SARA looking better - Earnings Call

[wilmawatts]

Nice jump in production rates last quarter, and they said the production growth continues, but company has to continue the trend into 2015.

Proved reserves PV10 less debt is $7.52 a share. Stock is selling at $1.66. A good cushion of safety. Then again, these guys need to execute, they said as much during the call last week.

I know these guys are not your favorite Dan, but I like the concept of a value based turnaround play with lots of proved preserves and a PV10 well above the current stock price and production rising, in an area using conventional drilling and well established infrastructure, with the latest seismic technology helping assist locating wells on HBP acreage. Risk is mitigated to some extent, with upside, the best place to find new oil is in an old field is the saying.

[ghrcap]

It can be bought on the bid with some patience as there is a seller around who apparently agrees with Dan. However, I agree on the fundamental opportunity and expect it will work higher as storm risk abates in October-November and 3Q results confirm cash flow neutrality including capex.

[dan_s]

They speak at EnerCom on Tuesday. I will try to listen to their update.

[dan_s]

I went to the SARA presentation today. It does seem to look a bit more promising but I want to see at least one profitable quarter first.

[wilmawatts]

Not a bad game plan Dan.

I listened to the Enercom replay and it seemed positive. But as you say, they have to walk the walk for more than one quarter.

Quarter one average BOED was 1,330

Quarter two (just reported) average BOED was 1,944

Production rate first week of August 2,662 BOED

They would not comment on what they thought the average for Q3 would be, which is probably good, but they said it would be up from the 1,944 (Q2) rate. We will see

[dan_s]

I have to focus on getting the newsletter out when I get back from EnerCom, then I have a bunch of updated profiles to get out on our model portfolio companies. It will be awhile before I can get to SARA.

I did spend some time with EPM. They are going to host a luncheon for us after Delhi reaches payout, which they said would happen in October. EPM's free cash flow will be over $10 million per month after Delhi pays out. It will be interesting to see what they do with all the cash. They may jack up the dividend on the common stock and call the pfd stock.

[wilmawatts]

The latest version of the View from Houston is great Dan.

Good job summarizing the state of the energy sector and highlighting some interesting investment choices.

[bearcatbob]

The latest version of the View from Houston is great Dan.

Good job summarizing the state of the energy sector and highlighting some interesting investment choices.

Each issue provides a "grounding in reality" as opposed to the emotion of the trading day.

[dan_s]

Thanks guys. My belief is that if we stay focused on production and proven reserves growth we will beat the market. None of know what oil and gas prices will do, but revenues are generated by production volumes X price. Owning companies with double digit production growth locked in why the Sweet 16 has averaged more than 25% annual growth since 2001.

As I have posted many times. This year reminds me of 2010 when we made a killing in the 4th quarter.