Voyager Oil & Gas (VOG) emerged as one of three stocks potentially having the most upside from a series of four previous articles where I compared the announced 2012 capital expenditure budgets for 20 various small/mid/large-cap stocks versus their enterprise value, which is total market cap plus long-term debt. This provides a bang-for-the-buck ratio which is a strong predictor of future production and revenue growth for each respective company. The higher the percentage of planned capital expenditures to total capital structure, the greater the growth potential to current valuation.
Three smallcap companies exhibited much higher ratios than the other 17 companies in the comparison; Triangle Petroleum (TPLM), U.S. Energy (USEG) , and Voyager Oil & Gas . In two previous articles I looked more in depth at Triangle and U.S.Energy . It should be noted Voyager is a microcap company and all microcap companies carry higher risks than larger more well established companies. In general microcap companies can have more difficulty accessing the capital markets to raise additional capital and are often subject to a much higher beta (swings in price) than larger companies.
As of April 17, 2012, Voyager had 57,848,431 shares outstanding and a marketcap of $138 million. The company had $14 million in cash and a $15 million undrawn borrowing base on its $150 million line of credit available as liquidity at the end of 2011. For 2012 Voyager has a $70 million capital expenditure budget. Voyager has a pure non-operator business model. The company takes an average of a 10% working interest in a field and is highly diversified in terms of both operators and geography across the Williston Basin in North Dakota and Montana. Voyager expects to spud 10 net wells and complete 6 net wells in 2012. The company recently reported it is on track to meet its 2012 projections and has already added 2 net producing wells. Voyager is depending on cashflow and a significant increase in the back half of the year in its borrowing base to fund its 2012 capital budget.
Voyager's primary asset is 33,000 net acres in the Bakken/Three Forks. The company anticipates 50% of the acreage will be held by production by the end of the year. The company has 33,500 net acres in the Heath Oil Shale in Montana, which management believes has similar characteristics to the Bakken. They also have 65,000 net acres in the Tiger Ridge area of Montana. This acreage is a natural gas play and drilling is not economical based on current natural gas prices.
Voyager posted a net loss for the year ended December 31, 2011 of $1.35 million on $8.43 million in revenue. The loss represented ($0.02) per share. Because of its non-operator business model Voyager has much lower general and administrative expenses compared to similar sized oil and gas companies. This should allow a lot of future production growth to flow to the bottom line. Production for the year ended December 31, 2011 was 98,011 barrels of oil equivalent (BOE), an increase of 84,231 BOE, or 611%, from 13,780 BOE for the year ended December 31, 2010. The company significantly increased production in 2011 and based on its plans looks to significantly expand production in 2012.
Voyager's assets are somewhat undervalued at present. Where Voyager offers a real opportunity to investors is in its growth potential. total production for the second half of the year could exceed 300,000 Boe. Based on current prices for oil and Voyager's current expense profile the company could become very profitable if it achieves its plans.
Disclosure: I am long USEG.