QIS Update #14 2012 - May 25th 2012
Included in this update:
- Blackbird Energy provides Bigstone drilling and operations update
- Virtutone Networks secures contracts for 17.7 million minutes per month of wholesale long distance
We’d like to thank all of our presenters, sponsors and attendees for making the recent Calgary Small-Cap Conference a success. There was a good turnout despite the weakness in the markets this month (TSX Venture down approximately 22% since April 1). The company presentations from this event are now available online at www.smallcapconference.ca/presentations.php. To keep up with our next planned conference dates, feel free to check us out online at www.smallcapconference.ca.
Doren Quinton, president of QIS Capital, was one of the keynote speakers at the Calgary Small-Cap Conference. First, an overview was provided of some of the information and services provided by QIS Capital and Canadian Small Caps. Then, he discussed a few Company Spotlights, namely, Audiotech Healthcare (AUD), Dalmac Energy (DAL) and Virtutone Networks (VFX). He mentioned that Audiotech was trading at an EPS multiple of just 5 times trailing earnings and that management may be looking for exit strategies. Dalmac is trading at just over 3 times 12-month trailing earnings with additional growth forecast for fiscal 2013. Virtutone Networks is another profitable stock that has recently created a wholesale division which has the potential to significantly increase the company’s sales in the near-term, which would also lead to increased profitability in this high margin business.
Please feel free to email us anytime at email@example.com or call us at (250) 377-1182. We look forward to your comments, questions, and feedback.
Blackbird Energy Inc. (BBI:TSX-V)
Current Price: $0.125 (coverage commenced Aug 19/11 - $0.18)
Blackbird Energy Inc. has provided the following update on its Bigstone, highly liquids rich natural gas resource project.
The fracing and completion operations planned for the recently drilled, Montney "Extended Reach" horizontal well 00/13-33-060- 22W5/0, have been delayed due to the annual spring break-up imposed road-bans which were activated during the second week of April. Movement of heavy equipment over secondary road systems in foothills areas, such as those required to access the Bigstone field, is restricted during the wet, spring thaw period to minimize road damage. Duration and extent of active road-bans are variable, typically ending during late May to mid-June, contingent upon weather conditions. As soon as practicable, after road bans are removed, in accordance with the "Cross-Conveyed Pooling and Participation Agreement" the operator will commence the completion phase of the operations. The well is equipped with liner and packer assembly configuration which will provide the ability to conduct up to 27 frac stages. Blackbird holds an undivided 12.5% pooled interest in the Pooled Lands and is participating as to a 12.5% working interest in the drilling and completion of the 13-33-060-22W5 well.
As stated in the company’s April 10, 2012 press release, construction of the surface production facilities and 1.6 mile, 8 inch pipeline to the Delphi operated gas gathering system has been completed and ready for production. The gas gathering plant through which Blackbird’s production will be processed, is scheduled for major plant turnaround maintenance operations and may take up to 6 weeks or to the end of June, delaying the previous estimated start-up date to sometime during the latter part of June.
QIS Capital Comments:
In speaking with several oil and gas service companies and producers over the past week, it sounds like road bans are beginning to come off and spring break-up may end a little earlier than anticipated. This would be good news for Blackbird as the market is anxiously awaiting testing operations and results. Oil and gas juniors have been pretty beaten-up lately; however, natural gas prices have shown a dramatic recovery rising 24% from $2.10/mcf to $2.60/mcf in the last month. This will have a significant impact on Blackbird and its partners once they tie in their liquids rich natural gas wells in the coming weeks.
Virtutone Networks Inc. (VFX:TSX-V)
Current Price: $0.225 (coverage commenced Sep. 9/11 - $0.10)
Virtutone Networks Inc. has announced that it has secured contracts for an estimated 17.7 million minutes per month of wholesale long distance from customers in its first month of wholesale operations.
We have surpassed our initial targets for Virtutone's launch into the wholesale market. With the quality and price we are offering, we are getting an overwhelmingly positive response from Canadian, US, and international customers, said Jason Allen, Virtutone's President and Chief Executive Officer. In addition, our sales team is engaged in numerous negotiations which we are confident will result in new customer wins. We look forward to providing continued successful updates as these deals come in.
QIS Capital Comments:
Virtutone is well ahead of initial expectations with regards to sales of new long-distance minutes. There is some discussion on the QIS Capital website forum regarding expected revenues and earnings from this Wholesale division although the company hasn’t announced any financial projections in this respect. In the company’s latest powerpoint presentation, management estimated that average billing per minute would be $0.004 from the Wholesale division. If this is accurate, then 17.7 monthly minutes would translate into additional annual revenues of about $850K (from the first month bookings alone). Since Virtutone is already funding its current corporate and public expenses, we would expect net margins would rise considerably with this new business.
For the next several months, Virtutone plans on announcing new minutes sold on a monthly basis. The financial impact from these sales won’t show up immediately as the company started selling in April (last month of Q1) but that month will be minimal compared with forward revenues. Q2 ending July 31 will show a full quarter of impact from the Wholesale division with results announced sometime in September. It should be a very exciting year for Virtutone as the company’s rolls out its new Wholesale division.
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 99,000 shares and 450,000 options of Blackbird Energy Inc. and 546,000 shares of Virtutone Networks Inc. QIS Capital has 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 - 2012 QIS Capital Corporation.