leaving DBLE with just under 25% working interest before payout and over 30% working interest after payout.
The Christmas Meadows Prospect has a long history. In the 1970s Gulf noted the structure on a regional seismic grid. Further seismic surveys by Gulf, American Quasar, Amoco, Chevron, Sohio, and others support the existence of the structural dome. Amoco staked a location to test the structure to 19,000 feet in 1982, but had still not been issued a permit in 1986 when it abandoned its efforts. DBLE acquired their first leasehold in the prospect in 1984 (1984 !!!!) . Chevron formed a federal unit in 1989 and staked a well but abandoned its efforts in 1994 after not getting a permit or offset acreage offered for sale. Chevron turned the project over to Amerac, who designated DBLE as its agent. DBLE purchased the Chevron leasehold and have farmouts from Amerac (now Unit Corp.) and Judy Yates, and finally acquired the open offset acreage at a BLM auction in November 2003. Combined with new leases purchased at lease sales, DBLE and Lockridge have interests in 41,237 gross acres, of which 22,875 gross acres are included in the Table Top Federal Exploratory Unit.
Prospective formations range from depths of 4,000 to 23,000 feet, and range in age from Mississippian to Cretaceous. Source rocks, reservoir rocks, structural timing, seal, as well as structure all remain to be determined through the drill bit, but we are encouraged by our analysis of analogous fields in the Wyoming Overthrust Belt and the Green River Basin. The initial well is projected to a depth of 16,000 feet, and DBLE believes it has a high risk, high reward potential. There is also engineering risk to consider, as there is a time deadline once operations commence and the overlying structure is complex and potentially difficult to drill.
DBLE has acquired licenses to six 2D seismic lines, or 60 miles. Five of the lines, or 53 miles, were reprocessed with state-of-the-art pre-stack depth migration. Imaging and understanding of the structure has improved as a result, although the structure map appears very similar to Chevron’s and American Quasar’s efforts.
2% Interest BSIC in Christmas Meadows (I own also. This would take another ten pages to summarize BSIC)
basicearth.net
Christmas Meadows Prospect
Summit County, Utah
Formation Drill Depth Est. Reserves (mean)
Frontier 13,960' 201 BCFe
Dakota 15,330' 232 BCFe
Nugget 17,100' 1444 BCF
Weber 20,930' 293 BCF
Madison 22,500' 904 BCF
Total Spec Reserves 3.074 TCF
Christmas Meadows Field Trip:
www1.investorvillage.com
www1.investorvillage.com
www1.investorvillage.com
tinyurl.com
Photos dyddcapital.com
Internet Postings by geologist involved in Central Utah.OILFNDR PROFILE
www1.investorvillage.com
Background
www1.investorvillage.com
Oil & Gas Journal, October 2, 2006
Utah’s 30-year prospect
Alan Petzet
After Covenant field in Sevier County, Utah, which opened oil production on the Central Utah thrust belt, where will explorers discover the next potentially giant oil or gas field in the US Lower 48?
Perhaps it will be up the road in Summit County, Utah.
A group led by Double Eagle Petroleum Co., Casper, Wyo., spudded a wildcat at Christmas Meadows, Utah, in late September.
The well is expected to cost $10 million and take 100 days to drill to TD 15,730 ft. Double Eagle cemented 34-in. conductor pipe at 235 ft and 20-in. conductor at almost 1,000 ft before Unit Drilling Co. moved in Rig No. 233 to drill the vertical Table Top Unit No. 1. The drillsite’s surface elevation is 9,573 ft.
Outlays prior to spud totaled $2.5 million for environmental permitting and building the road and location.
The large subsurface feature, a structural dome, appears on numerous 2D seismic lines, but no 3D data have gone into the drilling of this prospect. Overlying the dome, in the southwest corner of the Green River basin, is the Rocky Mountain Overthrust Belt.
Various operators have been attempting to drill this well since the 1970s.
Progressive suitors
The former Gulf Oil Corp. noted the Christmas Meadows prospect on a regional seismic grid in the 1970s.
Later 2D seismic surveys by Gulf, American Quasar Petroleum Co., Amoco Production Co., Chevron Corp., Sohio Petroleum Co., and others supported the dome’s existence.
