From this month's Buy Low/Sell High:
FOX ENERGY Corporation
recent merger to more than double cash flow per share for 2000
Fox was incorporated on August 23, 1993, and completed its initial public
offering on the ASE on August 24, 1994. On November 5, 1999, the company
completed the takeover of Petrohawk Energy Ltd. through the issuance of
4,166,667 shares, being 1 Fox share for every 4 Petrohawk shares. This
transaction initially increased the company's daily production by 60 boepd,
with an additional 85 boepd currently being tied-in.
During the first 9 months of 1999, Fox produced an average of 268 boepd.
Current production, following the merger and recent operating activities,
is about 450 boepd of which 60% is gas. The company plans to exit 1999
producing 500 boepd.
Fox has an average working interest of 51% in 21,120 (10,311 net) acres,
180 producing gas wells, a compression and dehydration facility, and a
gathering system at Medicine Hat / Hilda, Alberta. The company recently
completed the drilling of 8 natural gas wells in the area which are
expected to be tied-in shortly at an estimated net rate of 0.6 mmcf/d.
Current production at Medicine Hat / Hilda is about 1.9 mmcf/d.
Fox acquired two 50% operated properties at Bow Island, Alberta, in
November 1998. A gas well in the area was recently tied-in at
approximately 400 (200 net) mcf/d. The company also has 1,280 (320 net)
acres of undeveloped land at Bow Island on which it has identified two
additional drilling locations which have the potential to add net
production of about 100 boepd.
At Craigend, Alberta, Fox has operated and non-operated working interests
ranging from 20% to 65% in 25,024 (6,347 net) acres of undeveloped land and
20,480 (5,496 net) acres of developed land. The company has identified two
exploration targets with incremental production potential of about 400
mcf/d
net. Current production at Craigend is 125 mcf/d.
At Nevis, Alberta, Fox has a 31% average working interest in an oil and a
gas well which were recently tied-in at initial rates of 90 (41 net) bopd
and 1.0 (0.35 net) mmcf/d, respectively.
In late 1998, the company purchased a 100% interest in 4 producing oil
wells, a disposal well, and a battery at Veteran, Alberta. Current
production from the property is about 50 bopd.
At Battle Creek, in southwest Saskatchewan, Fox recently participated for
a 15.5% interest in a successful horizontal oil well. The well has been
placed on-stream at an initial rate of 150 (23 net) bopd bringing
production in the area to 41 bopd.
The company holds an average working interest of 33.33% at Morrisview,
located in southeastern Saskatchewan. The area currently produces
approximately 22 net boepd.
At Antelope Lake and Illerbrun, Saskatchewan, two oil wells were recently
completed and are expected to add 25 boepd net. An additional 14 potential
development wells have been identified in these areas.
Based on independent evaluations for Fox and Petrohawk as at December 31,
1998, the combined entity had proven and half probable reserves of
1,550,000 boe, comprised of 361,000 barrels of oil and 11,887 mmcf of
natural gas. Fox currently has an estimated net asset value of about $0.60
per share, using a discount rate of 12%. The company has tax pools of
about $7.0 million which can be used to offset any future taxes payable.
On October 26, 1999, Fox announced a normal course issuer bid to purchase
up to 500,000 of its shares over a one year period. Under its previous
issuer bid, Fox purchased 500,000 shares at an average price of $0.17 per
share.
FINANCIAL POSITION & OPERATING RESULTS
(all financial figures presented in Canadian dollars)
Balance Sheet Information (as at September 30, 1999)
Fox
Current Assets $ 654,985
Total Assets 7,570,520
Current Liabilities 631,118
Long-Term Debt 1,990,000
Shareholders' Equity 4,771,969
Petrohawk
Current Assets $ 286,376
Total Assets 1,394,894
Current Liabilities 316,757
Long-Term Debt nil
Shareholders' Equity 972,300
Pro-Forma
Current Assets $ 941,361
Total Assets 8,965,414
Current Liabilities 947,875
Long-Term Debt 1,990,000
Shareholders' Equity 5,744,269
Income Statements
Fox
9 Months Ended September 30, 1999
Revenues $ 1,582,509
Cash Flow 573,306
Net Earnings (11,694)
Cash Flow per Share $0.028
Petrohawk
9 Months Ended September 30, 1999
Revenues $ 423,312
Cash Flow 34,679
Net Earnings (130,036)
Cash Flow per Share $0.002
Projected Pro-Forma for the Year Ended Dec. 31, 2000
Revenues $ 5,712,740
Cash Flow 3,344,660
Net Earnings 1,266,090
Cash Flow per Share $0.12
SHARES
Authorized unlimited
Issued
Management & Insiders - Free-trading 1,224,610
Public - Restricted 1,485,000
- Free-trading 21,503,414 22,988,414
Total Issued 24,213,024
Fully Diluted 25,196,024
Stock Exchange Listing Canadian Venture Exchange (CDNX)
Trading Symbol FEC
52 Week Price Range High $ 0.30 Low $ 0.12
Current (December 1, 1999) $ 0.23
Market Capitalization $ 5.6 million
HEAD OFFICE
Address: 1400, 444 - 5th Avenue S.W., Calgary, Alberta T2P 2T8
Telephone: 1 - 888 - 720 - 2108 or (403) 265 - 3627
Fax: (403) 265 - 3628
Email: fec@foxenergy.com
Internet Site: www.foxenergy.com
Contact Person: Don Holding, President & CEO
CONCLUSION
The recent merger with Petrohawk has positioned Fox for substantial
improvement in financial and operating performance. Based on commodity
prices of US$18 per barrel of oil and $3.08 per mcf of natural gas,
management conservatively forecasts that the company will achieve cash flow
of $3.3 million or $0.12 per share for 2000. Using a typical price to cash
flow multiple of 4, Fox's shares should appreciate to the $0.48 level over
the next 12 months. Management is actively evaluating a number of
potential acquisitions and/or mergers which would offer share-holders
additional upside if successfully completed. Proceeds from the recent sale
and lease-back of a gas plant interest and the sale of a minor property
enabled Fox to reduce its bank debt to $1,990,000 giving the company
substantial debt capacity to finance further acquisitions, exploration, and
development.
copyright 1999 by CanStock Information Services Corp. Reproduction in
whole or in part without the written permission of the publisher is
prohibited.
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