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QIS Update #22 2011 - December 5th 2011



Included in this update:

  • Cobra Venture sells its Saskatchewan freehold mineral and royalty interests for $5.25 million
  • Dalmac Energy announces strong second quarter financial and operating results

QIS Capital has issued several email updates in the past few days. To view these recent, significant developments in some of our Feature Companies, please visit the Updates section of the website at www.qiscapital.com/updates.php.

 

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


 

Cobra Venture Corporation (CBV:TSX-V)
Website: www.cobraventure.com
Current Price: $0.30 (coverage commenced May 22/07 - $0.205)

 

Cobra Venture Corporation has announced that, subject to regulatory body and shareholder approval, the Corporation has agreed to sell all of its freehold mineral and royalty interests in the Province of Saskatchewan for an amount of $5,250,000, subject to usual industry adjustments, effective as of January 1, 2012. Cobra is expected to call a special meeting of shareholders of the Corporation in early 2012 to consider, and if deemed fit, to approve this sale transaction which is anticipated to close on or about February 1, 2012.

 

QIS Capital Comments:

 

This is a significant development for Cobra and will likely lead to a significant shift in focus. Following this sale, assuming it is approved, Cobra Venture will have pre-tax over $7.75 million in cash ($0.44 per share), 3.625 million shares of Zodiac Exploration ($0.05 per share) and additional working capital and minor property assets. There will be some consideration for tax on capital gain of the property.

 

Looking at it another way, the deal alone is worth $0.30/share in cash (a 28% premium to the closing price before announcement) plus Cobra has positive working capital of $0.16 per share (mainly cash) and investments worth another $0.05 per share for a total of $0.51 per share.

 

For the 9 months ended August 31, 2011, Cobra had net income of $511,654 ($0.03) per share. The company will have another 4 months of royalty income prior to the sale of assets which will further increase the cash value calculations above.

 

It remains to be released what the company plans to do with the cash from this transaction. In this market "cash is king" and management is discussing a number of opportunities that are currently available.

 

Cobra is presenting trading at less than 60% of its future cash and investment value.


 

Dalmac Energy Inc. (DAL:TSX-V)
Website: www.dalmacenergy.com
Current Price: $0.43 (coverage commenced Nov 15/11 - $0.37)

 

Dalmac Energy Inc. announced this morning its second quarter financial results for the three and six month periods ended October 31, 2011.

 

LATEST FINANCIAL RESULTS
  3 Mos. Ended Oct. 31 6 Mos. Ended Oct. 31
  2011 2010 2011 2010
Revenues $8,217 $5,910 $13,777 $9,723
Gross Margin 2,599 2,182 3,972 3,308
EBITDAS 1,575 1,457 2,065 1,902
Net Income 859 660 638 432
per share $0.045 $0.037 $0.034 $0.024



BALANCE SHEET
(as at Oct. 31, 2011)
Current Assets $ 8,951,325
Total Assets 24,297,171
Current Liabilities 11,437,426
Long-Term Debt 3,097,811
Shareholders' Equity 9,305,458

 

Activity levels began to pick up in August at a rate that is usually experienced in the winter season. Commensurate with the spike in activity levels, Dalmac’s labour/training, accommodation and operating costs also increased. Dalmac has increased its charge out rates over the course of the current quarter and expects to have the new rates fully implemented by the third quarter of fiscal 2012. Revenues for three months ended October 31, 2011 increased by 39% to $8.2 million in comparison to Q2 fiscal 2011. YTD revenues increased 42% to $13.8 million as compared to the six months ended October 31, 2010.

 

The gross margin, as a percentage, for both the quarter and the year to date decreased slightly (5%) from the previous year. This is consistent with the additional safety and training costs referenced in the Q1 MD&A which flowed over into Q2. Overall, on a dollar amount the gross margin was up 19% on the quarter and 20% as of the year to date.

 

The net earnings for Q2’12 increased 30% to $859,000 as compared to Q2’11 and the YTD’12 earnings were up 47% over last year to $638,000.

 

EBITDAS for Q2’12 increased by 8% over the same period in fiscal 2011 to $1.6 million while YTD’12 EBITDAS increased 9% to $2.1 million as compared to YTD’11.

 

Outlook

 

Activity levels in the Western Canadian Sedimentary Basin are maintaining their high levels of utilization which is a precursor to the expectation of a very busy winter season ahead. As of November 23, 2011, drilling rig utilization, in Alberta, was at 63% and service rig utilization was at 62%. Contributing factors bringing this about include strong oil pricing and the ever increasing application of horizontal drilling in the oil and gas industry, which has witnessed year over year increases in all aspects of oilfield activity. Dalmac has developed relationships with major oil and gas producers and operators across west central Alberta by providing quality equipment, well trained safety conscious personnel and a competent group of managers that together combine to provide value to our customers both in superior customer service and efficient operations. Over the course of the current quarter we have experienced strong utilization rates for our equipment and improved financial performance. This increase in activity is expected to continue throughout our fiscal 2012 based on the forecasts for increased oil and gas production driven by stronger oil prices.

 

Dalmac’s strategy is to continue to focus on optimizing operating efficiencies, trimming costs, improving safety and service while forging ahead with building strong customer relationships. All the foregoing is helping to position the company as the first call choice. In summary, management is very optimistic that the expanding applications for horizontal drilling and multi stage fracturing technology into Dalmac’s service area will keep the demand for services strong throughout the winter and well into the next year.

 

QIS Capital Comments:

 

Dalmac posted much stronger second quarter financial results confirming the trend we have been seeing in the oil and gas service industry. The upcoming third and fourth quarters are furthermore expected to continue this trend as a result of higher service fees, increasing rig utilization, and reduced costs as experienced in prior quarters.

 

We would like to invite our investors to participate in a conference call with management to discuss the results on Tuesday December 6, 2011 at 11:30am EST, 8:30am PST. To participate in the conference call please dial, 416-644-3414 Local in Toronto, or Toll free, 1-800-814-4859 and request the Dalmac Energy Conference. It would be appreciated if you could send us a quick email at info@qiscapital.com or call us at (250) 377-1182 to confirm your participation.

 


 

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. 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 406,000 shares of Cobra Venture Corporation and 14000 shares along with 200,000 options of Dalmac 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 - 2011 QIS Capital Corporation.

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