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Monday, June 23, 2008

New Buy and Hold - Yes it's an OTCBB

I rarely ever buy an OTCBB or PK stock (PLEASE DO NOT EMAIL THEM TO ME AT ALL). I generally don't like them. Yet as I researched this company, it reminded me too much of my initial PDO research. However, this is a dangerous (because of lack of liquidity), ultra low float, presently illiquid, hard to fill, OTCBB stock that I can't buy size and could get trapped in. That being said, here is why I bought some:

Better numbers and smaller float than PDO and MXC

TVOC.OB - Texas Vanguard Oil Co Float 314k Shares Outstanding 1.4m Per Bloomberg
Texas Vanguard Oil Company acquires, explores, develops, and operates onshore oil and gas properties in the United States. The Company operates in Texas, as well as New Mexico and Wyoming.

In 2007 they did $0.96 EPS on $7.4m in revenues, however look at the average selling prices for 2007:

Oil Production volume - 61,293 barrels
Average sales price per barrel - $68.04

Gas Production volume - 359,969 MCF
Average sales price per MCF - $7.24
Read More here

In Q1 2008 (apparently with higher oil/gas prices kicking in) they did $0.39 EPS on $2.2m in revenues. Included in that number was approximately .06 tax effected EPS for an impairment charge. Without that charge I calculate EPS would have been approximately $0.45 for the quarter. They finished the quarter with $5.3m of cash and no significant long term debt. Read More Here

TVOC.OB closed today (June 23, 2008) at $13.15. They did $0.39 EPS for Q1 2008
PDO did $0.22 EPS for Q1 2008
MXC just reported $0.27 EPS for Q1 2008

Having done $0.96 EPS for 2007 and $0.39 EPS for Q1 2008, is it reasonable to conclude that barring any more impairment or unusual expenses and if oil/gas prices remain high then TVOC.OB could have 2008 EPS of $1.50-$2.00? These numbers appear to be higher than the current reported EPS run rate of both PDO and MXC.


Tim Eriksen said...

Here is another way to look at it. Take annual production and divided it by 4 to get quarterly estimates. 15,000 bbls and 90,000 mcf. In Q1 the average was about $93 per bbl and $8.25 per mcf. In Q2 we are looking at an average of $120 per bbl and $11.25 per mcf.

So oil revenue should grow by $405,000 (15,000 times $27) and gas revenue by $270,000 (90,000 times $3). Total revenue growth of $675,000. There is no cost growth other than some higher production taxes. If we assume $125,000, that leaves $550,000 of pre-tax income growth , or $357,500 of after tax growth. That equates to $0.25 per share.

As you noted EPS excluding the one-time cost was $0.45. Thus Q2 EPS could be $0.70 per share.

If oil and gas stay at $130 per bbl and $13 per mcf, EPS could surpass 80 cents per quarter. That would give a current PE of just under 5.

Superman said...

Agree...I did similar analysis for PDO when it was $5....great analysis...thanks

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