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QIS Update #25 2012 - September 26th 2012


QIS Update #25 - September 26, 2012  

Included in this update:

  • Blackbird Energy announces signing of definitive agreement with Ruger Energy Inc.
  • Dalmac Energy reports record first quarter financial results
  • New Independent Research Report coming out later today

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Dalmac Energy – Q1 Conference Call:

A conference call to discuss Dalmac’s record Q1 financial results will be held September 26 at 1:30 pm EST, 11:30am MST. To participate in the conference call please dial, 416-644-3417 local in Toronto, or toll free, 1-877-974-0446 and request the Dalmac Energy Conference. We encourage as many as possible to participate in the conference call. Dalmac is on pace for another record year with a great start in Q1.


We are pleased to be issuing a new Independent Research Report later today on an oil and gas producer which has been showing year-over-year increases of 100% in production. The company is debt free and is expecting to increase from 650 boe/d to 1,200 boe/d by the end of 2012. Stay tuned for our upcoming report.


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: $0.095 (coverage commenced Aug 19/11 - $0.18)


Blackbird Energy Inc. has announced that it has entered into a definitive securities exchange agreement dated September 24, 2012 in respect of its previously announced acquisition of all the issued and outstanding shares of Ruger Energy Inc., a junior oil and gas exploration and development company in Alberta.


Ruger has a 100% working interest in 680 acres in the Alsask area located on the Alberta/Saskatchewan border and currently has cash and cash equivalents of approximately $3,600,000.


Pursuant to the terms of the agreement, Blackbird will issue to the shareholders of Ruger an aggregate of 39,679,537 units at a deemed price of $0.12 per unit. Each unit will comprise one common share in the capital of the company and one-half of one share purchase warrant exercisable at a price of $0.24 until April 5, 2014. In total, 39,679,537 transaction shares and 19,839,768 transaction warrants will be issued.


The terms of this agreement also provide for certain management changes to be effected concurrently with the closing of the acquisition. Current members of the board, Robert Booth, Dennis Paterson and Michael Sweatman will be replaced with Darrell Denney, Murray Scalf and Sean Campbell, all three of whom are current directors and/or shareholders of Ruger. Additionally, Blackbird will also grant an aggregate of 4,000,000 incentive stock options, exercisable for a period of five years from grant, to the Ruger nominees and certain persons which will act as consultants to Blackbird following completion of the acquisition. Half of the options will have an exercise price of $0.16 per share and the other half will be exercisable at a price of $0.20 per share.


Garth Braun, Chief Executive Officer and director of Blackbird, commented: We are very pleased to be taking this next critical step towards closing of the Acquisition. The transaction will provide Blackbird with a significant enhancement to the management team, a substantial cash injection to facilitate future drilling plans, and graduate Blackbird to becoming an operator in both Saskatchewan and Alberta.

The acquisition and all ancillary transactions remain subject to the approval of the TSX Venture Exchange.


QIS Capital Comments:


This acquisition in these difficult markets for oil and gas producers, provides Blackbird with the opportunity for continued growth due to several aspects. The new management additions will provide a new focus on complimentary producing assets and the expertise to operate these plays. The new management is also very knowledgeable of the Bigstone play which will be a further asset during future development of the area. Finally, the new management team may play an important role of assisting in any future capital raising. The main asset of Ruger is cash and deposits of approximately $3,600,000. With the injection of cash in Blackbird, the company will be able to meet all of its upcoming capital requirements including its next Bigstone Montney well. Cash is ‘king’ when markets are depressed and Blackbird now has the ability to look at new projects and continue to develop its Bigstone play without relying on prevailing stock market values during financing.


Dalmac Energy Inc. (DAL:TSX-V)
Current Price: $0.51 (coverage commenced Nov 15/11 - $0.37)


Dalmac Energy Inc. has announced record financial and operating results for the first quarter ended July 31, 2012.


Revenues for Q1’13 increased by 47% to a record $8.1 million in comparison to the $5.6 million reported in Q1’12. The gross margin for Q1’13 was 27% compared to 25% in Q1’12. EBITDA for Q1’13 increased by 105% to $1.0 million from the $490K reported in Q1’12.


