Recent Article in GlobeinvesterGoldWINNIPEG (GlobeinvestorGOLD) - Don Short’s energy portfolio is outperforming its peers.
His OCM Energy Total Return Fund produced a 14.7-per-cent total return for the 12 months ended April 30.That was about double the 13.3-per-cent average gain of natural resources equity funds in the period. Much of the gain was realized in the final three months of the period during which the fund gained 43 per cent, making it the top performer among 97 funds in the sector. Mr. Short, president of Origin Capital Management in Calgary, has headed the $14.5-million fund since inception in October, 2006.
“We are focused on junior oil and gas companies,” Mr. Short said. “The juniors tend to be more exposed to natural gas and they have higher growth rates. Their profits tend to come from success in finding new deposits. We are based in Calgary, the home of almost all Canadian oil and gas companies. We focus on the sector and can see new plays emerge before they are widely known. Closeness to the players allows us to make more nuanced judgments than if were just investing at a distance from the companies.”
Storm Exploration Inc. is a Calgary-based upstream oil and gas junior exploration company. Shares purchased at an average cost of $11.06 have recently traded at $15.62. The company has an excellent land base with promising drill results, Mr. Short said. Storm’s drilling results suggest its stock has strong growth prospects with production per share should growing at 20 per cent a year for next three to five years, he noted. Cash flow per share for the year ended Dec. 31, 2008 should rise to $2.12 per share from $1.20 a year earlier and $1.04 for 2006, he added.
Open Range Energy Corp. is a Calgary-based oil and gas exploration and development company. Shares purchased at an average cost of $3.14 have recently traded at $5.24. The company has a reasonable valuation based on its drilling results, Mr. Short said. It has a large inventory of locations and gets $3 back for every $1 put into the ground -- a top quartile outcome. Cash flow per share for 2008 should rise to 97 cents from 78 cents a year earlier and 46 cents for 2006, he suggested. The company has been drilling in the Rough Creek area of Alberta. If each well of the six to eight drilled is worth $30 million or $1 per share, the stock could double as results are assessed, he said.
Twin Butte Energy Ltd. is a Calgary-based upstream oil and gas development company. Shares purchased at an average cost of $3.05 have recently traded at $3.10. Twin Butte has a compelling valuation and trades at a substantial discount to net asset value, Mr. Short said. Twin Butte is drilling a horizontal well to improve recovery, a development that would add 50 cents to $1 to the stock price, he explained. Cash flow per share per share for the year ended Dec. 31, 2008 should rise to 86 cents from 50 cents a year earlier and 35 cents for 2006, he added.
Andrew Allentuck writes about investments for The Globe and Mail, and reviews books on finance for globefund.com and