QIS Update #14 2014 - May 1st 2014
Included in this update:
- Blackbird Energy announces large increase of P+P reserves at Bigstone project
- QUATTRO Exploration and Production reports annual 2013 financial and operating results
- Virtutone Networks announces record monthly sales for April 2014, files Q4 and year-end financials
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Blackbird Energy Inc. (BBI:TSX-V)
Current Price: $0.22 (coverage commenced Aug 19/11 - $0.18)
Blackbird Energy Inc. has announced the results of its revised independent reserves evaluation of its Bigstone project in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") as at April 30, 2014.
Highlights – April 30, 2014 compared to July 31, 2013
- Increased Proved reserves by 247% to 434 Mboe (33% liquids).
- Increased NPV of Proved reserves by 394% to $3.58 million (before tax discounted at 10%).
Proved plus Probable Reserves
- Increased Proved plus Probable reserves by 195% to 2,259 Mboe (33% liquids).
- Increased NPV of Proved plus Probable reserves by 479% to $22 million (before tax, discounted at 10%).
Summary of Reserves
The reserves data set forth below is based upon an independent reserves evaluation prepared by GLJ Petroleum Consultants (GLJ) with an effective date of April 30, 2014. The following presentation summarizes Blackbird’s crude oil, natural gas liquids and natural gas reserves and the net present values before income tax of future net revenue for Blackbird’s reserves using forecast prices and costs based on the GLJ Report. The GLJ Report has been prepared in accordance with definitions, standards, and procedures contained in the Canadian Oil and Gas Evaluation Handbook and NI 51-101.
A summary of the company’s estimated future net revenues associated with Blackbird’s Bigstone reserves as at April 30, 2014 based on the GLJ April 30, 2014 price forecast is provided in the following table. It should not be assumed that the net present values estimated by GLJ represent fair market value of the reserves. Numbers presented in table may not add exactly due to rounding.
QIS Capital: This is a very significant reserve valuation for Blackbird Energy as it further validates the company’s Bigstone asset and also further validates the Pennant Energy acquisition. A higher reserve valuation typically gives companies more leverage for farmouts, divestitures or other arrangements for underexploited assets. Based on our recent conversations with shareholders, investors have placed most of their emphasis recently on Blackbird’s Elmsworth holdings and had largely dismissed the Bigstone asset.
QUATTRO Exploration and Production Ltd. (QXP:TSX-V)
Current Price: $0.83 (coverage commenced Mar. 24/14 - $0.32)
QUATTRO Exploration and Production Ltd. has reported its financial and operating results for the year ended December 31, 2013 including net earnings of $0.39 per share.
Highlights for the year ending 2013 are based on management’s continuing approach to adding anti-dilutive shareholder value. In addition, Quattro continues to develop a strong and improving financial position as the foundation for growth through a continuous combination of acquisitions, remediation, development drilling and exploration.
- Revenues (pro forma 2013): $14,687,000
- Net earnings (including Gain on Acquisition): $12,696,000
- Revenues (net) only the remaining 56 days post-closing included: $2,932,000
- Cash and equivalents: $4,447,000
- Working capital: $1,519,020
- Net debt (excluding decommissioning liabilities & deferred taxes): $5,052,000
At year-end 2013, the company's exit production was 1,040 boe/d with an additional 200 boe/d going through remediation and workovers. Quattro continues to build on the financial foundation as summarized above and reported in its audited year-end financial statements and corresponding MD&A, utilizing stable low decline production and substantial infrastructure as the building blocks for growth in Canada.
Quattro, upon completion of its evaluation in accordance with IFRS, chose to continue to maintain a conservative course of action whereby to date only the IFRS compliant reserves evaluation has been reported on the balance sheet as of the acquisition closed November 5th, 2013. Minimal value was applied to the acquired facilities and infrastructure, resulting in the company's total asset value at year end being $48,641,000, with $6,754,000 being current assets, $39,714,000 being PN&G assets and the balance being $2,173,000 in exploration and evaluation assets.
