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SEVERAL COMPELLING REASONS TO LIKE KTNV Powerful news just released 2/11/2000: biz.yahoo.com 1. PROFITABLE! New management is experienced and has already executed a turnaround with two straight quarters of profitability since taking over (see news below) 2. Fully Reporting (http://www.freeedgar.com) 3. Incredibly cheap - near the very low end of its trading range (.14/sh as of 2/13/2000) 4. Strong asset base interest in 400+ properties 5. Strong oil prices 6. "BUY" rating awarded (see below) and trades on 2 exchanges for more exposure 7. Shareholders Meeting on Feb. 28 and new name coming (hey, I like management already...LOL!) Excellent website at cottonvalley.com Lots more DD at: ragingbull.com ***** "BUY" RATING GIVEN BY DOMINICK AND DOMINICK Prepared by Dominick & Dominick Securities Inc. Members of the Toronto, Vancouver & Alberta Stock Exchanges and the Investment Dealers Association of Canada 150 York Street, Suite 1174, Toronto, Ontario M5H 3S5 - Telephone (416) 363-0201 Fax: (416) 366-8279 Cotton Valley Resources Corp. (all figures in U.S. funds) Recommendation :Buy 12 Month Target Price :US$0.50-US$0.65 Symbol :KTNV(NASDAQ) and CVZC.U(CDN) Recent Price :US $0.20 6 Month High Low :$0.55-$0.13 Share Capital* :101 Million (or 59.7 Million weighted shares?) (My note: 73% of all shares apparently tightly held by management who is confident of increasing share value from current levels. Also, the latest filing from Feb. 8, 2000 shows 59.7 mil weighted shares for the last quarterly report of 1999, so I am a bit confused here. According to the filing, many of the warrants were given out and/or converted at prices 30-60% HIGHER than the current price as of 2/13/2000. Apparently many of their latest oil producing interests were funded by shares and warrants, the latter of which brings money back into the Company when converted to shares? Dave Gore) Market Capitalization :$20.0 million Market Float :28.9 million shares Asset Value (Proved Only) :$0.72 / share Cash Flow :FY2000 - $0.05 P/CF 4.0x (fiscal year June 30) :FY2001 - $0.08 P/CF 2.5x *Management & Directors own 73 million shares (73%) HIGHLIGHTS * New management, through a series of transactions, acquired control of Cotton Valley by vending in production and reserves from over 400 wells in return for shares in the company (73% control) effective July 1,1999 * The company has been rationalized and is now into a development phase - it is drilling wells at an average rate of 4 wells every quarter in 2000, and 7 wells per quarter in 2001. Company's previous three year drilling record was 52 completions out of 53 wells. * Cash flow will be 60% plus from natural gas. * What's different? Cotton Valley will accelerate its infill drilling program in Oklahoma under that state's "Increases Density Drilling Rules" (see attached explanation). This translates into rapid cash flow increase without exposure of the company to "wildcat" exploration risk. * Company is expected to change its name and consolidate the shares within the next few months. * Company is a full S.E.C. and O.S.C. registrant, and conforms to the S.E.C. accounting rules and reserve evaluations which are more conservative than Canada. * Share are eligible for RRSP investment. Grahame M. Notman (416) 369-6925 Senior Oil & Gas Analyst, Director ANYTHING DIFFERENT Yes. WHAT'S UNIQUE Oklahoma "infill" Increased Density Drilling Rules for development wells are significantly different than Western Canada. * Any existing Working Interest owner (not just the Operator) can propose a new well on the lease; each Working Interest owner has to elect to participate, or go "non-consent" -- if they do not participate, the Working Interest owner forfeits all rights in the new well, and any future "stepout" wells. * In the present industry environment, between 20-40% of the working interest holders go "non-consent", generally due to cash restrictions; the Working Interest owners include small family owners, not always corporate interests. * Thus, the Proposer is able to increase its interest in the proposed development well. * Development wells, minimum 10 acre spacing, invariably intersect the same geologic structure (as the original well); the unknown is the width or the pay zones as you "step out". * Cotton Valley has a 98% success ratio with its development strategy MANAGEMENT * Jack E. Wheeler, C.E.O., as the former vice president of business development at Sonat Exploration Company in Houston (subsidiary of Sonat Inc.); was successful in that company's $1.6 Billion acquisition programme - Jack has successfully made the transition to a small company three years ago and has built it to a critical mass for future growth. * Has assembled highly competent team of geologists, engineers and entrepreneurs equally motivated through stock ownership to advance Cotton Valley's progress. PROVED RESERVES (S.E.C. Rules) PDP (Proved Developed Producing) - on production PUDs (Proved Undeveloped, behind pipe) - these are identified structures but not yet on production. ***** REMEMBER ALWAYS DO YOUR OWN DD! | ||||||||||||
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