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Gulf Resources, Inc. Message Board

alan74z 40 posts  |  Last Activity: Jul 24, 2015 4:13 PM Member since: Feb 2, 1999
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  • First of all I am happy that they continue releasing information when they get it. However you look at it this news this morning is good news, while we still do not know the potential size of the gas field and it will certainly take a lot longer to estimate it and perhaps the drilling of a few more wells to confirm it, the fact that the first well is viable and can produce $4.7m of NG a year and a Net Income of $2.3, so yes it is good news. $2.3m is only $0.05/share but if the 10 other wells have a similar production, we are talking about $0.55/share of net income assuming the same cost structure. Of course we know that the cost structure will come down as the first well is always way more expensive to drill and the infrastructure they will put in place to produce and deliver the gas will also be leveraged across wells reducing the capital investment and COS of this gas. So assuming revenues of $52m a year for 11 wells, I would expect a Net Income certainly much higher than $25m, perhaps more around $30-35m. ($0.65/$0.75/share) adding that to the current low projection of $0.74 certainly going quickly to closer to $1.00 or over if the bromine prices continue to rise and demand is stronger, we could potentially expect in 2016 net income north of $1.5/share. The additional diversification of the company should enable the PE ratio to go up improving significantly the current share price. We should get more information during the earning call next week but yes the news this morning is good news and the stock price is reacting to it.

    Sentiment: Strong Buy

  • Reply to

    My take on the NG news

    by alan74z May 7, 2015 11:26 AM
    alan74z alan74z May 7, 2015 4:24 PM Flag

    I agree it is not possible, sorry, my extrapolation was just to play with the numbers but I agree some wells could produce more NG some less or none, so we will need to monitor this real time but the fact that the first well is a decent producing well of good quality gas is encouraging and is good news, yes the manipulators were able to take the price down at the end of the day but after the current release the company is worth more than it was before this information was released, the stock price traded on average for the day significantly up if you compute an average price for the day weighted on volume (between $2.70-$2.75) but was driven down by the manipulators at the end of the day, curious to see what happens tomorrow and even more on Monday after the Q1 earnings.

    Sentiment: Strong Buy

  • Reply to

    Thoughts on GURE

    by gocoltslionssuck May 8, 2015 7:47 AM
    alan74z alan74z May 8, 2015 1:09 PM Flag

    We should have the earnings tonight or Monday, so curious what they will say. While Q1 results will be with no big surprises but will include 2 months of the new chemical Business, I am more interested by their full year earning projection. With the price of Bromine up 8 % since the start of the quarter and with Chemical pricing up around the world up to 30%, I hope that they will consider revising their 2015 earning projection by a little at least. I also want to hear more about the NG finding and plan, these are the two main topics that I hope they will cover. 2016 is still a long way from now, so I do not expect any projection for 2016, let's see what 2015 will give us.

    Sentiment: Strong Buy

  • Reply to

    GURE is late to file 10Q

    by marubadbad May 11, 2015 2:52 PM
    alan74z alan74z May 11, 2015 4:55 PM Flag

    Sorry the SEC deadline is midnight US time not China time, they are not late and they could still file an NT 10Q tomorrow giving them until the 18th to file. If they are late it could be due to the integration of the financials of the chemical company which add to the complexity but let's wait until tonight to see if they file their 10Q on time or ask for a delay until May 18.

    Sentiment: Strong Buy

  • Reply to

    10-Q Filing

    by gocoltslionssuck May 12, 2015 9:48 AM
    alan74z alan74z May 12, 2015 10:54 AM Flag

    Nope I checked the official rule for the SEC is to be over $75m of market cap by the end of the previous year Q2 and on May 30, 2014, GURE had a market cap of $83m, so they are an accelerated filer and as they didn't file yesterday, they will have to file an NT 10Q that will give them an automatic extension until May 18, they will certainly state that they need the extra time to consolidate the numbers of their latest acquisition which I think is the reason for the delay. The assessment of the NG discovery value should not be a Q1 reporting issue as still far from being an asset. I am expecting the NT 10Q today as it would be normal process.

    Sentiment: Buy

  • Reply to

    GURE is late to file 10Q

    by marubadbad May 11, 2015 2:52 PM
    alan74z alan74z May 12, 2015 12:35 PM Flag

    Yes in fact you are right the "float" is what counts and difficult to know the exact amount of the float by May 30th 2014 but it could have put the company slightly below $75m, if so they would have until Friday to file.