At year-end 2013 Quattro is the owner and operator of the numerous facilities and infrastructure. Its 8 operated facilities have the capacity to process 16 mmcf/d of gas and 60,000 bbls/d of oil and fluids. It also has acquired more than 300 kilometers of pipelines and gathering systems, with an estimated replacement cost of greater than $80,000,000. Since January 1, 2013, the facilities were monitored by Quattro, but only recently been directly under the supervision of Quattro employees as at November 5, 2013. During the past 6 months the facilities continue to provide strong results and will be evaluated as deemed necessary to be recognized in terms of their market value in accordance with IFRS.
The combination of our financial position, our significant infrastructure and our current efforts over the past year continues to provide Quattro ample running room for organic growth. said Leonard Van Betuw, President and CEO. Our team, both in the office and field are energized and focused on growth, with the company continuing towards the production goal of 2,500 boe per day, utilizing a measured and coordinated approach.
The company as of year-end 2013, included 10 (net) drilling locations in Canada, of which one is classified as exploratory in its budget. Quattro anticipates that upon the completion of its geophysical and geological studies by year end 2014, within Quattro's material land base of more than 218,000 (net) acres in Canada, it anticipates adding a further 95 development locations and 4 exploratory locations to its inventory, by the end of the second quarter.
Quattro looks forward to exploiting the efforts of the past 3 years, for many years to come and anticipates that its expanded foundation will be the basis for further growth and diversification. added team leaders, Daniel Lucero and Brent McGillivray.
The company anticipates that during the following weeks it will be updating its plans to include a drilling program with a minimum of 8 (net) development wells and 1 (net) exploratory well to be drilled in the following 6-8 months in addition to its ongoing remediation and consolidation efforts.
It is through these efforts that Quattro anticipates it will have expanded its foundation to the material degree planned, prior to the ramp up of its operations in Central and South America, continuing to focus on adding diversified and sustainable value for its shareholders.
For the year ended December 31 2013, sales were $2,752,723, up from $248,614 for the year ended of December 31, 2012. It should be noted that the revenue reported in the December 31, 2013 consolidated financial statements is net of the income resulting from the acquisition of producing petroleum and natural gas properties closed by the company on November 5, 2013, having an effective date of January 1, 2013. In accordance with IFRS accounting practices it shall be accounted for as of the date of closing of the acquisition in the year ended of 2013.
The company, on a pro forma basis, has reported the quarterly effects of the acquisition so that the impact of the acquisition can be fully understood (see 2013 quarterly table below). As a result of the acquisition, the company has achieved pro-forma production levels greater than 1,060 boe/d in the fourth quarter of 2013, with the company’s current efforts providing a clear path towards daily average production rates in excess of 1,350 boe/d in the first quarter of 2014.
|2013 Quarterly Performance – Pro Forma|
|Three months ended (000s)|
|Dec. 31||Sep. 30||Jun. 30||Mar. 31|
*includes one time gain on property acquisition
The company’s complete financial statements and MD&A are available on the SEDAR website at www.sedar.com.
|LATEST FINANCIAL RESULTS|
|Year Ended Dec. 31|
|Gain on Acquisition of Properties||11,432,127||2,002,461|
(as at December 31, 2013)
|Current Assets||$ 6,753,691|
QIS Capital: Quattro Exploration posted a massive one time gain on its property acquisition demonstrating the difference between consideration paid and fair market value. As mentioned, management has placed little value in the financials on the fair market value of production facilities and infrastructure although the fair market value is significant. From an oil and gas perspective, investors may find the Q4 and year end financials difficult to understand due to the accounting for the acquisition. Q1 results, which are expected by the end of May, will provide a much better comparative valuation of cash flow and production. In the meantime, the company appears to be well on its way to meeting previous guidance.
Virtutone Networks Inc. (VFX:TSX-V)
Current Price: $0.42 (coverage commenced Sep. 9/11 - $0.10)
Virtutone Networks Inc. has recently announced that the company has generated over $11.5 million in revenue for the month of April.
Our team has delivered once again another record month with solid margins, we are back to our aggressive growth said Jason Allen, Chief Executive Officer of Virtutone. We have seen several record breaking revenue days in the month of April, which resulted in our largest month ever.
