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QIS Update #28 2013 - November 22nd 2013



Included in this update:

  • Blackbird Energy announces grant of options
  • Dalmac Energy reports second quarter financial results
  • Pennant Energy discloses results from its AGM and special meeting
  • Virtutone Networks announces non-brokered private placement

 


 

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

 


 

Blackbird Energy Inc. (BBI:TSX-V)
Website: www.blackbirdenergyinc.com
Current Price: $0.10 (coverage commenced Aug 19/11 - $0.18)

 

Blackbird Energy Inc. has announced that it has granted an aggregate of 5,275,000 incentive stock options to its directors, officers and consultants. The options are exercisable at a price of $0.105 per share and will expire on November 19, 2018. The option grant is subject to TSX Venture Exchange acceptance.

 


 

Dalmac Energy Inc. (DAL:TSX-V)
Website: www.dalmacenergy.com
Current Price: $0.385 (coverage commenced Nov 15/11 - $0.37)

 

Dalmac Energy Inc. has announced its financial and operating results for the second quarter and six months ended October 31, 2013.

Revenue in the second quarter was $9.3 million as compared with $10.1 million in the second quarter of the prior year. Net Earnings for Q2'14 were $313K as opposed to $719K in the previous year. Gross margin of 27% for the current quarter represents an increase of 9% over Q1'14 and is only 2% shy of the 29% for YTD'13. Given that the majority of Dalmac's service activity in Q2'14 was production related this is a positive indicator of improving profitability as production operations are more price sensitive than drilling and completions. The margin is expected to continue to improve with the advent of more drilling and completion activity. The Q2'14 EBITDAS declined 25% to $1.3M and was down 52% for the year to date.

 

The current quarter (Q2'14) was impacted by Canadian natural gas prices which fell sharply in July on the announcement that TransCanada Corp. intended to raise its short-term tolls on its cross-country natural gas pipelines in an effort to get shippers to sign up for long-term contracts. Producers reacted by putting more gas into storage rather than shipping it. This set the stage for lower gas pricing which is expected to linger until the onset of the winter heating season. According to a Bloomberg News Report on September 13, gas shipped from the Alberta AECO hub traded at a discount of $1.72 per MMBtu which is the widest since November 2009. The average discount price last year was about $0.54. Oil prices were also impacted by pipeline charges. As of the aforementioned date, western Canadian Select prices were discounted by $27/bbl from the WTI price. This was the steepest discount since March 4, 2013. The net impact of all this to Dalmac is that it pushed back the start of the drilling and completion season by about 2 months.

 

Outlook:


Dalmac continues to believe oilfield services activity for the remainder of 2013 will improve as the cold weather kicks in and narrows the oil and gas price differentials by increasing demand. Also in October 2013, Dalmac entered into a rental agreement with a frac tank provider which will enable the company to bid on entire frac jobs requiring water storage capacities ranging from 1420m3 to 6550m3. This will not only help Dalmac’s customers increase their water management efficiencies but will also create more demand for fluid hauling operations. The outlook for the longer term is equally gratifying as new liquefied natural gas projects gain approval and crude oil transportation capacity increases as a result of rail and pipeline development. Dalmac expects that the forecasted drilling activity increases in the Duvernay and Montney resource plays of Alberta will not only stimulate more production opportunities but will also create more demand for all of the company's products and services. Currently, the largest challenges facing the oilfield services industry are producer spending constraints, pricing differentials on Canadian crude oil, historically low natural gas prices, and the challenge to attract and retain skilled labour. Dalmac believes that its new and expanded product and equipment mix along with its corporate culture will provide a distinct advantage in retaining and attracting qualified individuals. Dalmac is of the view that its strong customer base and solid reputation will provide a compelling competitive advantage which will enable the company to continue its growth strategy and enable it to perform better than its current industry peers.

 

LATEST FINANCIAL RESULTS – in 000s
  3 Mos Ended Oct. 31 6 Mos Ended Oct. 31
  2013 2012 2013 2012
Revenues $9,330 $10,153 $16,944 $18,299
Direct Costs 6,853 7,107 13,103 13,073
Gross Margin 2,477 3,046 3,841 5,227
EBITDAS 1,272 1,693 1,291 2,700
per share $0.05 $0.07 $0.06 $0.13
Income Tax Recovery (Expense) (112) (241) 121 (320)
Net Income (Loss) 313 719 (388) 958
per share $0.014 $0.031 ($0.017) $0.041

 

BALANCE SHEET
(as at October 31, 2013)
Current Assets $ 10,331,062
Total Assets 33,061,347
Current Liabilities 5,211,273
Long-Term Debt 13,069,858
Shareholders' Equity 13,264,372

 

QIS Capital: Dalmac continued to be hampered during Q2 by external forces beyond the control of management. The commodity price situation will impact everyone in the sector as exploration programs were significantly curtailed during the period. Pricing differentials have since moderated and work programs are moving forward so this should translate into higher revenues and earnings for the upcoming quarters. Dalmac was able to get margins back in line with historical averages during the second quarter through cost cutting measures and more efficient operations. Management commented during the earnings call that they expect margins to continue to improve in the next two quarters.

 


 

Pennant Energy Inc. (PEN:TSX-V)
Website: www.pennantenergy.com
Current Price: $0.045 (coverage commenced Dec 7/12 - $0.075)

 

Pennant Energy Inc. has announced that all resolutions presented at its annual general and special meeting held on Tuesday, Nov. 19, 2013, including the appointment of directors, the appointment of Davidson & Company LLP as auditor, the reapproval of the company's stock option plan, the repricing and extension of James Britton's stock options, the adoption of new articles of the company, and the adoption of an advance notice provision, were approved by the shareholders of the company.

The directors elected to serve for the ensuing year are Garth Braun, James L. Harris, James Britton and Ron Schmitz.

 


 

Virtutone Networks Inc. (VFX:TSX-V)
Website: www.virtutone.com
Current Price: $0.385 (coverage commenced Sep. 9/11 - $0.10)

 

Virtutone Networks Inc. has announced that it will be conducting a non-brokered private placement of up to 6,000,000 units of the Corporation at a price of $0.25 per Unit, each Unit being comprised of: (i) one common share; and (ii) one half of one common share purchase warrants, for aggregate proceeds of up to $1,500,000, subject to the receipt of all applicable regulatory approvals. Each whole Warrant will entitle to holder to purchase one common share at an exercise price of $0.375 for a period of two years from the date of the closing of the Private Placement. The Private Placement is expected to close in one or more closings, beginning on or around November 22, 2012.

 

The Units issued pursuant to the Private Placement will be subject to a hold period of four months and one day from the closing date as well as other restrictions with respect to sales from control positions.

 

The proceeds of the Private Placement will be used for general working capital and corporate purposes.

 

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Virtutone Networks Inc. has announced that, with regards to the private placement announced earlier today, insiders of the Company have sold 500,000 shares to participate in the private placement.

 

QIS Capital: Virtutone was featured by a prominent newsletter today which is increasing awareness of the company. Virtutone’s shares hit a high of $0.45 this morning which represents a 350% premium since we first introduced the company back in September 2011. Congratulations to everyone who has been along for the ride.

 


 

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 822,500 shares and 650,000 options of Blackbird Energy Inc., 132,500 shares of Dalmac Energy Inc., 310,000 shares and 200,000 options of Pennant Energy Inc. and 635,000 shares and 125,000 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 - 2013 QIS Capital Corporation.

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