Amoco staked a location in 1982 to drill a wildcat to 19,000 ft on the structure but had still not been issued a permit in 1986, when it dropped its plans.
Double Eagle first acquired leases on the prospect in 1984. Then Chevron formed a federal unit in 1989 and staked a well but withdrew in 1994, having been unable to get a drilling permit or buy offset acreage offered for sale.
Chevron turned the project over to Amerac Energy Corp., which designated Double Eagle as its agent. Double Eagle acquired the last acreage critical to the prospect at a US Bureau of Land Management auction in November 2003.
Double Eagle holds interests in 42,095 gross acres, of which 22,875 gross acres are included in the Table Top Federal Exploratory Unit.
Seismic search
Double Eagle and partners have acquired licenses to six 2D seismic lines that span 60 miles.
The various exploration organizations reprocessed five lines covering 53 miles with the state-of-the-art prestack depth migration (PSDM) technique.
Imaging and understanding of the structure improved as a result, although the structure map appears similar on all four of the PSDM maps generated, said Stephen H. Hollis, Double Eagle president and chief executive officer.
Hollis said, “It’s a tough seismic area with lots of velocity problems to deal with. The geophysicists would prefer to have 3D seismic, but shooting 3D in a national forest in rough terrain was just prohibitive.”
Not until it reaches 11,000 ft is the well expected to drill out of the last thrust sheet and into the underlying Green River basin, Hollis said.
The Christmas Meadows structure’s position underneath the thrust is similar to that of Utah’s Bridger Lake oil and gas field, which doesn’t produce from beneath the thrust, and the size of the seismic feature is similar to Wyoming’s Anschutz Ranch East gas-condensate field, he noted.
The prospect
The Christmas Meadows structure appears to have prospective formations that range in depth from 4,000 ft to 23,000 ft and in age from Mississippian to Cretaceous.
Obviously a 15,730-ft well will not see the three deepest formations: Jurassic Nugget estimated to be at 17,100 ft, Pennsylvanian Weber at 20,930 ft, and Mississippian Madison at 22,500 ft.
This makes the present wellbore mainly a test of the Cretaceous Dakota and Frontier, Double Eagle said.
The well has about a dozen working interest owners. Double Eagle and one other entity hold 25% each, Unit Corp. has 5%, and Basic Earth Science Systems Inc., Denver, has 2%. END
Utah
By OGJ editors
HOUSTON, July 24 -- Double Eagle Petroleum Co., Casper, Wyo., expects a rig on location in late August to drill a 16,000-ft exploratory well in Summit County.
The well is in the southwestern Green River basin on the Christmas Meadows prospect, identified in the 1970s and since then the subject of much study and environmental permitting. The target is a structural dome overlain by the Rocky Mountain Overthrust Belt. Contractor is Unit Drilling Co.
Double Eagle and John P. Lockridge, private Denver independent, hold interests in more than 41,000 gross acres, of which 22,875 gross acres are included in the Table Top Federal Exploratory Unit. Working interest is just under 25% before payout and more than 30% after payout.
Double Eagle Drills After Long Delay
biz.yahoo.com
Operation Results Six Months Ended June 30, 2006
biz.yahoo.com
Double Eagle Petroleum Co. Chairman and CEO Featured in Exclusive Interview With WallSt.net
biz.yahoo.com
wallst.net
Newsletter “Tease” Profile of DBLE:
isecureonline.com
Website: dble.us
.
Corporate Headquarters:
Double Eagle Petroleum Co.
777 Overland Trail, Suite 208
P O Box 766
Casper, Wyoming 82602-0766
Phone: 307-237-9330 or 800-745-3253
Fax: 307-266-1823
John Campbell Investor Relations Double Eagle Petroleum Tel 303-794-8445 email jcampbell@eagle-eagle.net
Denver Office:
Double Eagle Petroleum Co.
1675 Broadway, Suite 2200
Denver, CO 80202
Phone: 303-794-8445
Fax: 303-794-8451
The above is for your own due diligence.
Disclosure: Owned DBLE since 2004 at around $ 15 share and purchased additional shares Thursday and Friday. Also own BSIC shares. |
