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Steve Zachritz
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Steve Zachritz, "Zman", is an investor/trader who specializes in the energy sector. He has managed small cap growth portfolios, been an energy banker, and a sell side exploration and production analyst (Prudential and Jefferies) in his 20 years in the financial markets. His daily writeups... More
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Zman's Energy Brain, LLC
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Zman's Energy Brain
  • SSN Announces Subscription Rate, Still Awaiting Acreage Sale Finalization 3 comments
    Jul 14, 2010 5:12 PM | about stocks: SSN, AOIX, KOG

    This article was originally posted to our site at zmansenergybrain.com last Friday.

    SSN Announces 75% Allotment:

    • Shareholders receive 75% of their subscriptions. Expect to see shares and refund checks for the 25% in accounts next week.
    • After the deal, SSN should have 82.7 mm ADS outstanding following the deal giving them a market cap of $71 mm.
    • Proceeds of the deal are $6.2 mm to their cash reserves for this deal.
    • Use of proceeds will be to tide them over on their programs and cash needs until the asset sale in the Niobrara closes in late July.
    • I would not be surprised to see some very volatile swings in the shares, now that people know what they have in their possession. The acreage sale after all is not yet a done deal and between now and then, I'm sure many holders will take the easily flip, myself possibly included.
    • My valuation thoughts in a table:

     

    This was posted to our site Monday.

    • Post offering share count confirmed, same as my model last week
    • Niobrara portion of presentation shows the acreage sold so they are assuming the deal gets done
    • In fact, they are assuming the deal gets done at the high end of the range of possibilities, $US 76 mm (pre tax).  Note that current market cap is $US 70.2 mm.
    • Planning to drill two 5,000 foot horizontal Niobrara tests on their remaining acreage (they are expecting 500 bopd IPs, one would assume based on results they have heard about from EOG just to the south).
    • They see 26.8 mm BOE recoverable reserves on their remaining Niobrara acreage … to early for me to gauge the reasonableness of the assumption but the math to get there would not be overly aggressive if this were good Bakken country.
    • My sense is that the stock will move on positive Niobrara news from the EOG 2Q call, should there be any (EOG has been going slow as usual with the data from this play although not with the permitting and drilling).
    • If we transition from thinking in terms of acreage valuation to EUR valuation and they are close to correct on the reserve forecasts the stock will leg higher from here, perhaps adding another $1.25 to my $1.31 to $1.61 price target range (so call the new really case target $2.50). That should take us into next year's drilling to accomplish.   
    • SSN is also planning to sell Rockies gas assets of about 11 Bcfe which could fetch $15+ mm.
    • Lastly, I find it interesting that in the back of their new presentation they compare themselves to KOG and AEZ.
    We continue to own shares of SSN and continue to await our 75% distribution in the rights offering, which, as of today's $1.01, affords an immediate flip gain of 74%.



    Disclosure: I am long SSN, AEZ, and KOG
    Stocks: SSN, AOIX, KOG
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Comments (3)
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  • snakesalive
    , contributor
    Comments (58) | Send Message
     
    zman! If you get a minute you can visit saadvisory.com and review the July 1 2010 email alert for sdcjf.pk recommendation and then review the June 1 2010 email alert for ssn!
    You like what we already liked - then check out my favorite stock in the world! awrcf.ob produce copper wire in Asia- they do biz in china,Singapore,Australia and Thailand
    rev for 1st q 100 million and .27 net
    last year 360 million and .73 net
    trailing 12 -- .89 net
    only 13.8 million shares outstanding and Michael Dell of DELL own 1.5 million
    bk around $10.00
    cash on hand $4.50
    currently trading at $3.15
    fully reporting - files 20f and 6k and intend to file for listing on major US exchange soon.
    In this weeks Wall St. Transcript
    see recent extremely bullish press!
    awrcf.ob - Sir now this is a cheap stock- let us see if you can see it!
    Yours truly
    snakes alive
    15 Jul 2010, 11:54 PM Reply Like
  • snakesalive
    , contributor
    Comments (58) | Send Message
     
    Financial writer for over 26 years- fundamentalist by trade-not interested in the herd and usually do the opposite of the current trend. Currently very bullish toward Bakken and Niobrara oil and gas shale. Our personal account during 09 was up 312%- The sky was falling chicken little, but we picked up the pieces as they fell!
    16 Jul 2010, 12:01 AM Reply Like
  • Steve Zachritz
    , contributor
    Comments (477) | Send Message
     
    Author’s reply » We sold half the SSN position today for $1.30, up 110% to our average cost and up 194% from out initial purchase.
    21 Jul 2010, 03:43 PM Reply Like
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