NiMin Energy (NNN.TO)

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dan_s
Posts: 34584
Joined: Fri Apr 23, 2010 8:22 am

NiMin Energy (NNN.TO)

Post by dan_s »

NiMin Energy gave a very impressive presentation at our EPG luncheon on June 17. I have no problem recommending the stock.

NiMin Energy trades on the TSX as NNN.TO

It also trades in the OTCQX as NEYYF

Their near-term growth is will be coming from four fields (all oil) they operate in Wyoming.

NiMin is heavily weighted to oil.

Dan
Dan Steffens
Energy Prospectus Group
ajootian
Posts: 47
Joined: Thu Jun 17, 2010 7:16 am

Re: NiMin Energy (NNN.TO)

Post by ajootian »

NIMIN Energy (NNN.TO, NEYYF.PK) -- this stock is a rare combination of a solid oil resource play, combined with virtually unlimited upside from a potential technology breakthrough (heavy oil EOR).

Wyoming Resource Play -- better economics than the Bakken

These are 4 heavy oil fields in the Bighorn Basin, and have about 9 mmbo of proved reserves, the large bulk of which are PUDs. The oil is in shallow formations, about 4,000 ft. down, and can be accessed with a simple vertical hole, and a single small frac (if that). The company estimates it will cost about $3-4/boe to drill out these fields. Differentials for heavy oil in the Bighorn have been holding pretty steady in recent years at about 85% of Nymex.

California Heavy Oil EOR

Presently, if heavy oil is any deeper than, say 3,000 ft., there is no way to recover any more oil after the primary recovery has depleted. For shallower formations its possible to do steamflooding, but once you get too deep it gets too cold for the steam to be effective. So right now there are tons of depleted heavy oilfields sitting out there, where only something like 8-10% of the original oil in place has been produced, and the remaining 90% is just sitting there, with no way for us to get it to the surface.

NIMIN has a fascinating experiment going that is trying to solvle this problem. They are injecting CO2 together with foamed oxygen down into the top of the formation, with the hope that that will start an in-situ combustion process that would be sufficient to force the heavy oil to start flowing down to some horizontal wells that have been drilled to locations below the injector wells. After about 10 months of injecting they have gotten only a small response, but still believe the process can work.

If this process works these guys would have the keys to the kingdom. There are literally billions of barrels of oil left behind in heavy oilfields that are totally worthless because there is no way to extract the oil at the time.

Finances

Until Thursday this was a great story stock but no much more since they had no money left. Then on Thursday they raised $10M through Thomas Weisel, with a potential 15% oversubscription option. They are also looking to get a $36 M term loan, part of which would pay off an existing $23 M bridge loan that comes due at the end of the year.

These financings change the whole picture for this company, IMO. Before, all the PUDs in Wyoming were great to hear about, but it was hard to put a value on them since the company had no means with which to drill them out. Now they do.

Once they close the term loan I believe they would be able to actually get not 1, but 2 rigs going over in Wyoming, in a continous drilling program. It costs about $1.5M a month to keep a single rig going there, and with $10M from the equity raise plus another $13 M (net) from the term debt, they would be in a position to drill a mess of wells over there, after which point, further drilling could be financed from cash flow. The optimum way to drill out the fields there would be to use 2 rigs at once, since it takes 2 weeks to drill a well there and 1 week to complete it. With 2 rigs doing the drilling, you could then have a dedicated workover rig follow behind the drilling rigs, completing 1 well a week nonstop.

Conclusion

I know a lot of folks here tend to shy away from the Canadian-traded junior stocks, for good reason. But I believe there are rare occasions when it makes sense to look into this sort of stock, and NIMIN is one of them. In fact this is now my largest position, by far. The fact that they chose a US-based company, Weisel, to be their financiers corroborates my belief that they intend to list on a US exchange at some point. In fact I would be surprised if this has not occurred within a year from now.

