Case Study: Add Management with Technical Expertise and Track record of Success
A few of my past favorites have gone on to great things—making it as far as mid-tier, income trust status, and one now has successfully converted to a dividend yielding corporation.
This said, I am now a staunch supporter of Petro One Energy and an increasingly accumulative shareholder. I watch the news like a hawk and was really please with what I saw today—the addition of a key management asset that has done it before.
I personally want to see people on the management and advisory teams that have considerable technical expertise. Specifically, I am looking for someone with a geological or engineering background, with a demonstrated track record of finding and developing cash flowing assets.
So I am really pleased with today’s news (Feb 14, 2011):
- Petro One Energy Corp. announces appointment of Paul Reynolds P.Geo to its board as an independent director.
- Mr. Reynolds was Chairman of the Board of Athlone Energy Ltd., a public company he successfully transitioned from a mineral exploration company to an oil production company which operated its own oil assets.
- Athlone was ultimately acquired by Daylight Resources Trust, an Alberta energy trust, only five years after Mr. Reynolds led it into the oil business. The values attributed to Athlone’s oil assets on its buy-out were $50,500 per flowing BOE per day and $17.90 per bbl for proven plus probable heavy oil reserves.
- Mr. Reynolds is a registered member of the Association of Professional Engineers and Geoscientists of British Columbia. He received a Bachelor of Science (Geology) degree from the University of British Columbia in 1987 and has over 24 years experience in the field. He has extensive experience in public company management and is currently President, CEO and a director of Central Resources Corp. a mineral exploration company focused in the Yukon, as well as sitting as a director of several other public companies.
As I have stated before, making a good bet in the junior oil market isn’t easy. It does take work. But when we buy or finance these companies, we need to remember—we own more than just the assets—we have also hired the management.
Today’s addition of Paul Reynolds is key. What we are witnessing is a very smart company that has hired another quality professional to do the hard work for us.
There is no way they would or could bring on someone of Mr. Reynold’s experience, credibility and sign a production agreement with Chapman unless this company was going into production, soon.
I’ve heard informal from numbers on this company from 500+ BBL and beyond, starting this year. If Mr. Reynolds can help this company repeat his success with Athlone, an extremely conservative gross valuation on flowing barrels of 500 BBL $50,500 * = $25,250,000.
Excluding all other assets, cash, marketable securities, and oil assets, as well as exploration potential, The company’s market cap is about half that!
Undervalued, soon-to-be cash flowing stocks are always a total no-brainer, and I invest accordingly!
Others have been digested, whole or in part, by larger companies and that suits me just fine. It doesn’t matter if these small companies don’t exist any more. What matters is quite simple: Did I own the stock at the right price and did the management turn the company’s assets into something of great value before the ultimate asset sale or takeout? If this is the case, then I’ve made a good investment, good money, and I don’t care about anything else. I don’t fall in love with any one deal and I suggest you do the same.
Over the years, I have seen so many junior oil exploration companies come and go.