    Sentiment: Strong Buy

  • Q1 earnings were better than expected but for me the most important elements were around cash management. They were able to generate about $190m of cash after investment, $160 went to pay for the Prospector debts and the senior note repurchase. They paid back about 42% of the debts on Prospector and financed the 58% remaining with their revolving credit facility, leaving them with $410m of $650m still available for future financing needs. The fact that they also purchased some senior notes (for $11m face value for $6.5m) is showing that they believe that they have enough liquidity even in the current challenging environment. Their cash position increased by $30m to $86m again providing them some extra breathing room. Their Debt to EBITDA ratio of 2.4 is still way below 4, so no risk of calling back the credit facility. So in summary as I said before no risk of bankruptcy even if the situation continues deteriorating. Yes the PEMEX situation is where revenues and earnings will be hurt mainly in Q3 and Q4 as Q2 will see only a portion of the impact. but again they are cutting costs and have shown that they can even with lower utilization rates of their jackup rigs, still turn a profit and continue generating significant amount of cash to now reduce their debt. I was a hold rating but I would say that given their latest results, I will move to a moderate Buy rating at least if the share price remains below $2.50

    Sentiment: Buy

  • Reply to

    question

    by enigma6008 May 14, 2015 11:45 AM
    alan74z alan74z May 14, 2015 5:46 PM Flag

    Their deadline is Friday, so my guess is that it could be Friday after the market closes but only my opinion.

    Sentiment: Strong Buy

  • Reply to

    EPS 12 Cents

    by tradelogic2001 May 15, 2015 4:16 PM
    alan74z alan74z May 15, 2015 4:33 PM Flag

    I went quickly through the earning release. I expect the Bromine and crude salt segment to be soft as the price of Bromine in Q1 was still soft, the price increase impact will start showing up in Q2 only. The new acquisition is delivering on its expectations, only 2 months of revenue and profit were included in Q1 but already a significant impact on both lines, will be more in Q2 with a full quarter and higher prices for chemicals too.
    I know people want to see some actions but overall I liked the comments from Management about building the company into a much larger one, including becoming a "significant producer of natural gas". Yes I am keeping my shares and could add some on weakness as I am very pleased with the current strategy and results. I now believe that $0.74/share of earnings for the year is conservative and Q2 should show that it is as I expect a significant increase in earnings in Q2 versus Q1 and versus Q2/2014. I will now go in details through the 10Q but wanted to pass my first impression.

    Sentiment: Strong Buy

  • Reply to

    EPS 12 Cents

    by tradelogic2001 May 15, 2015 4:16 PM
    alan74z alan74z May 15, 2015 5:08 PM Flag

    Still trying where the $7.8m of gas exploration costs are showing, it is stated that it was expensed in Q1 but cannot find it anywhere, I would have expected earnings to be much lower if those costs were included, will do more research. The cash flow picture was excellent by the way....

    Sentiment: Strong Buy

  • Reply to

    EPS 12 Cents

    by tradelogic2001 May 15, 2015 4:16 PM
    alan74z alan74z May 16, 2015 10:37 AM Flag

    OK I received an explanation from the company, the $325K spending was the spending on the exploration well for the quarter, the $7.8m exploration cost is the total cost of the well since they started drilling for the evaluation of the Bromine opportunity in 2011 and which had been already expensed over the last 4 years of exploration, the true additional cost for the gas discovery for this particular well was only $325K in Q1. In fact in their last 10K they had mentioned that they had spent $7m in exploration costs in previous years since 2011 to evaluate the Bromine opportunity of the Sichuan Province, then in 2014 they spent $489K again and now in Q1 2015 $325K adding up to the $7.8m that they mentioned in the earning release. I told them that they should clarify this in their conf call and make sure people understand that these exploration costs are not really the exploration costs of the NG first well but a cumulative exploration expense since 2011 initially searching for Bromine and at the end discovering NG. I now understand why they say additional wells for the NG are going to cost a lot less than that !!! OK I now better understand it.