So far the stock is only covered by Fundamental Research Corp., see their latest report on NIMIN at http://www.researchfrc.com/research/pdf ... 202010.pdf . Their report, which came out just before the equity raise, derived a "fair value" of $4.16/share (ignoring dilutive securities). I strongly suspect that part of the deal for NIMIN using Weisel for the equity raise was that Weisel would agree to initiate coverage of NIMIN with an Outperform rating in the near future.

There are about 11.5 M warrants that are exercisable at the current quote ($1.55), and these expire in Sept. '11. Given the torrid pace of drilling that will transpire starting very soon, I strongly suspect these warrants will all get exercised, which will help delever the balance sheet.

In conclusion, this stock is very undervalued even if you only counted its Wyoming play. The California EOR play provides some massive optionality, and right now none of that upside is priced into the stock.

*******************************************************************************
Above is a re-post of a message I put on theYahoo board a few months ago. Latest analyst update is at


http://www.researchfrc.com/research/pdf ... 202010.pdf

Nice to see you are following this on Dan. What do the rest of you folks think of this company?
dan_s
Posts: 34584
Joined: Fri Apr 23, 2010 8:22 am

Re: NiMin Energy (NNN.TO)

Post by dan_s »

I spent some time with the NiMin Energy management team before and after our luncheon. I was impressed and think this one is definitely worth watching closely. Their Balance Sheet is now in good shape and they have the capital needed to pursue their business plan. Look for a series of press releases during the second half of this year to draw attention to the stock.

All micro-caps carry a lot of risk and it is all about execution. The first test will be if they can deliver on increasing production in Wyoming. They plan to drill twelve wells this year and they are low risk vertical wells so they should easily be able to deliver on step one of the plan. Increasing production into year-end and increasing proven reserves usually means a rising share price for micro-caps.

Their heavy oil recovery method certainly adds some "sex appeal".

I think this one has a future.

Dan
Dan Steffens
Energy Prospectus Group
ajootian
Posts: 47
Joined: Thu Jun 17, 2010 7:16 am

Re: NiMin Energy (NNN.TO)

Post by ajootian »

Thanks Dan, helpful comments. Based on their recent news release it looks like they are well on their way toward passing the "first test".

Now that their CMD pilot has achieved cash flow breakeven I believe this will get a lot of other companies interested in this process. RIght now the market is not giving any value to the potential of their CMD process but now that it is proving to be commercially successful I think some value will start to be ascribed to that.
dan_s
Posts: 34584
Joined: Fri Apr 23, 2010 8:22 am

Re: NiMin Energy (NNN.TO)

Post by dan_s »

This is quite encouraging. I did buy some after they hosted our luncheon. I like the management team.
Dan

NiMin's Wyoming production has doubled in 2010 from 320 barrels of oil per day ("bopd") to over 650 bopd.-- The Company expects to complete ten additional operations in Wyoming before year-end to further increase production, including new drilling, fracture stimulation, polymer treatments and recompletions.-- The Company is proceeding with the next phase of development at the Pleito Creek Field in California in order to increase production and reduce operating costs.-- NiMin's current production is in excess of 1,000 bopd, a greater than 40% increase in production since the beginning of the year.
Wyoming

Through drilling activity at the Ferguson Ranch Field and workover activity at the Willow Draw Field, the Company has increased oil production from 320 bopd at the beginning of 2010 to over 650 bopd currently. This increase is a result of drilling and completing four new wells and one polymer treatment. For the remainder of the year, plans include the drilling of four additional wells, completion of two recently drilled wells, two polymer treatments and reactivation of two shut-in wells.

California

At the Pleito Creek Field, the Company's proprietary Combined Miscible Drive ("CMD") process continues to deliver month over month production growth. Current production is 260 bopd or 100 bopd above the natural decline of the field. Based on these results, NiMin plans to move from the initial phase to commercial implementation of the CMD process at the Pleito Creek Field. The next phase will include installation of permanent onsite oxygen generation, reactivation of shut-in wells and new drilling. These activities will take place in 2011 and are expected to both increase production and reduce operating expenses.

