QIS Update #13 2013 - June 20th 2013
Included in this update:
- Blackbird Energy announces new oil exploration project in Mantario and enters farmout agreement
- Dalmac Energy provides corporate update for Q4 and the year ahead
- NTG Clarity Networks awarded another contract; to develop mobile shopping app
- Pennant Energy announces execution of farmout agreement
The TSX-Venture Exchange hit another new 52-week low today and is showing little signs of improvement. This spells trouble for many of the cash-strapped junior resource companies which have had a terrible time getting access to new capital. On the other hand, we and many other value-based small-cap investors have had an excellent year as investors again appear to be paying attention to fundamental companies. NTG Clarity and Virtutone Networks have both been on a strong rally as of late and Dalmac Energy’s announcement today hopefully sets the stage for an excellent financial year ahead. Hopefully everyone is making money out there and best of luck!
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Blackbird Energy Inc. (BBI:TSX-V)
Current Price: $0.055 (coverage commenced Aug 19/11 - $0.18)
Blackbird Energy Inc. has announced that it has completed the following on its new oil exploration project in the Mantario area of West Central Saskatchewan (Mantario Project): Acquired more than 1,280 acres of petroleum and natural gas rights targeting the Lower Mannville, completed and evaluated 2D and 3D seismic on the lands, and entered into a Farm-out Agreement with Pennant Energy Inc.
Under the terms of the Agreement, Pennant may, subject to approval from the TSX Venture Exchange, earn a 30% working interest in certain lands and leases comprising the Mantario Project. To earn the 30% interest, Pennant must pay to Blackbird 50% of the land acquisition costs incurred to date including brokerage and transfer costs ($200,000 net estimated), and 50% of the 3D seismic program including geological and geophysical interpretation ($125,000 net estimated). Pennant will also be required to pay 50% of the drilling, completing, equipping and tie-in costs of the test well to earn the working interest.
Subject to receipt of Exchange approval, the Agreement provides that Blackbird will serve notice of its intent to spud the test well on or before August 1, 2013. Upon receipt of such notice Pennant will advance 50% of the drill and case cost estimate, being $221,907, to Blackbird.
Garth Braun, President and CEO of Blackbird stated, Over the last year the Blackbird team has focused on originating new projects. The Mantario Project announcement is the culmination of an extensive due diligence process and the assembling of a core land position. The team continues to focus on identifying new opportunities that will deliver value to our shareholders. In the last year, several wells have been drilled in the Mantario area of West Central Saskatchewan and the initial production rates have been in the range of 65 to 100 barrels of oil per day. Based on these metrics, Blackbird will be looking to aggressively explore and develop this oil project.
The Agreement remains subject to Exchange approval.
This is an exciting new play for Blackbird Energy and opens the door to an expanded exploration play between the company’s Alsask and Flaxcombe properties. There is a the potential for a significant development play on this land with shallow, low-cost, predictable drilling results. Blackbird continues to acquire new plays at bargain prices with its strong balance sheet and experienced management team.
Dalmac Energy Inc. (DAL:TSX-V)
Current Price: $0.40 (coverage commenced Nov 15/11 - $0.37)
Dalmac Energy Inc. has announced that the company has exceeded its previous revenue guidance of $40 million for fiscal 2013 ended April 30, 2013. While allowing for the fact that seasonal revenues have the potential to be impacted by forces outside the company’s control such as spring break-up and inclement weather, Dalmac still managed to finish the fiscal year with revenues of approximately $41 million, a 16% increase from the previous fiscal year, as a result of continued strong demand, new contracts, a stable recurring revenue base, and the deployment of new equipment in the fourth quarter. Full financial results are expected to be released in or before August 2013.
As reported in Q3, Dalmac recently underwent a significant overhaul of its equipment inventory to meet more stringent operating parameters from increasing demand. This led to higher costs in Q3 and Q4. As previously announced, the new credit facility is expected to improve the company’s weighted average cost of capital by approximately 2.5% on an annual basis.
In conjunction with increasing our rack rates by approximately 10%, management has also recently revamped its run time logistics to maximize yield and reduce dead head costs. The company is also revamping its policies which are designed to improve employee retention and thereby stave off spiraling labour training costs. It is expected that the combined effect of the above developments will lead to increased revenues, lower costs while yielding higher profit margins on a going forward basis.
Furthermore Dalmac has recently entered into new service agreements for the provision of additional service work to handle the production flow stemming from increased directional drilling and fracking technologies. In summary, this translates to more demand for fluid transfer services and that bodes well for growing revenue on a going forward basis.
Dalmac expects to be profitable in Q4 and is confident that the company is well positioned to transition into a record fiscal 2014. Management’s continued focus on customer relationships is proving successful as Dalmac has become first call with many of its key customers. Dalmac is expecting higher than normal utilization rates and with the recently completed $6.5 million investment in new equipment is forecasting revenues to exceed $45 million in fiscal 2014. With improving commodity prices, industry activity levels are expected to remain strong over the next several years and Dalmac is well postioned to capitalize on this strong demand with solid increases on both its top and bottom line.
Dalmac achieved its revenue forecast in fiscal 2013 and is projecting further growth for fiscal 2014. The company has received its $6.5 million worth of new equipment and is now deploying this equipment into the service market. With the completion of higher than normal costs (labour, financing, retrofit) in Q3 and Q4 combined with the increase in rack rates in Q1, the company appears to be well positioned heading into its next fiscal year.
