| Moderated By: Eric Maggard -- (Not Moderated) -- Started: 5/8/1996 2:51:00 PM Revision History |
Summary of the Company:
1) Valued at over $2 by Auditors
2) Continuing accutions
3) About to close on a acqution in Colorado
4) Currently at $.75
5) With acqutions could be valued at over $6
6) With audit completed, starting process to become NASDAQ small cap
See the following report and company press release:
SMALL WONDERS RESEARCH REPORTS ................. Date: April 22, 1996
Mike Harrison Tel: 860-688-6297 Fax: 860-688-0226 Email: email@example.com Web Site:
tiac.net (updated 2 market days after publication)
Oilex International Investments (OTC BB: OLEX) Call Allen Jones 303-470-8783 Company Web Site:
Industry Background: The recent break out of oil and gas prices to five year highs provides considerable credence to the theory, proposed by major analysts and billionaire investors (Fortune, Oct 95) as early as fall of 95, that a major trend reversal has occurred and that energy has begun a world wide economic-expansion driven bull market cycle. The Fortune article, titled "Your last big play in oil" documents recent increases in demand and projects only modest increases in production but massive increases in demand over the next 15 years. On the demand side, rapidly developing nations (many once referred to as third world) throughout Asia, Eastern Europe, and Latin America, are all simultaneously building factories and infrastructure, while their populations are clamoring for cars, homes, appliances and consumer goods. On the production side, many large fields outside of OPEC have or will soon peak in terms of output, including North Sea and Alaska. Russia, once a major exporter, has seen it's capacity hampered by the collapse of communism and decades of failure to replace and maintain oil equipment. China, once thought to be a potential future exporter, has seen internal demand outstrip supply by 2 million barrels a day.
The American Petroleum Institute, among others, insists that there are enough world reserves to insure that we will always have oil. The problem is that it is time consuming and expensive to get it out of the ground, especially in remote, physically and/or politically treacherous areas. In particular, the extremely low price of oil over the past few years had convinced many producers to leave it in the ground, and even to defer equipment purchases and maintenance. There will be a serious lag now, as production struggles to catch up in the face of so much demand. The article mentions four billionaire investors making big recent oil plays, including famous wildcatter turned movie producer Marvin Davis, who has been buying oil leases in Texas, Louisiana and Oklahoma on the cheap. A source close to Davis says one of the leases has been found to contain reserves worth about $1 billion, and that Davis paid $650 thousand for seismic data now worth $250 million.
Fortune goes on to predict price increases in oil and oil stocks of 25% over the next 6 months, highlighting 12 stocks to buy now in the oil and services industry. One share of each company then would have totaled $434.40, and would cost you $556.11 today, for a 28% increase - right on target. Fortunately for those of us that follow micro-caps, the inefficient OTC market generally provides ample opportunity to position in small stocks long after the big stocks have clearly established the winning trend. Such is the case with Oilex International, currently trading near 52 week lows even as they have added reserves at a rapid clip, and watched the value of their in-ground oil and gas appreciate by 25%.
Company: Present management acquired controlling interest in Oilex in November 1994, garnering $5.4 million in TLC (tax loss carry-forwards) along with lease interest in five wells in Clark and Smith Counties, Mississippi (which are slated for sale in 96). In 1995 management began acquiring additional assets, and since December 95 the company has aggressively added reserves in Texas, Colorado, Utah and West Virginia through acquisitions and lease purchases, increasing proven reserves from 1.3 million barrels of oil and 23.3 billion cubic feet of gas to 4.52 million barrels and 30.3 bcf of gas. Without factoring in the recent 25% rise in prices, the dollar value of the companies reserves has increased from under $100 million to $150 million. Current prices yield a reserve value of $ 187.5 million, or a break-up value for the company, at a conservative 50% discount for oil in the ground, (with 17 million shares outstanding, of which 14.5 million are insider held) of over $5 per share. All this is without inclusion of the companies latest acquisition (White River Dome in Colorado), the details of which have just been announced (see Investors Business Daily, April 19, page A17). I will report these reserves and valuations following some independent verification, but they are in the same ballpark as Marvin Davis' lucrative deal mentioned above.