Management Comments

"Our operating results in Wyoming have delivered significant production growth, and our inventory of planned activities is expected to continue adding new production," said Clancy Cottman, Chairman and CEO. Mr. Cottman continued, "Based on the technical and commercial results of our CMD process at the Pleito Creek Field, we are planning further development that will increase production and reduce operating costs."

For more detailed information, please see the presentation available on NiMin's website at www.niminenergy.com.

About NiMin Energy Corp.

NiMin is an Alberta, Canada-incorporated, California-based independent oil and gas exploitation and production company. Principal operations are located in the Bighorn Basin of Wyoming, the San Joaquin Basin in California and onshore South Louisiana. The Company has over 27 million barrels of oil equivalent ("boe") of proved and probable reserves, 97% of which are oil in California and Wyoming.
Dan Steffens
Energy Prospectus Group
ajootian
Posts: 47
Joined: Thu Jun 17, 2010 7:16 am

Re: NiMin Energy (NNN.TO)

Post by ajootian »

NiMin had new analyst coverage recently, by Global Hunter, $2.50 PT, Buy. The report was linked to NiMin's website for awhile but I see that is no longer.

The Global Hunter report had some good stuff in it, as follows:

1) Pg. 7 -- NIMIN has had "advanced talks" with other operators in the area of their current CMD pilot to form JV's to explore the use of its technology. This is great news, and any announcement of the formation of such a JV would send the stock up appreciably since it would constitute 3rd party recognition of the value of their technology.

2) Pg. 3 -- apparently not all of the wells that got drilled starting in July have been put on-line yet, and the expectation is that the last of these will be online by 11/15. This is great news, maybe I had read too much into the previous PR in my thinking that the production ramp announced therein was the result of having put all of these wells online. Assuming they put out an operations update in conjunction with announcing 3Q, this could be good enough news to overcome the fact that there was probably only a modest increase in production for 3Q. GHS is calling for about a 3% increase sequentially, and I concur with that.

3) Pg. 5 -- polymer treatments are costing $300K, and are expected to pay out in less than 6 months. This is great news in conjunction with the fact that they now plan to do a total of 7 more polymer treatments, 2 this year and 5 next year (pg. 8).

4) Page 8 -- initial cap ex budget for '11 is $18M, which should be easily met from cash flow (GHS is calling for '11 cash flow of $13 M) plus current cash on hand. Obviously if we get $100 oil next year they will be able to ramp up this budget.


I just bought some more of this in the last few days. I was encouraged by how much volume has been flowing into the stock ever since they did that Bloomberg interview and they got the Global Hunter ("GHS") writeup. If you combine TSE and Pink Sheet trading they have averaged well over 100K shares a day ever since then.

At this point volume is more important than price action -- the only way they are gonna get the Big Boys to look at them is to show more liquidity in the stock. They might be only a few weeks away from becoming a fully reporting SEC company and thus graduating to the OTCBB, at which point all the Big Boys that can't (or won't) buy Pink Sheet stocks will finally be able to buy this one.

I realize the stock could sell off a bit on 3Q earnings, but I also realize that there is the chance that they could issue another ops update in conjunction with that, and said update could be quite favorable.

I now own too much of this stock, somebody please remind me of this if I say I wanna buy any more.
dan_s
Posts: 34584
Joined: Fri Apr 23, 2010 8:22 am

Re: NiMin Energy (NNN.TO)

Post by dan_s »

Thank you for reminding us about NiMin. I do have a small stake in that one myself. I liked the management team.

I'm after their IR Manager to get them to host another luncheon for us early next year.

Dan

PS: Hope to see you all today at the EVEP Luncheon. Check out our Company Profile on EVEP which was reviewed with management and updated Nov. 10. I really like this one. Current yield is ~8%.
Dan Steffens
Energy Prospectus Group
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