    Sentiment: Strong Buy

  • I continued drilling on the Q1 numbers. First I looked at the new chemical business performance, as a reminder we had only 2 months on the Business incorporated in the statement as the deal closed on Feb 4th. 2014 run rate for the new Business was $4.4m revenue /month with an operating profit of 30%, what they included in Q1 2015 with $10.5m or revenues and $3.44m of operating profit represents $$5.25m of revenue per month or a growth of 19% over last year's average and a 32.8% operating profit margin. These numbers seem consistent with the the fact that the Business was growing 23% last year (2014 to 2013) and with the current Bromine chemical price environment I do expect the operating margin this year to be improving as well. Now if we use these numbers, this would mean that just by now integrating 3 months of the Business in Q2 and assuming flat growth versus Q1 and same margin which is conservative, the top line in Q2 should go up by $5.25m and the operating profit up by $3.4m just because of a full quarter of the new chemical Business.
    Now for the rest of the Business, since the price of Bromine if it stays where it is has gone up about 6% versus Q1 average price, Crude salt went down 5% and I would assume the Chemical Business benefitting from the Chemical price increases could see 10% price increase as well (world wide prices have gone up recently by 25% to 30% so 10% could be conservative) taking this into account the impact on the top line assuming no volume change (which for Bromine is certainly not true as if prices are going up demand must be going up but to be conservative I will assume no change in volume), Bromine revenues would go up $700k, Crude salt would go down $100K and the chemical Business excluding the new acquisition could see an increase of $1.1m as this is related to a price increase and not a volume increase it would go straight to the operating profit, so an increase of operating profit of $1.6m in Q2 versus Q1.
    to be continued

    Sentiment: Strong Buy

  • Reply to

    More Q1 10Q analysis and Q2 projections

    by alan74z May 16, 2015 11:16 AM
    alan74z alan74z May 16, 2015 11:33 AM Flag

    Ok to finish, we also know that Q2 is always higher than Q1 historically because of the Chinese New year and the bad weather, last year it was up by 20% versus Q1, so even assuming only a 10% increase due to business seasonality between Q1 and Q2 or an additional $3m in revenues and $700K in operating profit, we can derive what Q2 could look like conservatively. Revenues could be $34.9+5.25+1.6+3= $44.75m or a 28% increase versus Q1 and 41% increase versus Q2 last year. Operating profit $7.1m+$3.4m+$1.6m+$0.7m= $12.8m and increase of 80% versus Q1 and 70% versus Q2 last year. Assuming the same 26% tax rate, we are talking about a $9.5m Net income or on now 46.6m shares a $0.20/share earning This would put them on track for a $0.74/share for the year and all my assumptions are on the conservative side based on today's facts. Just thought I would share this analysis with you and curious to see how close I will be from the actual numbers for Q2.

    Sentiment: Strong Buy

  • Reply to

    More Q1 10Q analysis and Q2 projections

    by alan74z May 16, 2015 11:16 AM
    alan74z alan74z May 16, 2015 12:15 PM Flag

    I looked at the income statement not the Capex or the balance sheet, they could capitalize this Capex as it is investment for future production not anymore exploration but if they expensed it yes it would reduce their earnings in Q2 but also in their Q1 numbers they had $325K for exploration expenses and $115 of Audit fee for the new acquisition which would not be there anymore, so overall even if they expensed the whole amount the impact would be less operating income by $$1.9m but again if it is Capex to set up production, they should be able to capitalize it. You made me think of looking briefly at the potential cash flow statement for next quarter, assuming $9.5m of net income and $7.5m of depreciation they would start with $17m of cash generated but my guess is that their payable are way too high and will come down while their receivable could go up if the Business keeps growing, so my guess is that cash from operation will certainly be lower than $17m, perhaps more around $12-$13m, then as you noticed they will have capex of $2.3m assuming all in Q2 for a Q3 NG production and if they resume their Bromine facility improvement project that they delayed in Q1 it will take again some cash, so overall the cash picture will not be as impressive. We could end up with a Net cash generation for the quarter only in the $5m range, OK they already have $111m in cash so they could end up with "only" $116m or $2.5/share !!!!

