Notes
From the 2006 annual report:" Toreador Resources Corporation (TRGL), a Delaware corporation is an independent international energy company engaged in oil and natural gas exploration, development, production, leasing and acquisition activities. Our strategy is to increase our reserves through a balanced combination of exploratory drilling, development and exploitation projects and acquisitions. We primarily focus on international exploration activities in countries where we can establish large acreage positions. We also focus on prospects where we do not have to compete directly with major integrated or large independent oil and natural gas producers and where extensive geophysical and geological data is available. Our international operations are all located in European Union or European Union candidate countries that we believe have stable governments, have existing transportation infrastructure, have attractive fiscal policies and are net importers of oil and natural gas.
"We currently hold interests in permits granting us the right to explore and develop oil and natural gas properties in offshore and onshore Turkey, Hungary, Romania and France. We also own various non-operating working interest properties primarily in Texas, Kansas, New Mexico, Louisiana and Oklahoma. At December 31, 2006, we held interests in approximately 5.5 million gross acres and approximately 4.2 million net acres, of which 94.4% is undeveloped. At December 31, 2006, our estimated net proved reserves were 16 million barrels of oil equivalent (MMBOE).
"Historically, our operations have been concentrated in the Paris Basin in France and in south central onshore Turkey and offshore Turkey in the Black Sea. These two regions accounted for 86.9% of our total proved reserves as of December 31, 2006 and approximately 69% of our total production for the year ended December 31, 2006.
http://www.toreador.net/index.html
Some interesting analysis from Michael Brush (June, 2007):
http://www.investorideas.com/insiderscorner/Articles/060807.asp
I like this pointer to a long-term advantage for the company:
"One factor in Toreador's favor is that all of the countries in Eastern Europe where it has drilling rights are big importers of energy from Russia. Given how Russia has become more erratic and willing to use energy as a political tool, these countries should be keen to develop their own supplies with Toreador."
Dilution and other elitist crap
"As of March 31, 2007, there were 72,000 shares of Series A-1 Convertible Preferred Stock outstanding. At the option of the holder, the Series A-1 Convertible Preferred Stock may be converted into common shares at a price of $4.00 per common share (conversion would amount to 450,000 Toreador common shares). The Series A-1 Convertible Preferred Stock accrues dividends at an annual rate of $2.25 per share payable quarterly in cash. At any time on or after November 1, 2007, we may elect to redeem for cash any or all shares of Series A-1 Convertible Preferred Stock. The optional redemption price per share is the sum of (1) $25.00 per share plus (2) any accrued unpaid dividends, and such sum is multiplied by a declining multiplier. The multiplier is 105% until October 31, 2008, 104% until October 31, 2009, 103% until October 31, 2010, 102% until October 31, 2011, 101% until October 31, 2012, and 100% thereafter.
The preferred shares result in dividend payments of over $40,000 quarterly.
In March, TRGL raised almost $50 million by a private placement of common stock and warrants with institutional investors. This is bad: financially sound companies fund their growth with their operating cash flow.
This is crap. The company officers made a mistake and had to restate four years worth of financial statements, and as a result the shareholders paid them more:
"General and administrative expense, not including stock compensation expense and amounts due the former President and CEO, was $3.3 million, for the first quarter of 2007 compared with $2.1 million for the first quarter of 2006. The increase is primarily due to increased costs of restating the financial statements for the years ended December 31, 2003, 2004 and 2005 and the quarters ended March 31, 2006 and June 30, 2006 and the 2006 audit of approximately $702,000, increased personnel costs of $87,000 and increased Board of Director fees and expenses of $94,000 due to increasing the size of the Board and additional meetings held in January 2007 due the restatement of the financial statements for the years ended December 31, 2003, 2004 and 2005.
They pay $1 million a quarter in stock compensation.
Natural gas prices in Turkey are about 20% higher than in US.
20JUL07 $14
May 23, 2007 press release:-- Initial production rate from three wells on Akkaya platform approximately 20 million cubic feet of gas per day
-- Wellhead price of approximately $8 per thousand cubic feet of gas
-- Full production estimated to be approximately 50 million cubic feet of gas per day from three platforms by third quarter
The company has a 36% interest in these wells. So, under full production by the third quarter, they get a cash flow of $48 million per year from this production. Its operating cash flow for 2006 was only $14 million, so the money-making will accelerate soon.
GROWTH ESTIMATES -- some real eye-poppers
2008 revenue estimate: 77%
2008 Earnings estimate: 1130% <--WOW
However, the company has history of missing earnings guidance by a wide margin. Last quarter it missed by over 200%.
Big pile of insider buying in 2007, in the $13-16 range.
Fundamentals are mediocre at best. This is a growth story:
Market Cap (intraday): 268.70M
Forward P/E (fye 31-Dec-08): 8.67
Price/Sales (ttm): 7.23
Price/Book (mrq): 1.5 (almost all tangible)
Current ratio: 1.4 (not good)
Price/Cash Flow: 23
Note cash flow will quadruple by the end of 2007 (according to management--see Akkaya note above), giving a forward P/CF ratio of 5. S&P average P/CF is 14.
Thoughts: a complicated and intriguing oil/gas company. High-risk and high-reward, but perhaps not so high risk as it seems. It is making concrete, verifiable claims about production in the Black Sea which lead to hard cash numbers that look good. Credibility has been a problem for this company: if it starts pumping gas and making money, the stock price will rebound a bunch. One year growth estimate of 1000% is very enticing. The possibility that it offers an alternative to Russia as a source of natural gas in Eastern Europe seems alluring. Russia has been acting like an energy bully, and all sensible countries in the region want to reduce dependence on it.
15SEP07 - $10.50
Conference Call NotesThe CEO claims his "intense focus" is to maxmimize cash flow. The company sold some US properties, and now calls itself a "pure play" international energy company. It's looking for a strategic partner for exploration activity (suggesting cash on-hand isn't adequate to capitalize on opportunities). Several references to unreasonably low stock price. The compnay expects much lower expenses in the second half of 2007. "No need for equity financing" (i.e., dilution).
Forward P/E (fye 31-Dec-08) : 7.84
Price/Sales (ttm): 5.10
Price/Book (mrq): 1.13
Price/Cash Flow: 21.30
Total Debt/Equity (mrq): 0.661
Current Ratio (mrq): 2.236 <-- big improvement
Growth Estimates:
Revenue 2008: 81%
Earnings: this qtr. 0%; next qtr. 172%; next yr. 193%
I wonder why next year's growth estimate declined from over 1000% to a mere 193%.
19DEC07 - $7.56
Market Cap (intraday): 146.50MEnterprise Value (19-Dec-07): 242.40M
Forward P/E (fye 31-Dec-08): 10.08
Price/Sales (ttm): 3.32
Price/Book (mrq): 0.82
Enterprise Value/Revenue (ttm): 5.49
Enterprise Value/EBITDA (ttm): -10.594
GROWTH
Earnings: Current Qtr. 88.0%; Next Qtr. 127.3%; Next Year 124.8%
Sales: Next Year 65%
Thoughts: Still a growth story, and still plagued by setbacks. Recently, a fishing boat damaged the main gas pipeline from Toreador's main well in the Black Sea. The company says insurance will cover the repair, and it has begun litigation against the fishing company. Production will resume early in 2008. Toreador has more natural gas than oil, and gas is underpriced relative to oil. (It's also cleaner burning, and more likely to benefit from future environmental legislation.)
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