Personally, I'd rather have a meeting with Keith to see what's going on. If authorized, I will go, maybe one or two others would like to accompany me.
I wouldn't rule out that it is happening now, as the departure of Mark is notable. Then we can get a devil we don't know, as opposed to the devil we do know.
However it might make sense to have a COO willing to spend lots of time in South Texas since that's where the company's future is.
On May 27, 2014, USEG sold Williston Basin oil properties for $11.5 million. When acquired, the company paid $1.4 million for the property which included .22 producing net wells. While the total cost of selling .62 wells was not disclosed, it might be assumed the additional investment of .4 wells was about $4 million, making it a total investment of $5.4 million and a $6.1 million gain. The PV-10 on this property was disclosed as $8.7 million.
While it appears to be about a $6 million gain, the sales proceeds were recorded as a credit to the full cost pool, thus nothing to the income statement.
On May 7, 2014, USEG paid $3.9 million to acquire a net interest in 3,384 acres in Dimmit County Texas. So far, the S. McNight 1305H and Berry 1H have both released results which appear to be total duds. The working interest in these properties was 33.3% and net revenue interest was 22.5%.
The company, according to its last 10Q spent a total in this acreage and wells through Sept. 30 2014 of $7.8 million. According to the latest press release, a third well, the S. McKnight 1317HB was spud on Sept 28, and is going into the Eagle Ford formation.
While this project still has potential, it could end up as a big loss. On the other hand, if the Eagle Ford well is successful, there are many more wells that could be developed, not to mention the potential for Austin Chalk potentials.
It’s on the books for a little over $21 million. The company also spends at least $3 million annually to maintain it. Plus probably some extra for admin on this asset.
If this project fizzles totally, the company might have to reverse its asset and create a liability.
On the other hand, according to USEG’s previous 10K’s, an agreement was made on Aug 19, 2008 with Thompson Creeks Metals Company giving them the ability to acquire a 75% interest in the mine for $400 million. While the deal expired during the financial collapse, this obviously shows the mine had some value.
You tell me what this mine is worth today, or not worth today.
It is intended to present a fair financial position of a company. It works well for simple businesses. Say you have a retail business unit that rents all its store locations and turns its inventory over every few days. It becomes quite easy to allocate gross margin against fixed costs and overhead and know the profit. But even these businesses can get complicated when they start demanding rebates from suppliers based on volume.
Then you have a business like General Motors which was obligated with life time health care benefits as a retirement benefit. At first it was considered only a benefit from contract to contract, but eventually considered permanent. Later on there were issues of life expectancy, assumptions of the rate of inflation on healthcare, and when General Motors went down, they had to acknowledge over $100 billion of costs that were catch up accounting. The point is that GAAP accounting was wrong for decades at GM, but much of it was noted in the footnotes of GM's 10K reports.
In the business of oil exploration and development, there are also accounting issues that are disconnected from quarterly or yearly income statements. It may take years to develop a property like Booth Tortuga, or for that matter, even a moly mine. As a result, it might be more beneficial to do a detail analysis of properties vs the balance sheet, as opposed to looking at a short term income statement. The PV-10 is a great piece of off balance sheet analysis, but even that data has to be tested with its assumptions.
In particular, if a management makes continual improvements to its property portfolio, it is doing a good job. If it just milks revenue off existing known properties, then there hasn’t been any improvement.
The solicitations to join in on the lawsuit ends Dec. 2. I suspect they are having trouble finding clients. The announcements are likely nothing more than paid Yahoo advertising, it certainly isn't news.
If you followed the situation, PCRX got a warning letter from the FDA. After advertising Exparel as a 72 hour pain block, the FDA reminded PCRX that its approval was only as a 24 hour pain block. PCRX was ordered to change its literature, however there was no fine. PCRX has plenty of clinical data showing Exparel works as a 72 hour pain block, the issue was its FDA approval was based on the 24 time frame.
The stock fell back about 10% on the news, but only after this incredible two year run up from the mid $20's to over $100 per share. So ask yourself about this class action lawsuit, who was damaged?
This is the kind of dialogue that IMO is beneficial to interested parties.
The share price is a disaster. However the sector has also been hammered. Also the short interest is up a bit in the last reporting period, and according to Reg Sho there was high short selling between the last week in October and first week of November.
With the family management issue, it will be interesting to see what kind of person replaces Mark Larsen as COO. In addition, I'm interested to see if the new COO operates out of Riverton WY, or South Texas.
USEG stock seems to lost a higher percentage of its value than most companies in the sector. I suspect the uncertainty of the moly mine and possibly the family management structure have contributed to this. But if that’s why the share price is undervalued, just imagine the upside potential if these problems get fixed.
Donnie ,I’m not sure why there is so much sensitivity in talking about some of the USEG baggage. It seems there are a number of long term shareholders who find it necessary to chide anyone that posts something they perceive as negative. Believe me, you aren’t the only one who’s gotten that reception. Personally, I encourage open debate about the good and the bad, it leads to better understanding, IMO.
I believe I was the one who first referred you to USEG and I’m sorry if you got caught with some shares in the three or four dollar range. Back when oil was over $100 I felt USEG shares were worth $8-10 and potentially higher if a couple issues would have been favorably addressed. Assuming oil stays permanently where it is now, that brings my opinion of a fair share price more to $5-6. I never imagined oil would go down 30% so quick.
My primary method of valuing oil drilling & exploration stocks is to look at the market value of their assets. The idea being to assume if they liquidated all properties, what would be the cash value per share returned to the stock holder? USEG stock now trades at about half the value of its book value. In addition, last year’s PV-10 was $115 million for its proved oil properties, properties that showed book value of only $79 million. Because of the huge premium over book value, I see little risk of any impairment to USEG’s oil properties during this year end.
In addition, the Booth Tortuga lease appears to have much more oil on it than has currently been proved. The Austin Chalk and Eagle Ford formations also might have millions of barrels available on the same lease, simply by drilling to different depths than the Buda. If that isn’t enough benefit, we’re finding that oil prices in this section of Texas get about $15 more per barrel than up in the Bakken due to better weather and few takeaway constraints.
The company is not levered with debt like many of the other small oil companies. Yet during the last four months, USE
If you're contending that reserves will go back on the books after prices rise, that's not correct. Once a property is impaired, it stays at that book value until sold.
While I respect the rights of posters with an opinion, we all know anyone who could project a share price like Westcost claims would very soon be a billionaire. He is nothing more than a false profit that got lucky once.
Basically you're confirming there is no evidence that Mark Larsen has recently sold any shares?
Despite that he might have an incentive to do so.
ED, you have this habit of chiding people when they post something other than production stats, especially if it is a complaint.
Maybe Kel doesn't want to sell his shares at one third of what it ought to be worth. Can't he discuss this with someone without you trying to shut the conversation down?
They also have the $3 million annual nut from the moly mine. Plus the $6-7 million to employ 15 staff people.
Wait for the de-listing, then you can get some shares at a bigger discount.
With a share price under $2, the stock is acting like it's a bankruptcy candidate. Maybe Keith should explain how the company will survive $50 oil with few new drilling projects.