Best Resources Pick of 2014?

[prevalou]

thanks SD. Then it is equity recovery and not earning power.To evaluate earning power it would be interesting to know the equity allocated to new book of business and apply a ROE. But what would be the value of the old book (before 2009) ?

[prevalou]

I made a rough calculation about MTG earnings power. Suppose half of revenue is old book of business (before 2009) and the other half new book. The old book makes zero profit and the new a combined ratio of 30%. Then profit=(1000/2)*,7=350 versus market cap=2800 . Not bad if there is some growth but not a great bargain.

[DTEJD1997]

Best resource stock for 2014?

 

Where to begin?

 

One thing I'm finding is that a large of the gold/silver miners seem to be over leveraged.  Some of them are carrying large amounts of debts.  They also seem to have a lot of marginal mines and thus are LOSING money at these price levels.

 

Conversely, there appear to be many small producers that have excellent deposits, are making money, and have much better balance sheets.  Heck, some of them have single digit P/E's, pristine balance sheets, and are paying good dividends.

 

Nevsun (NSU) comes to mind.

 

Another example is Mawson West (MWE.to).

 

There are many others that I'm trying to establish/build positions in.

 

Of course, there is a lot of risk, but I think it is worth taking a shot at some of these.

 

We will see in the upcoming year!

[ItsAValueTrap]

altius

[moustachio]

WRES, Warren Resources. It is very cheap on a cash flow basis, around P/CF of 3X, and EV/CF of around 4.5X. Going forward it should be cheap on earnings basis as well(currently one time items are bumping up earnings, soon TTM EPS might look very high). It has American operations, is growing production, is very cheap valued on an assets basis, and has relatively new management. It is tough to see much downside unless management makes a stupid deal. They are looking for a 200M acquisition funded by debt and have made bids, but were outbid. If a decent deal is done it could make the stock more attractive, as these tiny resource companies seem to get overlooked pretty easily. I think its undervalued because it is small and has bad bad management in the past.

[DooDiligence]

Two ideas I find interesting: MVN (TSX-V) and EOX

 

The first idea is not for the faint of heart and is not as cheap as it was a month or two ago, but still has a lot of "potential" upside. Madalena is a Canadian based E&P that has acreage in Canada and Argentina. The company is currently reworking a lot of its Canadian acreage (applying horiztonal drilling and modern fracking techniques). The current stock price 0.68 is mostly covered by the value of their Canadian production (which should continue to grow at a very fast clip).  The reason the stock is cheap is because of its exposure to Argentina's Neuquen Basin (where it owns 135k total acres). Because of the YPF/Repsol debacle the market is assiging little to no value here. This gives you a cheap call option on their ability to sell that land or find a partner in Argentina. There are a lot of reports out there about how Argentina screwed itself over, because the country does not have the capital it needs to internally develop this field. The went from being somewhat energy independent to dependent. If they infact take a less nationalistic approach than maybe this call option is worth some money. 

 

This is not a sexy pick, but I like EOX... it is a Bakken E&P that trades cheap relative to its acreage holdings. The company does not look cheap on a per flowing barrel basis (unless compared to pure Bakken comps). That said, production is ramping nicely and I think mgmt's guidance is low-balled (thanks to Dedwards for doing the heavy lifting)

 

Dedwards did a great writeup on his blog and the company presenation is also helpful.

 

1. http://dedwardssays.wordpress.com/2013/10/19/emerald-oil/

2. http://content.stockpr.com/vyog/media/8106a25206d1d477060b3101ed2779ba.pdf

 

You still following MVN/MDLNF?

 

A lot has happened since 2014.

 

New management & a cash infusion (see attachment.)

 

Jose Penafiel is the new CEO & he appears to have a lot of experience in the Vaca Muerta, Permian, etc., & he's had extensive dealings with Lukoil (Formerly the CEO of Hispania Petroleum SA & an Oxford PPE grad FWIW.)

 

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Cristina is gone?

 

https://www.forbes.com/sites/riskmap/2017/03/23/argentinas-mid-term-elections-will-macris-pro-business-reforms-stand-the-test/#769e1da426ca

 

Likelihood of a recurrence of the Repsol mugging?

 

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It appears that the reforms are attracting capital

 

http://petroleumworld.com/story17010605.htm

 

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Does anyone know if they still cap petroleum to curb exports?

 

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Price is significantly lower than 2014 & looks like it has enough volume for small accounts.

 

and of course

 

https://en.wikipedia.org/wiki/Vaca_Muerta

 

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Not sure if this is significant

 

https://globenewswire.com/news-release/2017/09/27/1133980/0/en/Madalena-Announces-Change-of-Auditors.html

 

I think they're looking for the removal of a statement regarding "ongoing concern"

 

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I haven't read any of the company's reports yet & so far it's just a neat sounding story.

 

I'll listen to the latest call...

 

(this idea came from a Tweet by Maglan Capital)

08092017_Announces_the_Issuance_of_Warrants_to_Hispania_Petroleum_SA.pdf

[DooDiligence]

Oops...

 

https://www.law360.com/articles/951809/abn-amro-adds-defendants-to-12m-defaulted-loan-suit

 

Hispania Petroleum SA

 

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I got sucked in by Eike Batista before & suppose this could be another one...