Richard/Richland Petroleum Summary
At $4.25 shares are selling 21.5% below Year Ending 1995 Net Asset Value and at a deeper discount for Year Ending 1996.
Acquisition of Signal Energy was a steal.
Cash flow per share in 1995 was $1.58. Thus far in 1996, company has reported $0.19 cash flow less than what they reported last year. However, cash flow has increased $0.06 in the second quarter compared to first quarter. In the last 6 months of 1995, the company generated $0.75 in cash flow. I'm looking for the company to generate a minimum of $0.78 cash flow in the 2nd half of fiscal 1996, thus totaling $1.42 for the year. Your number of 3X cash flow is right on the button. However, on the other hand, the ratio can be further reduced to 2.5X (my estimate) if you were to apply 12 months forward cash flow ($1.70 Jun97). Based upon 6X CF which the shares will demand next June, it will be a $10.00 stock at that point.
The stock is vastly undervalued and underfollowed, all as a result of last half 1995 results. This company is on the go. They have had very serious steep production declines and are still improving their status without benefit of the Signal acquisition. They are finding oil as fast as they were losing it. However this time around with new production and reserves, the situation is recognized and accounted for. The company is definitely back on track. It won't take long for street analysts to recognize the feat the company is accomplishing.
Company budgeted activity was based on $18.00 WTI price. Hedging accounts for 2100 bbl's/d at $18.06 for the balance of the year. This means they will be selling another 1500 bbl's/d in the 2nd half at unhedged pricing. As you're aware, WTI price is far higher at this point in time.
The company is valued in the marketplace as though they are just exploiting and developing their land holdings. Richland is an agressive exploration orientated company.
Although I haven't talked to Richard Todd of late, I can tell you that he is low profiled and conservative. The moves he has made in last 6 months are great. Knowledge is the key to success and it would now appear he has put all the pieces of the puzzle together (personnel) to
continue growth in a more fashionable manner.
I would of liked to see more land acquisition in Alberta, however I see that they are staying in the Williston Basin where they have gained in-depth experience. An interesting question to ask if you are in contact with the company, are they going for the deeper rights in further exploration of Southeastern Saskatchewan lands such as Berkley Petroleum's play there.
I, as you do, feel Richland is a great investment and I hope other viewers interested in my TOP 20 SELECTIONS review this report. I must let all know I prepare reports like this on the fly, so expect the bad English and manner I present the information. If anyone should have questions or want to add to coverage of Richland, please do so.
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