VIRGINIA HILLS OIL CORP VFGGF

RE: bottom?

[splurge]

Yes it could hit a buck but i hope not cause this stock has been painful. It seems to though that investors never new or understood the stock they thought they had... Including me. Purchased started at $1.82 and down to $1.23. Turns out the netbacks have been great but they spent a ton of money especially through issues and production increased but not as much as expected. High decline rates and finding costs around $35 or so although recycling ratio keeps them onside. But not what hoped for. Also the fact that they can't drill year round but are able to spend money year round has an impact on production especially given the high decline rate. You have to drill and get the money in the bank quickly so you can drill again quickly. This asset does not lend itself to that very well. However here we are at $1.08. The good news is that for those who liked it above $2 they should like it more now. Not just because it is $1.08 but because it could be a better company. In 2011 they spent $166 mln on cap ex and drilled 30 wells. Today they will spend $136 mln and could end up drilling 34 wells. The decline rates as we know will also approach the industry norm over time and evidence of this will begin this year. The company has been on a learning curve and so costs should continue to decline per boe. Production in the past has declined in some qtrs sequentially however thrre will come a time that this may be of much less significance. So while this is not the high growth stock we expected we have some bottoming here and a pivotale year. Growth is reasonable at a very fair price now and I think growth will accelerate in 2014 as the decline rates come down and cash flow  should have an easier time growing production.  Q1 will interesting and I hope they spent a ton of money to make up for a quiet Q2. Q1 production above would surprise some. I am not sure what to expect but they were at 5080 bbls/d year end and cleanups were still taking place. one has to think spending in q1 will add onto this. Q3 will be significant with the waterflood results and to see if the will offset the decline somewhat from the q2. Bottom line is I am still hanging in by the skin on my teeth.