Pre-tax net earnings for Q1’13 continued to show marked improvement over the previous year. Pre-tax net earnings increased by 250% over Q1’12 to $318K compared to a loss of $213K. The company’s net earnings after-tax increased by 212%, to $239K or $0.01/share, compared with a loss of $213K or ($0.01) per share. Deferred tax liabilities for Q1’13 were $80K compared to nil in Q1’12. This is the first time Dalmac has achieved profitability in the first quarter of the fiscal year, which is historically a slow period due to spring break-up.


Expenses for Q1’13 increased by only 24% to $1.9 million, approximately half of the percentage increase in revenues over the same period one year ago. Total debt, excluding capital leases, decreased by 12% over the same period last year to $7.9 million.


Subsequent to quarter end, the company secured a $17 million credit facility with PNC Bank Canada branch. Over $5.0 million will be reclassified in Q2 FY'13 from Current Liabilities to Long Term Liabilities thereby increasing our working capital and improving the working capital ratio to about 1.5:1.0. There are no principle repayments necessary on the new facility thereby improving cash flow and allowing greater financial flexibility to grow. Lastly, this facility will improve our weighted average cost of capital by nearly 3% saving over $200,000 annually.



Q1’13 was a record quarter which generated the first positive Q1 performance in the company’s history. All of its divisions are benefiting from increased oil prices and technology driven industry conditions which continue to create an increased demand for Dalmac’s services.


It is important to note that approximately 75% of the company’s annual revenue is currently recurring work, i.e. fluid transfers and servicing of existing production, while the remaining 25% is contributed from drilling, fracing, completions and maintenance work for new and existing customers. Both of these revenue streams continue to expand, particularly with the longer-length, multi-stage frac wells that are becoming more prevalent in the industry.


Responding to the current surge in demand for its services, Dalmac plans on increasing the size of its fleet by purchasing about $6.5 million dollars of additional oilfield equipment. The company is confident that current positive industry indicators will continue to translate into higher revenues and earnings for Dalmac through calendar 2012 and well into 2013.


Conference Call:

A conference call to discuss the financial results will be held the same day at 1:30 pm EST, 11:30am MST. To participate in the conference please dial, 416-644-3417 local in Toronto, or toll free, 1-877-974-0446 and request the Dalmac Energy Conference.



  3 Months Ended Jul. 31
  2012 2011
Revenues $8,146,178 $5,559,953
Direct Costs 5,965,899 4,187,569
Gross Margin 2,180,279 1,372,384
EBITDAS 1,006,00 490,000
per share $0.043 $0.027
Income Tax 79,604 -
Net Income 238,812 (212,812)
per share $0.010 ($0.012)


(as at July 31, 2012)
Current Assets $ 9,658,117
Total Assets 26,413,654
Current Liabilities 9,849,808
Long-Term Debt 3,147,914
Shareholders' Equity 12,223,701



QIS Capital Comments:


First and foremost, we invite all of our subscribers to participate in the conference call which is scheduled for today at 1:30pm EST (10:30 PST). This is an excellent opportunity to speak directly with management and to get on overview of what to expect in coming quarters. To participate in the conference call please dial, 416-644-3417 local in Toronto, or toll free, 1-877-974-0446 and request the Dalmac Energy Conference.


As mentioned, this is the first time in history that Dalmac has produced a profit in the first quarter which includes spring break-up. Furthermore, spring break-up this year was particularly long as it was a very wet spring for much of western Canada. Management is forecasting continued growth rates of 20%-25% in fiscal 2013 and the first quarter is a positive indicator for achieving these targets. The company’s balance sheet also continues to show dramatic improvement with a reduction of debt of more than 12% year over year. Despite its impressive financial performance, Dalmac continues to trade at less than 3.5 times 12 month trailing earnings.


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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 127,500 shares and 450,000 options of Blackbird Energy Inc. and 8,500 shares and 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 - 2012 QIS Capital Corporation.





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