Virtutone Networks Inc. has recently reported its financial and operating results for the fourth quarter and year ended January 31, 2014.
We are pleased with the progress we made in 2014, with the sale of our retail division and our focus on wholesale market, which has resulted in tremendous growth in our revenue, gross profit, and income from continuing operations. We are confident that we have the foundation in place to support our continued growth, said Jason Allen, Virtutone’s CEO. Subsequent to year-end, we have set a new daily revenue record of $550,000 on April 23, 2014 and are on track for a record breaking month in April.
The company’s complete Annual Financial Statements, Management Discussion and Analysis, are available on SEDAR (www.sedar.com).
|LATEST FINANCIAL RESULTS|
|3 Mos Ended Jan. 31||Year Ended Jan. 31|
|Cost of Sales||24,337,271||145,978||47,261,175||561,778|
|Income from Continuing Ops.||n/a||n/a||90,990||(589,329)|
|Loss from Discont. Ops.||n/a||n/a||(750,055)||(30,760)|
Note: The company sold its retail division in fiscal 2014, so many of the year-over-year Q4 figures are not applicable for relevant comparison as the fiscal 2013 Q4 included both retail and wholesale operations, while Q4 of f2014 includes only wholesale results.
- There were several asset write-downs due to the sale of the retail division, generating a net loss from discontinued operations.
- These financial results are presented in conformance with International Financial Reporting Standards (IFRS). Certain comparative figures have been restated to conform with the current year’s presentation. The Corporation’s retails division has been presented as loss from discontinued operations.
(as at January 31, 2014)
|Current Assets||$ 9,171,935|
|* finance lease obligations|
During the year ended January 31, 2014, Virtutone sold its retail division, and financial results from this division for the years ended January 31, 2014 and 2013 have been classified as discontinued operations. The company’s exclusive focus on its wholesale division has driven the increased revenue, gross profit and income from continuing operations.
Revenue from continuing operations was $48,823,653 compared to $416,502 in fiscal 2013. Gross profit increased by $1,707,754 to $1,562,478 and income from continuing operations increased by $680,319 to $90,990 over the prior year.
Net loss was slightly higher due mainly due to expenses related to the discontinued retail operations offset by earnings from continuing operations.
Fourth Quarter Highlights
Revenue from continuing operations was $25,125,266 for the three month period ended January 31, 2014. This revenue was offset by cost of sales in the amount of $24,337,271 and resulted in a gross profit before expenses of $787,995. Total revenue from continuing operations for the three month period ended January 31, 2013 was $106,103 and gross loss before expenses was $39,875. G&A expenses have been allocated on a percentage basis between the wholesale and retail divisions. A comparison of G&A between the three month periods ending January 31, 2014 and 2013 would therefore not allow for a proper analysis.
Virtutone, through its wholesale market focus, is well positioned for growth:
- The company’s wholesale division continues to achieve new milestones.
- The company has tested and installed new software subsequent to year end that optimizes voice traffic, resulting in increased margins.
- The company recently announced the launch of its Short Message Service (SMS) division and expects the division to contribute to revenue and gross profit.
- The company will seek financing through increases to existing debt facilities and new debt and/or equity financings in order to fund its growing working capital needs.
The company’s annual financial statements, management discussion and analysis, and other disclosures are available on SEDAR.
QIS Capital: Again we have annual financials that are difficult to analyze due to the sale of the company’s retail division during 2013 and the accounting for discontinued operations. Actual margins and earnings for Q4 are thus difficult to accurately determine. Virtutone had a tremendous month for revenues in April and the company is now operating at an annualized rate exceeding $138 million. This compares to only $48 million in fiscal 2014. If margins can even be maintained, this should generate significant EBITDA and earnings but looks like we will again have to wait for the next quarter to get a clear picture of financials. Virtutone will be announcing Q1 results by the end of June.
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 227,856 shares and 350,000 options of Blackbird Energy Inc., 61,500 shares of Quattro Exploration and Production Ltd. and 574,000 shares and 212,500 warrants of Virtutone Networks 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 - 2014 QIS Capital Corporation.