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Author: willewonka Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 40  
Subject: basic overview Date: 10/3/2007 1:16 PM
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I'm trying to get a handle on this stock.  It seems like a spectacular buy.  But I'm concerned that I might be missing something. 

Question 1:
All things being equal, rate of growth is directly related to cost of oil.  (I think I remember reading that they lost money when oil was around $60/barrel, so they should come in with some REALLY great news now that it's $80/barrel)

Question 2:
The biggest risk with this particular company is the political instability of the region.

So as long as that part of the world is (relatively) quiet and the price of oil stays the same or keeps going up, things should work out very nicely for stockholders.

Am I missing anything?

Thanks in advance for your help.
Will E
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Author: oneCrookedFella Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30 of 40
Subject: Re: basic overview Date: 10/6/2007 3:04 PM
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Here are some additional observations:

1) There's a disincentive for EGY to produce more than 25k barrels/day in Gabon due to their contract with the gov't (higher royalty bracket that mgmt feels cannot be renegotiated). This serves as an effective ceiling on their growth in Gabon.

2) 1) may be irrelevant since there's an overshadowing concern related to their diminishing reserves.

3) Their entire production operation is dependent on a single ship used to lift the oil. They're in a good contract with the owners of that ship but are trying to renegotiate to increase the ship's capacity, which is currently a limiter on the production rate. The new contract may be unfavorable.

4) Their recent announcement to expand into north sea exploration smacks of desperation. The oil production in that region is in long decline and has become more costly over the years. There's no fundamental reason to believe that EGY will be more successful than the other big names that are already there and currently looking to reduce their dependency on the region. You may also consider that EGY does not currently have any infrastructure in that hemisphere and is looking to partner for a rig.

Disclosure: I hold shares in EGY.

These are some of my greatest concerns but I believe the stock is fundamentally undervalued at $4-5/shr. Also, the basic business model is good and the management team is excellent.

--oneCrookedFella

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Author: willewonka Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31 of 40
Subject: Re: basic overview Date: 10/7/2007 12:46 AM
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Wow. Glad I asked. Thank you for the great information. It looks like my due diligence wasn’t very diligent – I missed all four of your points in my research.

This seems like very detailed and in-depth information. Are you in the industry? Or was this all in the annual reports and I just plain missed it?

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Author: oneCrookedFella Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32 of 40
Subject: Re: basic overview Date: 10/7/2007 6:12 PM
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Willewonka,

This information should be available in their 10-Qs and quarterly conference calls.

Best,

oneCrookedFella

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Author: MoneyfanInOK Three stars, 500 posts Old School Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33 of 40
Subject: Re: basic overview Date: 10/25/2007 10:48 AM
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These are some of my greatest concerns but I believe the stock is fundamentally undervalued at $4-5/shr. Also, the basic business model is good and the management team is excellent.

One other thing I think is worth mentioning is that insiders have not purchased any stock in over 5 years. I agree that the stock appears to be undervalued on paper. But there has to be a reason management isn't buying.

Cheryl
Discl: I also own shares of EGY

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Author: reverendh Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34 of 40
Subject: Re: basic overview Date: 11/29/2007 12:54 PM
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Management has announced plans to buy-- a $20 million stock buyback program. As for personally buying, management has plenty of options and does not need to buy shares on the open market to benefit from low prices. The CEO owns a lot of stock outright. The CFO does nothing but exercise and sell his $1.16 options, on a monthly basis, and retains almost no shares.

One other esoteric but important point that has not already been noted is that the company gets absolutely killed by Gabon taxes. Q3 2007 tax expense is 60%, and all of it was paid in cash. Typically with American companies you will see a wide difference between taxes accrued at the statutory rate of 35%, and taxes paid (disclosed at bottom of cash flow stmt)---with payments usually much less. With this company, the two are equal, so there is little hope of the tax rate averaging out to something more reasonable over the long term. MD&A explanation for the very high tax expense in Q3 is that all tax expense is coming from Gabon, and they had very few deductions in Q3, because they were not spending for exploration and development in the country at that time. This would appear to be not good news; one would expect a field to make more money, in cash as well as after tax profits, as it matures to a fully developed status, with fewer cap ex. In the US, the tax rate would be a max of 35%, net of exploration expenses. In Gabon, it appears to be more like 60% net of exploration expenses. So long as the company was spending heavily there, the high tax rate was disguised. This is my analysis of what happened, based on the tiny amount of info they have disclosed.

For 2006, the tax rate was 40%. For the first nine months of 2007, the rate is 62%. For Q3 2007, it was 60%.

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Author: Brankk Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39 of 40
Subject: Re: basic overview Date: 12/1/2008 2:21 PM
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point no 3 was a bit concerning...after reading about pirates stealing ships recently-http://voanews.com/english/2008-11-25-voa60.cfm

the stock was interesting today because it was one of few climbing in the sea of red declining stocks. speculation...not sure.

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