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Gold/Mining/Energy : Canadian Oil & Gas Companies

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To: Darwyn Petras who wrote (5580)	11/13/1998 7:22:00 PM
From: Kerm Yerman	Read Replies (1) of 24925

Darwyn / Startech Energy Yes, I like Startech and follow the company closely. I use to have the company listed in my portfolio but eliminated them when I cut back my coverage. What I did respect is that the company was one of the first, if not actually the first, to announce cutbacks in their capital budget and to work within cash flow. The part that worried me was if they could continue to reflect growth in reserves and production. I determined that I would monitor their progress and put importance into their 4th quarter and 1st quarter reports. That information along with their 1999 capex program would give me an insight into their near future prospects. I think the cash flow number you mentioned for 1998 is a good number. If anything, they may report a few pennies more. I expect a little bit more out of them for 1999 than the flat cash flow you mentioned. I am using a cash flow dollar amount of $1.25 and feel I am on the conservative side. That's quite an estimate - 25% growth in cash flow. The quarterly reports I mentioned prior will give me a further feel as to how good a number I am using. I just noticed the company is forecasting $1.33 share. Based upon their recent straight forward attitude in declaring their position in progress with shareholders, I woiuld think the number to be reasonably accurate - or even slightly on the low end. The other major factor to zero in on - is debt. Earlier this year the company reduced their debt with monies from an equity offering. It was a good move at the time for the offering was done at a much higher share price when compared to the current share price. Existing shareholders benefited from this anti-dilution factor. The companies debt position at the end of this year will amount to about 2.1X 1999 cash flow. This multiple is exactly the average for companies in Startech's peer group. I don't know the "assumptions" the company used to forecast their 1999 cash flow. I used $15.50 as my 1999 average oil price. Keep in mind, the company is basically an oil producer. On a positive note, their life reserves are long term and are mostly light sweet crude. Investment in the company at the current $4.95 share price is attractive for superior long term gains. Startech is unlike most dominant oil producers where I have said one should wait for further price weakness before jumping in. Their share price has remained firm since the end of the first quarter - about the time they announced their cutback status. I would not be hesitant to begin accumulating shares in the company at a ceiling price of $4.95 (less than $5.00) I would be patient and let this current Iraq affair play out first. If lucky, maybe I could get in around $4.50-4.75 price range. Heck, three years from now, I could look back and see that this was really a mute point. My end June price objective is $6.50 and 12-month target is $8.50. Keep in mind, just one person's opinion - this time it was mine.

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