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

To: Stocker who wrote (5250)	7/22/1998 3:16:00 AM
From: Kerm Yerman	Read Replies (2) \| Respond to of 24905

Stocker / Upton Resources I currently view Upton Resources as a good bargain, but recent due diligence would be required to confirm their situation. The first thing I wish to point out is that they are primarily an oil producer and we all know most of these type companies have had their shares fall to near 52 week lows. In Upton's case, shares are selling at less than 2.7X projected 1998 cash flow. I have revised my 1998 estimate to $0.85/share due to the slow recovery anticipated with oil prices. Another view is that shares are selling at about $0.60 to $0.65 of 1997 year end net asset value. Their debt load is reasonable and manageable. The financial multiples are very favorable at the current time. Of course, they only work to our advantage if the near and longer term future of the company is positive. And I think they are. Keep in mind, the company has already taken a ceiling test writedown on assets. Thus, there should be no surprises in this area. In their words, beginning with the last quarter of 1997, they are refocusing on their experience with what they identify as bread and butter properties. By the end of the first quarter of this year, they had already replaced production lost in the asset sale to Berkley/Paramount/Westminster. They had projected a very reasonable production target for 1998 and further identified it as conservative. I have been following the company for some time and I can state from previous forecasts, they are extremely conservative in nature. As example, their 1998 production target was close to their production rates ending the first quarter. Properties are classified as excellent for further exploration and development and - quantitative for a company of this size. The only problem for me has been the life of their reserves. Although primarily an oil producer, keep in mind it is mostly light oil. I consider their first quarter operating results very successful. it did include three new pool discoveries. One of the few questions I would want to ask the company before buying further shares - would be to get an idea as to how successful a second quarter they had. If you believe the price of oil will improve to $18.00/barrel sometime next year, Upton is an incredible bargain at current prices. Shares are truly undervalued. With the planned activities known at this time with identified near term drilling locations --- coupled with an increased oil price of $18.00/bbl, it is quite possible to see a dramatic increase of cash flow in 1999 to about $1.50/share. If that happens, we're looking at a target share price 3X of the current share price. Keep in mind, contact with the company is necessary before further purchase of shares are to be made. The focus should be on the operational end - just how good a second quarter did they have. You could also ask what their current forecast is related to cash flow for 1998 and what assumptions they are based upon. If the answers are to your satisfaction, I wouldn't hesitate to buy more shares prior to release of their 2nd quarter report.