BUK opportunityI think there’s value in BUK, let me tell you why:
· July was 1.6 mln US hedge income, I don’t see why the next 2 months couldn’t be the same. This makes 4.8 Mln US for the Q. Back-out is a bit more difficult but NR Q1 report says that from 23.5mmcfd 12 mmcfd was sold net, so 11.5 mmcfd was backed out, we ignore condensates. Let’s assume they get 6mmcfd back-out money, which is conservative: 6x4.3 US x 28 days = 722.400 a month, 2.16 mln US per Q. We ignore any production before 2 July shut in. This is close to 7 mln revenues with very litle costs, let’s say 6 mln free cf, 24 mln US per year. Divided by 132mln + 6.25mln (Idaho)=138 mln shares. 24/138=0.17 US is 0.19 CAD cf/s· So BUK’s share price is 1xcf/s· This is a no depletion scenario · However if you take last Q production at 23.5 mmcf/d and 530 BOC at an operating netback (including hedging) of US/BOE 38.7 x 4450 x 330 = 56.8 mln US is 61 mln CAD cf/s divided by 138 mln = 0.44 cf/s potential – BUK notes 0.5 cf/s multiplier. 2xcf/s isn’t much to ask = 0.88 cad. · Total expense is GBP 4.7 mln per year is GBP 1.18 per Quarter is 2.1 mln CAD, this includes servicing the debt· They have no debt issues. Out of the NR: ‘’Bridge is making a voluntary debt repayment this quarter and will be making a further substantial debt reduction payment in the next quarter on its senior debt facility.’’ Next payment isn’t until June 2010· Futhermore they’re servicing their 20 mln US debt by 0.83 cad shares – that’s a pretty neat trick in current circumstances. NR “Details of the junior convertible debenture facility agreement are included in the Financial Statements but it should be noted that the Bridge makes the interest payments on this facility through issuance of common stock. The number of common shares issued pursuant to the facility agreement is calculated at the current market price or $0.83, whichever is greater.” Principal Jr. Convertible doesn’t need to be paid until 2014· At these prices they are not planning to float new shares – they own too much themselves for that and they don’t need to as per above · Warrants only kick in at around 0.95 cad from here – they can be discarded, or we have a 475% gain, fine by me too· They’re drilling aspen gas, planned at no dry hole costs· They’re drilling steamboat oil prospect, targetted no dry hole costs· They’re drilling 5 holes in the US, of which 4 this year, with a 93.7% chance of hitting pay (source: crystal project presentation on their site)· If they hit a prospect they can farm it out for money and develop with cf from Durango e.g. one of the above or Wherry· Whery field development plan approval to drill well in beginning of 2010 (source: site presentation)· Managment is good, you can debate that mistakes were made but mistakes will always be made, it’s what you do with it afterwards. The hedge, the Idaho prospect, the 0.83 share interest payment on Jr. Debt – they’re all prove of good management· Uk gas spot won’t remain around 4.3 US forever...
Remember IAE at 0.19 cent and no-one wanted to touch it? Why not? Because of uncertainty and unclarity at that time. Same chance is happening here. I am not saying they’re in as good as a position as IAE but there’s definte upside. And they have a producing asset. IAE didn’t at the time they did the Dyas deal. Who knows maybe IAE is interested in a gas prospect and deals in a little piece of Durango ;-)
Stop ogling, don’t you see a chance when it bites you in the as$?
Keep smiling,
Resilience