Today’s Daily Alert recommendation is a micro cap oil and gas junior. Trading under a dollar, this recommendation is only for the most aggressive, risk-tolerant investors.
The new idea is followed by an update for holders of Compugen (CGEN).
Marquee Energy (SKWEF)
from S.A. Advisory
Marquee is a junior oil and gas company focused on light oil and natural gas liquids (NGL) production in Alberta, Canada.
Many Canadian oil and gas opportunities need to catch up to the sudden surge in WTI prices during the past 45 days. Currently WTI is $106.00/barrel, Brent is $108 and Canadian Heavy Oil is around $75/barrel.
Marquee’s first quarter production stood at around 2300 BOEPD. According to management the exit rate will be at least 2700 BOEPD. Management estimates that at the end of 2013 their oil and NGLs will be around 65%-70%. Only 60% of their production is hedged so SKWEF will benefit from the current strength in fossil fuels.
During the second half of 2013 Marquee intends to drill seven additional wells on their acreage. They are drilling six horizontal wells within their Michichi acreage (light oil) and one well within their heavy Oil acreage (Lloydminster). They have never drilled a ‘dry hole’ on their Michichi acreage. Management estimates their Michichi acreage has over 110 locations. Management has had 100% drilling success within their Michichi acreage.
The CAPEX for 2013 is around $27 million. The current net asset value (NAV) is around $2.08/share (around 60 million shares fully diluted and outstanding). At present SKWEF trades at 75% below its NAV. At current levels SKWEF is attractively priced as a takeover candidate with huge upside potential.
The company has a 2.7 million share buy back program in place until May 2014. The company is actively engaged in selling non-core acreage. The current debt is around $40 million. The next earnings report will be issued around August 22nd with a corporate update.
We believe that pending drilling results, higher oil and NGL prices, sale of non-core acreage, increase of reserves (NAV) and the cheap fundamentals of Marquee Energy will lead to a higher share valuation. It should also be noted that the continued consolidation in the oil patch that SKWEF is an ideal buyout candidate.
We like Marquee Energy short and long term and believe that it will appreciate 100%-200% within the next 12 months.
Marquee, in our opinion, offers very little downside risk and many upside angles. We rate SKWEF with a strong speculative buy at current levels.
William Velmer, S. A. Advisory, www.saadvisory.com, 801-272-4761, August 11, 2013