Fairmount Energy FMT:TXV near year lows, Production doubles. Gas prices up 60%. Global Cooling is the new hot trend! I am freezing while writing this.
Posted: Thursday Feb 21 6:42:55AM 2008
I think we have an easy 50% growth story in this stock. There are now 17.243 million shares outstanding with management owning over 22%. Last November the company raised capital at $1.40 per share. Their book value is over $1.20/share. Production is presently 635 boe/d and is slated to rise by 145 barrels to 780 boe/d by month end. To put this in perspective at Sept 30th /06 the company produced 250 boe/d one year later they produced 357 boe/d a 42% increase. At 780 boe/d we have triple eighteen months ago and more than double six months ago. Last quarter the price of gas was in the toilet at $5.00 per 1,000 cu. ft. Today we are much closer to $8.00. That is a 60% gain. Last winter was unusually warm. The people who brought you the movie global warming have lulled everyone into a false sense of comfort that warm winters are here forever. Myself however having grown up in an age where we believed in geology I have some difficulty with global warming. Twelve thousand years ago there were thousands of feet of ice covering most of Canada. A mere thousand years ago the vikings were enjoying pleasant temperatures in Greenland. (The earth is subject to change.) Most oil and gas created on the planet came from the bottom of warm intercontinental seas, which covered most of Canada for millions of years. Even if global warming were to occur the demand for electricity to feed air conditioning needs would significantly increase natural gas demand. Finally if enough gas companies stop drilling for gas. Supplies drop which increases demand and companies which are still in the business reap the rewards.
Posted: Friday Feb 22 12:42:47PM 2008
While I find some of the numbers compelling for this company I am quite wary of their debt situation. Working capital at December 31 was over 11 million in the red while cash flow for the quarter was only ~$440 thousand. This is even after a 5 million dollar placement during the quarter. Granted NG prices and production have improved since then but I am always cautious around companies that allow their debt to get so large. Their shares outstanding at quarter end were actually 17,243,889 after the aforementioned placement.