QIS Update #29 2014 - September 30th 2014
Included in this update:
- Blackbird Energy signs strategic infrastructure memorandum of understanding at Elmworth, increases financing
- Dalmac Energy releases first quarter financial results. Conference call Tuesday
- Virtutone Networks files its second quarter financial statements
The Calgary Small-Cap Conference is only one week away today and will be held on Tuesday, October 7, 2014 at the Coast Plaza Hotel and Conference Centre. We have posted the speaking schedule on our website at www.smallcapconference.ca We are once again pleased with the quality of companies coming to the event from a variety of industries. If you are in the Calgary area and have not yet registered, please register now at www.smallcapconference.ca/register.php to reserve your seat.
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This year’s Calgary Small-Cap Conference is highlighted by a variety of guest speakers and quality companies from a number of industries including telecommunications, oil & gas, biotech, mining, manufacturing, and more. The guest speakers will be sharing their outlook on the markets and current economic conditions, and will be providing their top picks. As usual, we have several door prizes to give away at the conference.
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Blackbird Energy Inc. (BBI:TSX-V)
Current Price: $0.35 (coverage commenced Aug 19/11 - $0.18)
Blackbird Energy Inc. has announced that it has executed a strategic infrastructure memorandum of understanding (MOU) with Mistral Energy Inc. to pursue the development of a gas gathering system and processing infrastructure in the Elmworth / Gold Creek area which will serve Blackbird and other producers.
The MOU contemplates the development of facilities to handle 20 mmscf/d of Blackbird's associated gas, with a future expansion to handle up to 35 mmscf/d. The facilities planned total capacity will be 50 mmscf/d of sour gas, with provisions for handling another 70 mmscf/d of sweet gas, and additional potential expansions thereafter. Processing facilities will be staged with packaged and modularized units to reduce field installation time and cost, and to allow for expanded capacity to be quickly and efficiently matched to drilling activity and well results.
The MOU further contemplates the building of an 8 inch or larger pipeline and gathering system that will run from the Blackbird's Elmworth lands south of the Wapiti River to existing infrastructure and ultimately the new Mistral sweet and sour gas facilities planned for Gold Creek/Kakwa.
Mistral Energy Inc. is comprised of the management team which recently developed the 700 km Vantage Pipeline project and a 50 mmscf/d cryogenic gas plant in Saskatchewan with a 70 km gas gathering trunk line.
Garth Braun, CEO of Blackbird noted, "Blackbird is at the beginning of an exciting period of growth and is pleased to continue to proactively address the challenges that are present in the Elmworth / Gold Creek corridor. The addressing of infrasture and egress will allow Blackbird to continue its strategy of aggregating additional land at a cost effective basis in its core area. Blackbird is also looking forward to building a strong relationship with Mistral Energy Inc."
Blackbird Energy Inc. has announced that, in connection with its previously announced offering of special warrants and flow-through common shares on a "bought deal" private placement basis, Blackbird and the syndicate of underwriters led by National Bank Financial Inc. and including Raymond James Ltd., Haywood Securities Inc., TD Securities Inc., Cormark Securities Inc. and Jennings Capital Inc. (collectively, the Underwriters), have agreed to increase the size of the offering to an aggregate of 15,900,000 common shares to be issued on a flow-through basis in respect of Canadian Exploration Expenses (the Flow-Through Shares) at a price of $0.34 per Flow Through Share. The size of the previously announced offering of special warrants (the Special Warrants) remains unchanged at 86,207,000 Special Warrants. Aggregate gross proceeds of the Special Warrants and Flow-Through Shares will now be approximately $30.4 million.
Blackbird is also pleased to announce an increase to the previously announced non-brokered private placement of Special Warrants (the Non-Brokered Private Placement) to 24,138,000 Special Warrants at a price of $0.29 per Special Warrant for gross proceeds of approximately $7.0 million.
The financings are scheduled to close on or about October 15, 2014 and are subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the TSX Venture Exchange, and other securities regulator authorities as applicable.
QIS Capital: With the closing of this financing, Blackbird will have around $47 million in cash, 4-5 immediate wells to drill in the exciting Montney formation, AND with a proactive approach to setting in place a plan to construct pipeline and gathering facilities that can handle a very large production flow, the company is sending a message to the market that they expect to be successful and to become a significant player in the Montney area. With Blackbird’s large land position in the middle of major producers, the company has up to 300 locations that can drilled making this an enviable foothold in the area. Blackbird has received several institutional research articles in the past few weeks and is garnering increasing attention from the investment community. If anyone would like a copy of some of these articles, please contact us. Blackbird will be speaking at our Calgary Small-Cap Conference next week.
Dalmac Energy Inc. (DAL:TSX-V)
Current Price: $0.35 (coverage commenced Nov 15/11 - $0.37)
Dalmac Energy Inc. has announced its financial and operating results for the first quarter ended July 31, 2014.
First Quarter Financial Highlights:
- Revenues of $7.2 million
- EBITDAS increased 30x to $578K from $19K
- Gross margin improved to 22% from 18%
- Over $175K spent on modern IT system development, designed to reduce costs
- Expenses down 9% to $2.1 million
The company reported revenues from fluid transfers and well stimulation services of $7.2M as compared with $7.6M reported in the first quarter of 2013. The first two months of the first quarter came in on forecast but the third month of July was slower than expected as many customers took time off for the summer break. The first quarter is typically the slowest quarter of the year as the spring breakup and road bans restrict activity Gross Margin as a percentage of revenue increased to 22% which represents an improvement of almost 25% over Q1'14. The company demonstrated an impressive 30 times multiple increase in EBITDAS to $578,000due to better management controls over operational efficiencies along with refining our customer mix to focus more on long term strategic partners.