NTG Clarity Networks Inc. (NCI:TSX-V)
Current Price: $0.23 (coverage commenced Feb. 4/10 - $0.045)
NTG Clarity Networks Inc. has announced that the company has received a Purchase Order from a leading mobile operator in Egypt to perform data migration from a legacy system to a new billing system. The contract value is (Egyptian Pounds) 950 000 or approximately CDN$140,000. This project is expected to be completed within 3 months.
Over the years, NTG Clarity has developed proprietary techniques for data migration which have proven to be very successful where others have had difficulties. This has made NTG a leading respected data migration specialist.
Unsuccessful data migration is one of the main reasons large projects fail. NTG has developed a reputation for timely and accurate migration of data. NTG's expertise, techniques and tools have simplified the process. said Ashraf Zaghloul, NTG Clarity’s Chairman & CEO.
NTG Clarity Networks Inc. has announced that the company has signed an agreement with Mi-World Mall Inc. to develop, host, support and maintain an end to end mobile commerce solution for use throughout the world. With the rapid adoption of smartphones, consumers are turning toward convenient, fast and low cost ways to find and buy the products they need and have them delivered to their homes. With the Mi-World mobile app solution, retailing is set to undergo the next logical transformation into the mobile app world. NTG would receive fees for its software. In addition, NTG will own 30% of Mi-World Mall Inc.
Mi-World will provide a niche state-of-the-art electronic mobile shopping mall on the smartphone and tablet. With the mobile commerce sales expected to reach $34 billion by 2015 in North America alone, Mi-World has built a strong business plan targeted to capture part of this market share in the growing mobile commerce business.
Mi-World has signed with several merchants and smart communities that have thousands of merchants ready to deliver products and services to customers.
NTG's utilizes the latest mobile app technology to support all platforms of smartphones and tablets including Android and iOS, and building mobile App on HTML5 and Hybrid development. NTG has completed the solution development and is progressing in testing and preparing for production release.
We chose to partner with NTG Clarity because they have the technology and the experience with online commerce. They have strong mobile expertise and the outstanding system integration required to make our offering successful, said the Hon. Sinclair Stevens, Mi-World chairman.
We are pleased to work with and invest in Mi-World. This partnership gives us the opportunity to be part of this fast growing market. We trust that our investment in the mobile solutions will open a new range of opportunities for NTG, said Ashraf Zaghloul, NTG Clarity's Chairman & CEO.
NTG Clarity has had a number of significant developments announced over the past few months. The company has now booked more than $9.0 million in new contract work which is expected to be completed this year and is well on pace to more than double previous annual revenues. Over the past 12 months, NTG Clarity has achieved earnings of over $1 million ($0.035 per share) and despite a 300% increase in share value over the past 30 days, the company is still trading at less than 7 times trailing earnings. Congratulations to all of the recent investors who were able to profit from the significant improvement in shareholder value.
Pennant Energy Inc. (PEN:TSX-V)
Current Price: $0.02 (coverage commenced Dec 7/12 - $0.075)
Pennant Energy Inc. has announced that has entered into a Farmout Agreement with Blackbird Energy Inc. and its wholly-owned subsidiary, Ruger Energy Inc., whereby Blackbird has agreed to allow the company to earn a 30% working interest in certain lands and leases owned by Blackbird in the Mantario area of West Central Saskatchewan. In order to earn its 30% interest, the company will pay to Blackbird, within 15 days of receipt of the approval of the TSX Venture Exchange, the following: (i) 50% of the land acquisition costs incurred to date including brokerage and transfer costs ($200,000 net estimated), and (ii) 50% of the 3D seismic program including geological and geophysical interpretation ($125,000 net estimated). In addition, the company has agreed to pay 50% of the drilling, completing, equipping and tie-in costs of the test well to earn the working interest.
Subject to approval from the Exchange, on or before August 1, 2013, Blackbird will serve notice of its intent to spud the test well. Pennant has agreed, upon receipt of the notice, to advance to Blackbird 50% of the drill and case cost estimate, being $221,907.
Garth Braun, President and CEO of Pennant states; We are very pleased to have diversified our project base by farming in on this conventional oil play in West Central Saskatchewan. Lower Mannville wells that have recently been drilled in the Mantario area have demonstrated initial production rates in the range of 65 to 100 barrels of oil per day. The metrics of this agreement fits extremely well with Pennant’s abilities to fund ongoing requirements and also balances the risk to return ratio for our shareholders.
The Agreement is subject to the approval of the Exchange.
This is a significant accomplishment for Pennant Energy. New management has been successful in drastically reducing costs and burn rate while preserving capital so that Pennant could continue to pursue new opportunities in a market that hasn’t been kind to junior resource companies. As mentioned in our Blackbird update above, this play could develop into a significant company maker and would add much needed cash flow and self-sustaining cash flow for Pennant. Management has extensive 2D and 3D seismic over this land package along with comparable data from competitor wells in the Mantario region. The first well is expected to spud at the beginning of August.
Disclaimer: This article is for informational purposes only. The information contained within this article should not be construed as offering investment advice. Those seeking direct investment advice should consult a qualified, registered, investment professional. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The company profiled assumes no liability for the information presented. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock. The author(s) owns directly or indirectly 733,500 shares of Blackbird Energy Inc., 93,000 shares of Dalmac Energy Inc., 634,000 shares of NTG Clarity Networks Inc. and 315,000 shares of Pennant Energy Inc. QIS Capital may have a financial relationship with these companies and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright © 2003 - 2013 QIS Capital Corporation.