Investment Highlights
- Q1 production and revenues were in line with expectations. Net production revenues (after royalties) in Q1-2010 were $3.31 million, up from $1.76 million in Q4-2009. Revenues increased due to higher commodity prices and production from the Wyoming assets acquired in December 2009.
- The increase in production and commodity prices resulted in higher netbacks QOQ.
- There has not been any major developments since our previous report in April 2010. We have maintained our production forecasts (889 boepd in 2010, and 1,250 boepd in 2011), but lowered our revenue forecasts due to the recent drop in commodity prices and the corresponding drop in short-term price forecasts.
- In April 2010, the company announced the execution of a preliminary term sheet for a 5-year, 12.5% p.a. senior secured loan for $36 million.
- In May 2010, the company closed a C$11.5 million private placement by issuing 9.20 million shares at C$1.25 per share.
- The company is in a strong cash position (assuming the company enters into a definitive agreements for the proposed senior loan) and has access to sufficient funds to repay the existing $22.50 million loan (due in December 2010), and fund its 2010 capital budget of $13.75 million.
- EV/proved plus probable reserves is just C$2.89/boe. Our valuation dropped from C$4.16 per share to C$3.60 per share primarily due to share dilution.
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