While capital expenditure programs are typically curtailed during Dalmac’s first quarter, the company is now experiencing a significant increase in orders and the winter drilling season is off to a good start.
Dalmac still remains optimistic looking forward as rig counts are projected to continue to improve over the remainder of 2014 and into 2015. Given the current degree of activity in the field and the number of work orders being received for Dalmac services, management is confident that the remainder of fiscal 2015 is shaping up to be a banner year. The continued focus on productivity improvements such as the implementation of a new computerized dispatching and invoicing system will not only improve labor costs but will also optimize equipment deployment by allowing for real time monitoring of fleet operations in the field. Other added benefits will stem from more timely customer invoicing, maintenance scheduling and improved administration of excess equipment capacities. Management strongly feels that these processes will not only help lower operating costs but will better position Dalmac for increased growth and profitability in fiscal 2015.
The company announces that Leonard Jaroszuk has resigned as director of Dalmac effective September 26, 2014. Dalmac will be conducting a comprehensive search to find a replacement director with suitable industry experience as expeditiously as possible. "On behalf of the board of directors I would like to wish Len all the best in his future endeavors and to personally thank him for his nine years of service and tireless dedication to the Company" stated John Babic, the Chief Executive Officer of Dalmac.
A conference call to discuss the results will be held on September 30, 2014, at 1:30 pm EST/11:30 am MST.
To participate in the conference call, please dial 416-260-0113 local in Toronto or toll-free 1-800-524-8950 and request the Dalmac Energy conference.
|LATEST FINANCIAL RESULTS|
|3 Months Ended Jul. 31|
|Income Tax Recovery (Expense)||115,994||233,536|
|Net Income (Loss)||(364,513)||(700,609)|
(as at July 31, 2014)
|Current Assets||$ 7,860,976|
QIS Capital: We invite anyone available today at 1:30EST to listen to Dalmac’s conference call. This is a very important call as the company has provided a better start to fiscal 2015 and is indicating that Q2 is showing solid sales demand. With the cost savings put in place over the past year, improvement in margins, and an increase in revenues projected for this fiscal year, Dalmac is expected to return to solid profitability. We also expect to receive an updated research report on Dalmac today and can make that available to any investors who may have an interest. Elias Foscolos, an analyst at Industrial Alliance which follows Dalmac, will also be speaking at The Calgary Small-Cap Conference.
Virtutone Networks Inc. (VFX:TSX-V)
Current Price: $0.25 (coverage commenced Sep. 9/11 - $0.10)
Virtutone Networks Inc. has recently filed its financial and operating results for the three and six months ended July 31, 2014.
The company’s wholesale division continues to achieve new milestones. Revenue from wholesale was approximately $11,400,000 in August 2014, as previously announced. The company continues to focus on building its customer base and making a name for itself in the wholesale telecom market. The company’s maintains its previously stated goal of increasing margins to 6% in fiscal 2015, 8% in fiscal 2016, and 10% in fiscal 2017. The company has yet to achieve its goal of 6%, but remains confident that current initiatives will result in increased margins.
During and subsequent to the six month period ended July 31, 2014, the company invested in a new automated routing and billing software management system that will allow the company to continue to reduce support staff for the daily operations of the company. The new system is currently live and customers continue to be transitioned from the previous system. At the end of the transition phase, the company expects to realize immediate operational cost reductions.
The company recently announced the launch of its Short Message Service (SMS) division. The company will be able to leverage its current existing relationships and expand its market reach. SMS has the same business model as wholesale voice termination, but with much higher margins. Expected gross margin from this business line is in the 20% range. The company has hired Harold Baxandall, a 33-year veteran of TELUS, to lead its SMS division.
Management’s vision of the company is one of a simple business model that generates sustained profitability. Aggressive growth, a streamlined and automated wholesale operation, sale of the retail division, and the new Board of Directors, as previously announced, are all major steps that the company has taken to help bring this vision to reality. Management and the newly appointed Board are working hard to ensure proper capitalization of the company to support its growth. Management is keenly aware that growing too fast can be detrimental, and is taking every effort to manage growth in an orderly fashion.
Management will remain vigilant in the area of cost control and revenue generation and looks forward to a return to profitable results in the remainder of fiscal 2015 and beyond.
As at September 29, 2014, the company has 42,355,000 common shares outstanding.
|LATEST FINANCIAL RESULTS|
|3 Months Ended Jul. 31||6 Months Ended Jul. 31|
|Cost of Sales||41,638,346||8,418,012||69,049,637||11,439,245|
(as at July 31, 2014)
|Current Assets||$ 19,930,173|
|Finance Lease Obligations||59,785|
QIS Capital: We’ve been waiting all month for Virtutone’s second quarter report and while we had to wait until the last moment, we weren’t disappointed. Virtutone has proven that its low margin model can work as long as revenues meet the threshold and can continue to grow. Furthermore management has indicated that they plan to be successful in improving margins so this would have a significant impact on the bottom line if successful. Q2 annualized earnings are a little over $0.06 eps making Virtutone currently trading at a multiple of 4X annualized earnings. The recently announced line of credit should allow the company to continue to grow after a little pull-back in August due to capital constraints and the negotiation for the line. Virtutone should be announcing its September revenues later this week.
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 219,00 shares and 350,000 options, and 706,348 warrants of Blackbird Energy Inc., 90,000 shares and 200,000 options of Dalmac Energy Inc., and 450,500 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.