finally something to cheer aboutIt looks like the punishment phase is finally over. Shorts have had their day and will have to cover soon which should give us a nice pop to the upside. This company has been way oversold. Trades finally swinging to the ask side, what a welcome relief. It's nice to see big volume with positive price movement.
The fatal blow to the share price/value for this company was delivered by the reserves audit. Reserves estimation is a very subjective process and we had a new auditor this year. I have been told that when a new reserves auditor comes in they take an ultra-conservative viewpoint and that is what happenned here with respect to the reserves write-down. It doesn't mean that the reserves aren't there it just means that the estimate is a worst case scenario. It will be management's top priority to restore the reserves base because ultimately that is where the value of any oil and gas junior/mid-tier producer is derived. Production and cash flow fund exploration but the reserves are the key to value.
This company has invested alot of capital into land acquisition and seismic and has a large inventory of drilling locations. Moving forward this year the capex will be more focused on drilling up their prospects with the emphasis on restoring the reserves base.
They also had some success in their exploration drilling this winter.The release mentioned success on one of their deep exploration wells which are more costly to drill but typically are more productive. Details are sketchy but that is purposely done for competitive concerns.
Natural gas prices have hurt us but the longer term fundamentals for gas look good. Let's hope that the cold snap in the U.S. have finally put a dent in the nat gas storage levels. That said the production is shifting more towards oil with their light oil play in Saskatchewan. This is positive because the light oil brings a nice premium and the netbacks are strong.
My take on management is that they are highly committed to the success of this company. They hold a large stake in this company and have lost more and have more to gain from from it's rebound than most individual investors. Replacing the CFO will be a challenge but it will be done.
It looks like the perfect storm is over and I for one believe the future prospects look good.
Good luck to all longs.
OceanRanger1