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Teacherman1 (47.64)

Liquid Gold for the Price of Mud

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October 04, 2011 – Comments (10) | RELATED TICKERS: AXAS

At the time of this posting, AXAS is trading at a 17% discount to "PROVEN" reserves, and at one point was down to a discount of 22% of "PROVEN" reserves.

The net assest value of their shares, using only "PROVEN" reserves, is $2.46 per share.

If you add in "PROBABLE" reserves, the net asset value per share is over $13.00.

They have hedges on their production through 2013 at an average of $75.69 for oil, and $6.69 for gas.

They have 77% of their production hedged for 2011, 80% for 2012, and 67% for 2013.

They expect to end 2011 with a daily production of between 4,700 and 4,900 per day.

They have 10% insider ownership, and 40% institutional.

There is a lot of "short selling" going on in this stock, but it is not based on any "real problem area". It is just "speculative" trading.

I am not trying to "tout" this stock. I personally am in at $1.90 per share, and was up over 200% at one point, and was not even "tempted" to sell.

This is an unbelievable opportunity to pick up a winner in the O & G sector, for those who are willing to take advantage of it.

If nothing else, take a small position for your "future well being". The downside from this level is "minimal", and then only for the short term.

The above is JMO and worth exactly what I am charging for it.

10 Comments – Post Your Own

#1) On October 04, 2011 at 3:41 PM, MegaShort (99.96) wrote:

"There is a lot of "short selling" going on in this stock, but it is not based on any "real problem area"." 

"The downside from this level is "minimal", and then only for the short term."

They have $94M in debt against $4M in cash. In order to survive they had to issue 43 million shares over the last 4 years.

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#2) On October 04, 2011 at 4:04 PM, Starfirenv (< 20) wrote:

Live webcast today-  10/05/11 at 2:45 p.m. CT.

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#3) On October 04, 2011 at 4:18 PM, Teacherman1 (47.64) wrote:

How much do you know about the history of this company?

Are you aware that for a number of years they were primarily the General Partner in a partnership that was supposed to go public in April of 2009 (via Lehman Brothers), and AXAS itself had no debt.

Since the "crash" prevented that from happening, they had to go another route, so this is almost a "start up" from 2009.

They sold off non-core assets and issued stock to get money to pay down their credit facility to the $90M level and entered into a joint venture to expand their capex to $60M for 2011.

They still have some $20M available from the joint venture partner to use, as well as $30M to $40M available under their credit facility (based on proved reserves), to use in their operation.

At that same time, they were able to get rid of an "overhang" in outstanding shares left over from the other partners being paid off.

They have increased their drilling and production tremendeously  over the past 18 months or so, and are in line to increase their annual revenue to the $120M to $135M level, based on their anticipated production level by the end of this year, and that is with oil at their hedged rate of $75.

They have a lot of positive things happening, including preventing the problems they had in not being able to secure needed drilling services that hurt them in the Baken earlier.

They have now bought their own rig, and after it is refurbished, they will employ it for "pad drilling" there.

You are entitled to your own opinion, just as I am, but simply looking at the financials of this company can give a very misleading impression.

Where they are now, and where they will be in the future, has no relationship to where they were in the past.

JMO and worth exactly what I am charging for it.

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#4) On October 04, 2011 at 4:50 PM, Teacherman1 (47.64) wrote:

Starfirenv

You can see the information (as slides) that they are going to present, at their website.

By the way, what happened to your picks? Did you close out and start up under a new name?

AXAS is up 15% since I first posted this blog this morning, and 27% from their low of the day.

They will go up and down because for now they are a "short target", but over time, the "shorts" will have to give up.

Just take advantage of the times that the "shorts" are active to buy in for a longer term hold.

It will be worth it.

JMO and worth exactly what I am charging for it.

BTW MegaShort, did you short them in CAPS? Since you feel so strongly that they are "toast", it would be interesting to see how it plays out.

Hope both of you do well in all your investments.

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#5) On October 04, 2011 at 5:20 PM, MegaShort (99.96) wrote:

"BTW MegaShort, did you short them in CAPS? Since you feel so strongly that they are "toast", it would be interesting to see how it plays out."

Not currently, I red thumbed them at $3.16 and closed it at $2.55.

In my comment above, I didn't offer an opinion on their current value.  But I do disagree with the general idea that a small oil company with low cash and high debt has minimal potential downside.

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#6) On October 05, 2011 at 10:31 PM, shamapant (90.85) wrote:

*Im posting a comment on your older blog 'green grass in summer heat'* about DCIX, just wanted you too see the comment

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#7) On October 10, 2011 at 11:18 AM, Teacherman1 (47.64) wrote:

Up 52% this morning ($3.09) from when I posted this blog 6 days ago, when it was at ($2.02), and is up 66% from its low that morning of ($1.86).

It can go down as well, but the point of my blog was that there was a minimal downside, and this was a good longer term hold.

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#8) On October 11, 2011 at 4:14 PM, Starfirenv (< 20) wrote:

$3.40 today-  great call!

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#9) On October 11, 2011 at 5:25 PM, Teacherman1 (47.64) wrote:

Thanks Starfirenv

I'm glad to see it up just to prove my point, but this is only about 25% of where I expect it to be over the next couple of years.

The shorts may pile back on and run it down again, and if they do I will try once again to get longer term investors to look at it carefully and take advantage of the dips.

One of these days, they will have such a great quarter that this level will be history, and a great investing opportunity will have been missed.

Of course, that is JMO and worth exactly what I am charging for it.

Have a great week.

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#10) On October 27, 2011 at 2:29 PM, Starfirenv (< 20) wrote:

$4.37-  More than a double in what 16 trading days?  Consider you point proven.  Congrats, best

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