Dave / Northstar Energy
Just received 2 years history of financial and operating reports from
Nothstar today.
After just looking at price chart, I can see you might feel that the
shares are going nowhere. I think the company is now a good buy.
Hold on to your shares.
Right now, shares are selling about 5.5X fiscal 1996 cash flow ----
my estimate. I don't have information projecting growth for 1997, but
a fair estimate would be $3.00/share, which gives us a ratio of 4.7X
cash flow for fiscal 1997.
On the earnings end, company is selling @ 22.5 trailing 12 month
earnings. I suspect this is one of the reasons stock has been lagging
in performance. However, they are now on the improve. If the company
comes in with a big last quarter as they did for last year, I would estimate
eps to be in area of $.70 to $.75, which would result in a ratio of about
19.0X. Using a number of $1.00 eps for 1997, ratio is 14.0X earnings.
I based data for above based upon current price of $14.00/share.
Keep in mnd, these estimates are mine. Call the company and ask if
they have internal forecasts available----they may have presented them
to financial analysts in near past. Based upon stocks performance, they
should be. Also ask for copies of research analyst reports on the
company. With this information, you can adjust my numbers accordingly.
Reasons for my good estimates. The company has identified the need
for balanced production between oil and gas. Just 2 years ago, they
were basically solely gas producers. Now production numbers are
almost 50/50, and that's based upon 25,000 boe/d. They have made
gigantic inroads with oil. That will impact earnings, the area they were
hurt in 1995, due to lower gas prices.
A word about their debt. The bulk of it is in the form of unsecured notes
issued to U.S. investors last year, amounting to a little less than 1X
1996 cash flow. Don't let that worry you. Principal payments are not
until year 2001 and then they pay it off over a five year period. By that
time, it should be a small amount of their annual cash flow.
They have around 500,000 acres of undeveloped acreage. With
production at this level, I would of liked to have seen a higher number.
Hit me with any questions you may have. Look for the 3rd quarter
report. On a year to year basis it should be good. Also, look at
progress on a quarter to quarter basis. |
