KGEI Underperformance

[allen46]

Dan, in the past month or so almost all of your stocks are up 10% or more but KGEI is down about 20%. Do you have any explanation? Is this a buying opportunity or is something wrong?

Thanks!!

[dan_s]

Nothing wrong that I know of. Delay in getting audited financials out is weighing on this stock, but it is not a real world problem. When small-caps uplist to Nasdaq they often have to get new auditors, which put them at the back of the line.

KGEI has very little analyst coverage, which makes investors nervous.

If they are able to meet the midpoint of their 2024 production guidance (3,500 to 4,000 Boepd with 73% crude oil), they should generate free cash flow this year.

I just updated my forecast model to my new oil & gas price deck. You can view it directly from the EPG Home Page.

[allen46]

Dan, in your profile dated December 13, 2023 you showed 2024 production at 6500boepd. In your latest spreadsheet you show 2024 production at 3750 boepd which is a 42% reduction. What happened? I know they had some completion delays that they announced in December, but this reduction is production is massive. I think it is time for me to cut my losses and sell - I currently have a 26% loss on my holdings which were bought a year ago.

What small caps would you suggest I replace it with? Ring or ROK? I already have Surge and Hemisphere. Most of my holdings are in much safer energy stocks but I want to maintain small cap exposure.

[Fraser921]

That's a hard question;

But... ROK warrants are selling for a measy 1/2 cent premium and that's a canadian cent , not a US dollar cent

Rok on TSE is .33 cents bid .335 ask
Rok warrants, convertible at .25 cents are bid 8.5 cents ask .09 cents

so you get a the upside for 1/2 of a canadian cent and you limit your downside risk to the warrant cost which is .09 cents

If the stock doubles to .67 the warrants would be worth 42 cents vs your 9 cent costs a 4.7 x bagger

I own Surge. Anyone with WCS oil is going to do good. Some of these guys budgeted 75 wti and 16 differential net 59.
Its now 85.75 less 13 net 72.75 vs the 59

A name I dont own but watch is Gear energy GXE. They pay 6 cents a year and trades at 66 cents canadian 10 % yield and their budget was based on 59

I actually like some bigger names like SU Suncor for instance

I own Surge which should do well.

[dan_s]

I think ROK has the potential to be a big winner for us. The balance sheet is in very good shape and they have a lot of high-quality Running Room.

The Canadian Juniors are trading at very low multiple and discounts to their PV10.

KGEI needs to rebuild some trust after missing their 2023 production guidance by a wide margin.