Small-Cap Growth Portfolio Update - Jan 17

[dan_s]

I am updating the forecast/valuation models for all ten companies in the Small-Cap Growth Portfolio this week using my fresh oil & gas price forecast. My valuations won't change much since the companies are all getting most of their revenues from oil sales.

Hemisphere Energy (HMENF) gets all of its revenues from oil sales.

We will be publishing an updated profile on Talos Energy (TALO) late this week. They recently announced two new deep-water discoveries. TALO has the most exploration upside.

I talked to the Ring Energy (REI) CEO yesterday. He told me that the integration of the Stronghold Energy assets and the new staff is going well. Ring is going to report a big increase in production from Q3 to Q4. My current valuation stays at $7.10 per share. I expect Ring to host a webinar for us in late March to update us on their 2023 drilling program. If WTI stays over $80/bbl, Ring should generate over $250 million of operating cash flow this year (compared to $179 million in 2022). There is nothing to justify REI trading at less than 2X CFPS.

[dan_s]

I just posted my updated forecast model for HMENF to the EPG website. The stock is still trading under $1.00 and my valuation is still $3.00.

Hemisphere will be completing two new wells within Atlee Buffalo in Q1, so 2023 should get off to a good start.

I expect Hemisphere's 12/31/2022 3rd party reserve report to show a PV10 Net Asset Value of just their P1 reserves to be over $3.00US per share.

[mrbill]

"Qualified dividends from HMENF". Is there any way we can get those back or are they taken for good by the Canadian government?

[dirtdauber]

They should withhold Canadian income taxes on the dividends. Don't rmember how much (flat 20%???).
Your broker will report the withholdings to you, along with the gross dividends, so you can report both of them on your US Form 1040. Use Form 1116 for the withholding. Usually, you will get a 100% tax credit for the Canadian tax and pay full measure to Uncle Sam for the US tax. I think there are some caveats, but have never encountered them. I've done this several times and had no trouble, using H&R Block's (and its predecesor's) software.

[dan_s]

The U.S. has a treaty with Canada, so we get 100% "Foreign Tax Credit" for the Canadian taxes that are withheld.