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QIS Update 19 2012 - August 1st 2012

QIS Update #19 – August 1, 2012  

Included in this update:

  • Blackbird Energy commences production at Bigstone
  • Virtutone Networks announces update on wholesale operations


Summer is half over and it has been eventful for QIS Capital. We have launched our new website at and we have had great runs with Audiotech Healthcare (AUD:TSX-V), and Virtutone Networks (VFX:TSX-V). In August we are expecting more news from Blackbird Energy (BBI-TSX-V) regarding their third well results and we expect to have Dalmac Energy’s (DAL:TSX-V) fourth quarter financial results sometime around mid-August. Despite the very challenging markets for small-caps stocks, we are shaping up to have a great year.


Please feel free to email us anytime at or call us at (250) 377-1182. We look forward to your comments, questions, and feedback.


Blackbird Energy Inc. (BBI:TSX-V)
Current Price: $0.105 (coverage commenced Aug 19/11 - $0.18)


Blackbird Energy Inc. has recently provided the following Bigstone operations update.


Blackbird's Bigstone HZ 14-29-60-22w5 Montney discovery well (Blackbird 37.5% BPO/25% APO) was placed on production in mid-June 2012 and during the first 42 days of operation produced at an average rate of 1.61 mmcf/d (605 mcf/d Blackbird W.I.) and 72.8 bbls/d (27.3 bbls/d Blackbird W.I.) of condensate for a combined oil equivalent total of 341 BOE/D (128 BOE/D Blackbird W.I.). Further NGLs will be extracted during processing at the shallow cut plant and are estimated to be 30-35 bbls/mmcf of raw gas. Blackbird has a 37.5% W.I. in the 14-29 well subject to a 2% GORR, plus a 10% ORR on its W.I. until payout at which time Blackbird reverts to a 25% W.I. and 2% GORR.


Blackbird's Bigstone HZ 15-32-60-22 W5M well (Blackbird 25% W.I. subject to a 2% GORR) commenced production on July 16 and for the first 7 producing days has been producing natural gas, free condensate and NGLs which will be extracted during processing. The 15-32 well had technical problems during the completion and only 6 stages of the planned 23 stage frac were completed successfully. The well is currently producing and the initial production rates are encouraging. The well has averaged 1.75 mmcf/d (437 mcf/d Blackbird's W.I.) with 153 bbls/d (38.25 bbls/d Blackbird's net W.I.) of condensate for a total of 445 BOE ( 111 BOE/D Blackbird net W.I.). The current fluid production includes both load fluids and free condensate, as 100 percent of the load fluids have not been fully recovered to date.


Blackbird's Bigstone Hz 13-33-60-22w5 well was drilled to a total measured depth of 5,336m and completed with a 23 stage frac. After initial flow back and clean up, the well is currently waiting on dry weather to install production tubing and final flow testing as well as commence construction and installation of surface facilities. The well will be tied into the Donnybrook operated Bigstone pipeline system as soon as access conditions permit. All operations at 13-33 have encountered delays due to heavy rain which has made access to the lease site difficult. As soon as surface conditions dry out, operations at 13-33 will commence. Flow rates on the well are currently not being released by the partners until final testing has been completed.


Industry activity in the Bigstone area continues to prove up the potential of Blackbird's land holdings to the west. The most recent well to be announced was an extended reach HZ that terminated 195 m south of Blackbird's 25% W.I. lands in Twp 60-23w5. The operator has reported the well tested an average 16 mmcf/d and approximately 800 bbls of condensate per day at the end of the test. This compares very well to an initial extended reach HZ well by the same operator which, for a mile of HZ length offsets Blackbird's 25% W.I. lands in 60-22w5 and is only 200m west of Blackbird's lands. The initial well tested 12.5mmcf/d and 770 bbls per day of condensate. These wells continue to demonstrate the excellent reservoir potential of the Montney Formation underlying the western sections of Blackbird's 25% W.I. lands in the Bigstone area. Blackbird has a 25% interest in 4 sections (2,560 acres, 640 acres net) in the western portion of its Bigstone prospect area that have not been drilled to date.


Based on results to date, four new horizontal Montney drilling locations at Bigstone have been surveyed. The timing of the drilling of the additional wells will be finalized in the fourth quarter of 2012.

Garth Braun, CEO of Blackbird stated, The commencement of production at Bigstone is a major milestone achievement for Blackbird and will be foundational to the funding of future development activities. Blackbird's horizontal wells have efficiently evaluated the Montney formation and with competitor drilling activity all around the company's lands the play has been largely de-risked.

QIS Capital Comments:


Finally some news from Blackbird Energy (BBIL:TSX-V) as we have been receiving numerous calls and emails regarding the status of the company. We are very pleased that the first two wells have now been tied-in and we are particularly pleased with production results from the second well which is producing 445 boe/d despite the technical difficulties during completion. We have furthermore seen a significant increase in natural gas pricing which is now at $3.15/mcf – up nearly 50% in the last few months. The commencement of production is a significant step forward for Blackbird and will reduce future financing needs.


As mentioned in the press release, Blackbird and its partners are commencing the installation of production tubing for the third well which indicates a successful completion. We haven’t seen or heard any numbers yet from the third well, but we expect to have those numbers released in the next few weeks as long as the weather co-operates.


Virtutone Networks Inc. (VFX:TSX-V)
Current Price: $0.225 (coverage commenced Sep. 9/11 - $0.10)


Virtutone Networks Inc. has recently announced that it has secured additional contracts for an estimated 26.3 million minutes per month of wholesale long distance. This results in a total of approximately 44 million minutes per month since the inception of the wholesale division.


We are pleased to see higher than expected results from our new wholesale division said Jason Allen, Virtutone's President and Chief Executive Officer. In addition to our domestic voice traffic, which is growing at a steady pace, we are getting a lot of interest in our international destinations. These routes generally come with higher per minute rates and will result in greater revenue growth than with our domestic routes.

Virtutone is also pleased to announce that the retail division has won a new contract with a large oil and gas company to provide managed line services. The initial order is for 300 lines and has the potential for significant growth. While we are excited by the prospects for our wholesale division, the retail side of our business, continues to grow, said Mr. Allen.


QIS Capital Comments:


Virtutone Networks (VFX:TSX-V) continues to proceed well ahead of expectations for number of minutes from the new wholesale division. The company was looking for about 100 million minutes in the first year of operations and Virtutone is already in excess of 44 million minutes in just 3.5 months. The company will be reporting its second quarter financial results in September which will include a full quarter of the wholesale division operations. This will provide us with the ability to forecast future results.


In addition to the wholesale minutes, Virtutone also announced a new contract with 300 lines. This is a significant contract for the company and will bolster Virtutone’s pending record results for fiscal 2013 (ending January 31). We continue to expect that the company will have an excellent year financially and operationally.


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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 733,000 shares 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 - 2012 QIS Capital Corporation.





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