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October 16, 2010 – Comments (4)

"Liberty Energy Provides a Corporate Update for the Quarter to September 31, 2010" 

Let's hope Liberty Energy has a better grasp of the oil exploration business that it has of the Roman calendar! I started poking around this one when I got a paid promo email titled "Urgent: LBYE Shares May Quadruple on Mega-Oil Find"

This is my favorite part:

"Both Cuba and the Bahamas are taking advantage of the the oil rich fields found off their coasts, and as we speak, are setting into motion the steps to start the deep water drilling to extract millions of barrels worth of Black Gold. But while these countries are drilling off-shore, Liberty already has working wells producing oil now - giving them the edge to profit now - instead of months down the road."

Working wells! Hot diggity dog! Certainly that merits a market cap far beyond the current $43 million?

What this promo does not mention is that the company bought its Texas properties, which comprise a 100% interest in one producing gas well (not oil, as the promo claims), a 2% interest in a property with some shut-in wells, and 850 acres of "exploration property" for $125,000. Liberty also bought 1/64th of 1% of a 100% overriding royalty on a property in Bulgaria for $100,000. That's the whole company.

I have requested that LBYE.OB be added to CAPS. I don't expect it to be ratable for very long, so keep an eye out.

TS 

4 Comments – Post Your Own

#1) On October 16, 2010 at 3:44 PM, kdakota630 (29.69) wrote:

TMFSmashy

Your comment regarding the Roman Calendar had me on a one hour Wikipedia hunt as often happens due to my natural curiousity.

Incidentally (and not to sound like a smart-ass) but we currently follow the Gregorian Calender.

And thanks for the pump n' dump heads-up.

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#2) On October 16, 2010 at 5:54 PM, XMFSmashy (99.91) wrote:

Oh jeez. I really took it old school there. Incidentally, September has indeed had 30 days since Julius Caesar bumped it up from 29.

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#3) On October 17, 2010 at 11:26 AM, Teacherman1 (53.06) wrote:

In your various analysis of E & P companies, have you ever done one on AXAS? If so, could you direct me to where I might find it?

Do you have any thoughts on what their Joint Venture with Blue Stone might mean for them going forward?

Would appreciate any information or comments you might have.

I have been following them for a couple of years and they are a significantly different company than what they once were, having merged the Partnership into the "Parent" company.

They are also moving away from being primarily a GAS E & P, to about 50% Gas and Oil.

Their financials are not overly impressive at this time, but they are in a period of transition, and have been ( and intend to continue) divesting non-core assets to raise cash.

They are carrying a lot of debt at this time, but also have a lot of "desirable" reserves, both proven and potential.

I'm wondering, if in addition to more possible Joint Ventures, they might get some outside interest in their "acerage".

I apologize for "hooking a ride" on your blog, but would appreciate your insight if you have any time or interest.

Have a nice weekend

 

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#4) On October 18, 2010 at 12:45 PM, XMFSmashy (99.91) wrote:

Hi Teacherman,

I'm only slightly familiar w/ AXAS, but I tend to pass over E&Ps with this much debt. These companies already possess huge operating leverage to commodity prices. Piling financial leverage on top of that is just asking for trouble. This likely creates a binary situation for the equity holder - multibagger or Chapter 11.

I'd rather create such an asymmetric situation by buying call options on an E&P with a clean balance sheet, but that's just me. I'm afraid of debt in the case of businesses that don't have highly reliable, recurring cash flows, and I like oil and gas CEOs who share that aversion. I find they've often been involved with companies that went down in flames, and "got religion" on debt after that.

Sorry I can't give you a very specific opinion on AXAS. After a quick glance, I'll note their assets are all over the place (looks like they grab acreage in whatever the "play du jour" happens to be -- Haynesville, Bakken, Eagle Ford, etc. -- but that may be unfair), and am glad to see there's a divestiture plan in place. That should do the company a lot of good.

TS

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