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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: Kerm Yerman who wrote (4788)	3/5/1998 9:14:00 PM
From: Farmer	Respond to of 24921

Ah, I see ... Thanks Kerm as I own shares of Colony. Farmer

To: Kerm Yerman who wrote (4788)	3/6/1998 9:52:00 AM
From: Kayaker	Respond to of 24921

Kerm / The Korner I'm a keen reader of the Korner, but have one suggestion. Many messages such as #9454 are too wide to view without scrolling to the right, even with navigation turned off. Any chance the line lengths could be shortened? Thanks, Bob. PS. 17 inch monitor, 800x600, 12 point Verdana

To: Kerm Yerman who wrote (4788)	3/6/1998 1:00:00 PM
From: SofaSpud	Read Replies (1) \| Respond to of 24921

Kerm / Merit Merit Energy Ltd. (TSE:MEL; $5.85) I saw the release for the Q4 figs and was a bit concerned about a couple of the numbers. I got hold of a set of slides from Merit's New York road show, which helps flesh out the picture a bit. Let me bounce the story off you. (And yes, I do have a position). Merit has 28.9 million fd shares (mgmt, employees etc. =10%). NAV on fd basis is $4.84. Production mix is 70/30 in favour of gas, with only 6% heavy oil. Average production was around 4,400 boe/d in '97, and is expected to be 8,600 boe/d in '98. The company projects '98 exit at 9,200 boe/d. CF was $0.52 in '97, and projected $1.10 in '98. They claim an 84% success rate on the '97 drilling program; I don't know what the breakdown between exploration and development was, but they claim to have replaced 11x production. Areas include Ft. St. John in NE B.C., Alberta southeast of Calgary, East-Central Alberta on the Saskatchewan border, and southwest Saskatchewan. They've negotiated an alliance with Gulf for east central Alberta. Now the part that bothers me. Debt was $26 million at YE '97, or a smidge over 2x CF. The 1998 capex budget is $92 million (of which $32 for drilling, $38 for acquisitions). Financing goes something like this: Debt YE 1997 = $26 Capex '98 = $92 Subtotal = $118 LESS CF '98 = $32 Divestures = $10 Facility Financing = $10 Suggests debt at YE '98 is $66 million, or 2x projected '98 CF. I think the Rigel deal for 2,000 boe/d is the bulk of the acquisition budget. Note that their CF ests. are based on AECO spot of $1.60/gj, NYMEX at $2.40/mmbtu avg., and WTI @ 18.50/bbl @ $0.72. Rumour has it that there has been close involvement with some of the same people who got CNQ moving. In other words, the idea is that "management" has a track record. Two years ago I might have pulled out all the stops to buy these shares -- it looks like an outstanding growth story. In the current environment, I'm not so sure. Are they being too aggressive? Looks like their pricing ests. might be a bit generous on the oil side, but they're very gassy, and the gas prices look OK. So pricing isn't too likely to undermine their CF assumptions. But they're looking for a big leap in production; if they don't make it, then debt won't be 2x any more. OTOH, they should be at something like 6,500 boe/d already with the acquisition. Bottom line is whether $66 million is too much debt for this company in this environment. Any thoughts?