    Sentiment: Strong Buy

  • Reply to

    More Q1 10Q analysis and Q2 projections

    by alan74z May 16, 2015 11:16 AM
    alan74z alan74z May 16, 2015 12:16 PM Flag

    I agree this would be nice to know

  • Reply to

    EPS 12 Cents

    by tradelogic2001 May 15, 2015 4:16 PM
    alan74z alan74z May 16, 2015 6:59 PM Flag

    I went back to better understand the exploration costs, in fact out of the $7.8m, $7m was spent in 2011 and is in their 2011 10K, it was expensed within the Bromine segment as this was exploration for Bromine, my guess is that in 2011 they had no clue that there could be NG. Then they stopped all exploration activities, certainly because the price and demand for bromine went down and there was no urgency to build additional supply as they were running way below capacity. Then in 2014 in fact certainly in Q4 2014 as I do not see it in previous quarters but only in the 10K, they started again exploring and spent $488k and my guess is that it is 100% for the NG discovery and finally in Q1 2015 they spent $325K again for the NG discovery, so for sure out of the $7.8m of exploration costs in Sichuan Province since 2011, $0.8m is for sure NG related, to say how much of the other $7m spent in 2011 reduced the cost on the latest NG exploration is impossible to say, we will have to wait for the second well to see how much a dedicated NG well cost but I would guess a lot less than $7.8m. as to computing a ROI you have to understand that the 2011 exploration costs are sunken costs, so you will not based your decision to invest or not based on these costs, what you will want is to know now how much you need to invest in the next 3 or 5 years or longer as I know for a fact that the NG and oil industry is more looking over 10 years or even 20 years when putting together a ROI analysis and how much profit you can generate on this investment and when. I do not think that at this stage they have enough data to come up with such an ROI analysis as they are still not sure of the size of the NG field capacity, by adding a few wells in logistically defined locations they should be able to assess it. It is still a gamble but with better odds now that the first well seems commercially viable.. to be continued

    Sentiment: Strong Buy

  • Reply to

    EPS 12 Cents

    by tradelogic2001 May 15, 2015 4:16 PM
    alan74z alan74z May 16, 2015 7:08 PM Flag

    end of my long message, sorry
    Sadly enough the infrastructure they will need to build will require more than just one producing well to provide any kind of acceptable ROI, as I said they will need to start building the infrastructure before they are 100% sure of the size of the field, so still a gamble. I would love to know what is their current CAPEX plan for the NG 10 wells and for the infrastructure. They will certainly need to present such a plan to the authorities to get the NG license for the other 10 wells as they will want to make sure that whoever get the Business has a solid plan to exploit it and the financials to back it up as the local authorities will have a direct financial interest as well. Still a lot of work in front of them but again the odds are now getting better with the first well being commercially viable.

    Sentiment: Strong Buy

  • Reply to

    PGN did good

    by pismire_03 May 13, 2015 4:42 PM
    alan74z alan74z May 16, 2015 7:57 PM Flag

    Someone was asking how much Business has PGN with PEMEX, in their 10K they said that PEMEX represented 16% of their total revenues in 2014, so yes it is significant and if they lost it all, that would reduce their revenues by up to 16% if they do not find new contracts with other customers for those rigs.

    Sentiment: Buy

  • Reply to

    PGN did good

    by pismire_03 May 13, 2015 4:42 PM
    alan74z alan74z May 17, 2015 1:50 PM Flag

    In fact the % with PEMEX should be even lower if you consider the Prospector acquisition in Nov 2014 which was only integrated in the 2014 numbers for 2 months, so with a full year of prospector revenues PEMEX would represent less than 16% of total revenues for sure. Again large enough to impact revenues and earnings significantly if they lost all the PEMEX business but not large enough to put PGN in financial trouble ie. bankruptcy.

    Sentiment: Buy

  • Reply to

    Disappointing

    by gocoltslionssuck May 18, 2015 10:36 AM
    alan74z alan74z May 18, 2015 11:04 AM Flag

    I could not attend the call but will listen to it now. Anyway we know this stock is manipulated, the interesting thing is the volume this morning. Most volume was traded pretty close to flat at around $2.60 until a few minutes ago,when now the price decrease is on ridiculous volumes for a stock that just announced their results. Let's see where the manipulation will take it today but I still believe that we should see an upside momentum especially when we approach Q2 as my guess it that Q2 will show that they can even easily meet or beat their $0.74/share eps in 2015 and we should be on the NG trial production well and new wells should also have been confirmed as well as the rights to exploit this NG otherwise they would not have drilled these wells and stopped everything. As for their payment of a dividend or stock buy back, right now they need to keep the cash and show that the company is solid enough to be granted the NG rights in Sichuan Province, then when they get those rights and understand their cash needs with a realistic Capex plan, they should be able to be more opened to a dividend or stock buy back. Anyway I am not selling a single share until Q2 earnings as Q2 should be a key quarter and could add on weakness.

    Sentiment: Strong Buy

GURE
1.99+0.02(+1.02%)11:59 AMEDT