The companies drilling program will begin next month at the Big Foot field in Frio County, Texas. This lease consists of 35 existing wells which were capped 3 years ago, 10 of which will be reworked in 1996, with the other 25 slated for production in 97. This is a spacious field, on which 10 new horizontal and one new vertical well will be drilled in 97. In July this year, the first of 10 wells are scheduled for the new White River project, with an additional well to be drilled each quarter. In late 96, the first of two wells will be drilled at M Half Circle, in Jefferson County, Texas. The second well in this field will probe the LOX B formation, which is calculated to contain more than 24 BCF of gas. Also slated for late 96 is a test well at the Carancuahua Creek prospect in Jackson County, Texas, followed by 2 additional wells in 97, looking for an estimated 5 million barrels of oil total. The companies financials are currently being audited by Moore, Stephens, Simonton, LLP, for 1993, 94, and 95, which will allow the company to become fully reporting (expected this quarter) at which point they will apply for Nasdaq Small Cap listing.
Bottom Line:: These are big, big numbers for a small company, and I expect them to get bigger yet, as acquisitions continue. In fact, these numbers are so big, and the share price is so undervalued at $.65 (down from $1 as recently as January, and down from $3 in 95) that OLEX qualifies as Small Wonders best find of 95 and 96 based on valuation, and we predict that it will be our best percentage performer of the year. We are comfortable with a 96 target of $3 to $4 at this time, but may be compelled to raise it following analysis of the new White River project.
In summary, then, oil and gas have just entered a bull market as evidenced by supply/demand analysis, the bets that big money has been making, and the recent breakouts in energy prices and energy stocks. The daily and weekly fluctuations based on events such as Iraq cutting/not cutting a deal with the UN to sell 700,000 barrels of oil a day for 6 months will have little overall impact on the long term trend of the market. Energy prices have had a major impact on inflation in the past (both increasing and decreasing) and can be expected to do so again, raising concerns about valuations of financial stocks, and pointing to the need to include commodity stocks in a balanced/defensive portfolio. The inefficiencies of the micro- cap market often present superb risk/reward situations, and OLEX is one the best one we've come across in a long time. Currently $.63, buy up to $1.25 for a minimum target of $3, and stay tuned for updates.
* Information is obtained from sources deemed reliable but is not guaranteed as to completeness or accuracy, and should not be construed as an offer to buy or sell any securities. Complete information should always be obtained directly from the company. Small Wonders personnel may have a position in this company. Subscription is on a pay-as-you-go basis. To guarantee timely receipt of our next report, by Fax or Email, pay for this report by check for $25 to Small Wonders, 45 Woodland St, Windsor, CT 06095
(COMTEX) OILEX ANNOUNCES RECEIPT OF AUDITED FINANCIALS
HOUSTON, May 1 /PRNewswire/ -- Oilex International Investments, Inc. (Nasdaq Bulletin Board: OLEX) announced today receipt of its Independent Auditors' Report for the periods ending Dec. 31, 1995, 1994 and 1993 from Simonton, Kutac & Barnidge, LLP. Highlights of the report indicate Discounted Future Net Cash Flows exceeding $37 million, and a Net Break- Up Value per common share of $2.05.
In further comments related to the report, the company stated that reserves added since January 1 would increase these figures significantly. Specifically, proven and probable reserves from properties in West Virginia (83,751 deeded oil and gas mineral leases) Carbon County and Unitah Basin in Utah (5,840 acres) and the Tin Cup Mesa field in Utah. Using the same accounting procedures applied by its independent auditors, these fields could yield Discounted Future Net Cash Flows exceeding $111 million, and a Net Break-Up Value per common share of $6.12.
Above valuations exclude the latest acquisition-in-process, White River Dome in Colorado, with 500 billion cubic feet of estimated proven reserves, and the potential for over $1 billion in future cash flows. This acquisition is on track to close on or before May 15, 1996.
CONTACT: Allen Jones of Oilex International Investments, 303-470-8783, e-mail: firstname.lastname@example.org, or C
JONES Web Site: ibb.com (OLEX) CO: Oilex International Investments, Inc. ST: Texas
IN: OIL SU: