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HistoricalPEGuy (62.62)

BRNC and Wexford

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February 17, 2007 – Comments (4)

A good buddy of mine, who is a huge fan of BRNC, noticed something very interesting. An investment firm called Wexford Capital has been selling a massive amount of shares over the last couple of months. Check it out here (aka Bronco Drilling Holdings):

http://www.j...rLookUp=brnc

This is clearly putting downward pressure on this stock. Wexford wants out - but why? Our guess is that they invested well before the IPO and now is profit taking, probably got shares by the penny -- now looking to get into other ventures. The massive selling is a bit concerning, but at this close to book value, our guess is that they simply have made their return on investment and our now looking for other opportunities (any thoughts out there)? Once the sell off has finished and the downward pressure subsides, BRNC could really take off - especially with earnings simply in-line or even slightly below analysts expectations. This should be fun to watch. A stock hovering this close to book value with clear growth prospects and oil well above $40 seems like such a no-brainer. Only time will tell.

4 Comments – Post Your Own

#1) On February 17, 2007 at 11:10 AM, CycleFreak7 (27.01) wrote:

I agree.

It's quite puzzling when looking at the prices of stocks like BRNC, HERO, OMNI, BAS (etc, etc). They all seem terribly oversold and I've loaded my caps portfolio with a bunch of energy small caps that are trading at historical lows.

Demand for energy will not lessen due to the drop in oil prices. Therefore, demand for oil services companies will not lessen. If anything, demand will increase which will increase these company's revenue and profits.

I sure hope I'm right - I've got real money invested in many of these.

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#2) On February 17, 2007 at 5:26 PM, dwot (95.70) wrote:

I guess the thing to really check out with an Oil stock is that they are adequately replacing their reserves.

I've never evaluated oil stocks, but I have seen quite a few trading way below book value, so I don't know how to interpret that.

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#3) On March 05, 2007 at 9:51 PM, dwot (95.70) wrote:

Take a look at Bear Ridge Resources on TSX.

It was one I was following and what a crash, trading for about 1/3rd of what it was at last month.

Look at the cash flow, the debt, the drilling.

Bear Ridge management screwed up royally and they had to issue new equity for cash flow as they simply had no more access to bank loans and if they don't do something about their cash flow, the back will sell off those assets at bargain basement prices to cover their loan and shareholders will get nothing.

I make no comment what-so-ever about this stock, but to actually look at one that crashed and study it, you can think about where to look for potential problems here. Could be just locking in profits, could be they see something you don't.

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#4) On March 09, 2007 at 9:56 PM, HistoricalPEGuy (62.62) wrote:

Wow, you weren't kidding.  BER.TO took quite a hit recently.  However, I don't really think there is much of an analogy here with BRNC (although I am having trouble finding cash flow and debt on BER.TO, where would you look?  TSX.com doesn't really have much).

BRNC - Debt/Equity is a paultry 0.19 - they are practially debt free.  However, there is this holding company, Wexford, which owned all of their stock.  Also, these guys are profitable with over 20% ROE, BER.TO is not.  Investing in BRNC simply isn't risky when you do the numbers.  At so close to book value, it just makes you scratch your head and thinkl - I'm either onto something sweet or just don't know something (as you state - which of course scares the piss out of me - I'm going big on this one).  No guts, no glory.  From what I can tell, its a clear buy with almost no downside.  I really appreciate your skepticism, dwot.  It helps me re-affirm why I love this stock.

Now to go get rich off Molydbendum - no way I can spell that without looking first... 

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