QIS Special Report - Osprey Energy - August 7, 2001
From time to time, QIS Capital is pleased to present investors with special situations
which we believe deserve some due diligence. On November 29, 2000, we
introduced Osprey Energy at $0.60 in a special report. Osprey is again gearing up
for some substantial production increases and has added a number of high-impact
plays which could become significant company makers.
The following is a brief corporate profile of Osprey:
Osprey Energy (OEL-CDNX)
Current Price: $0.95 (August 7, 2001)
Osprey Energy is a dynamic international emerging oil and gas company with
substantial proven reserves, accelerating production, profit, and several high potential
exploration projects. Osprey has nearly tripled production since QIS Capital
provided a special report last November, and expects to more than double its
current production of 950-1000 boepd by the end of this fiscal year (June 30,
2002). The production growth is reflected in the financial statements for the past nine
months which show revenues jumping 632% to $1,937,395 and net earnings from
operations soaring 793% to $804,820. The profits have been utilized primarily for
remedial work to enhance production on its Louisiana properties.
The Louisiana properties were purchased at deep discounts before the upward spike
in commodity prices last year and were assessed in October 2000 by an independent
Houston geological firm, Keljor Group LLC, at US$36,150,000 net to Osprey, or
US$19,570,000 discounted at 10%.
The twelve well Cotton Valley Project, which was purchased for US$1,000,000,
was assessed at US$29,520,000 ($15,480,000 discounted 10%) net to Osprey. Six
of the twelve wells are currently producing. One of them, the Crosby 36A, is a virgin
well that is operating at a sustained rate of 700 bopd and 1.5 mmcf/d of natural gas
(75% net to Osprey until payout, 50% after payout). Similar production is expected
from the nearby Crosby 25 when it comes onstream later this summer. It is also
anticipated that production from the other wells will commence once scheduled
remedial work is completed this year.
The Bayou Choctaw property includes eight wells that are expected to produce 250
bopd and 400 mcf/d after remedial work is completed over the next few months.
Osprey holds a 60% working interest in the total proven and probable reserves of 2
million barrels of oil and 3 bcf of natural gas. In addition, recent seismic data has
discovered several significant new oil and gas zones.
The Livingston Field, in which Osprey has a 30% working interest, has two wells
with net reserves of 500,000 barrels of oil and probable reserves of 1,000,000
barrels. The net production of 60-80 bopd is expected to rise to 250-300 bopd after
remedial work next year. On the exploration front, Osprey has three exciting projects
in Alberta,
Prince Edward Island, and Nova Scotia. In north-central Alberta, 3D seismic by an
international major has indicated a potential of about 1 trillion cubic feet of natural
gas. Drilling on the property, in which Osprey has a 21% working interest, should
commence in the late fall.
In Nova Scotia, Osprey has a 15% working interest (with the option to acquire an
additional 10%) in an onshore 220,000 acre prospect north of Truro. Preliminary
seismic data shows a potential reserve of 75,000 barrels of oil and 345 bcf of natural
gas. Follow up seismic fieldwork has just been completed and is in the process of
being analyzed.
Recently, the company announced that it had acquired a 10% working interest (with
the option to add another 15% over the next 120 days) in seven onshore exploration
permits for conventional natural gas and coalbed methane on 642,000 acres of
Prince Edward Island. Drilling is expected over the next twelve months. Both of
these prospects are in the Maritime Basin, a l57,000 square mile sedimentary
formation covering parts of the three Maritime provinces and the Gulf of St.
Lawrence. It is an area of increased drilling activity, with several recent gas finds
spurring even greater interest.
In Alberta, Osprey has a 5% working interest in 10 producing wells operated by
Conoco and a 28.9% working interest in an Elk Island well. Following a review of its
asset base, the company determined that shareholder value could be maximized by
the sale of its 12.9% working interest in 69 Jenner Shallow wells so that the
proceeds could be more effectively allocated to develop other company assets.
Osprey's net Alberta production is
currently about 40 bopd.
QIS CAPITAL COMMENTS
Osprey Energy has shown dramatic growth over the past year and has demonstrated
that its prolific Louisiana wells can be reworked successfully. The company acquired
these properties for a mere fraction of their worth and have more than paid for the
purchase through generated cash flow. Furthermore, the asset value assigned to these
properties translates into a per share amount of $3.19 per share ($2.02 per share
fully-diluted) not including Osprey's other assets.
Over the past three months, more and more analysts and investors have become
familiar with Osprey which is leading to increased coverage and interest in the stock.
David Heden, a third party financial analyst, issued a report on May 28, 2001, with a
fiscal 2002 cash flow target (year ending June 30, 2002) of $11.0 million or $1.16
per share ($0.73 per share fully-diluted). On July 17, 2001, Michael Evans, a
contributing research analyst for The Richmond Club Small-cap Equity Research,
issued a report with a short-term stock price target for Osprey of $1.55 and a
medium-term target price of $2.60. In this report, management was quoted with a
fiscal 2002 cash flow estimate of $9.5 million or $1.00 per share ($0.63 per share
fully-diluted). Investors can locate these reports on Osprey's website.
There are currently few oil and gas producers such as Osprey which are trading at
less than 1.0 times forward cash flow (1.5 times fully-diluted). The company is
trading at this level regardless of its high-impact drilling which is expected to take
place over the next 12 months. The fundamental performance of the company has
given investors some downside protection while Osprey's upside potential has
continued to grow with a number of recent agreements including several significant
exploration plays.
Following its recently announced private placement, Osprey will have approximately
9.5 million shares issued and outstanding (15.0 million shares fully-diluted).
******
Contact Information:
John MacDonald
Ian McGavney
Phone: 1-866-238-1185 or (902) 543-5666
Fax: (902) 543-7532
Website: www.ospreyenergy.com
E-mail ir@ospreyenergy.com |
