Overview:
- 60 Junior Oil and Gas Companies with production between 500 and 10,000 BOED
- Average market capitalization per BOED is $16,141
- Average debt per BOED is -$9,549
- Average enterprise value (market cap less debt) per BOED is $30,871
- 8 of the 60 companies didn't have any debt
| Company | Market Cap per BOED | Debt per BOED | Enterprise Value per BOED |
| Questerre | $183,658 | $63,217 | $246,875 |
| Insignia | $10,259 | $34,508 | $44,768 |
| West | $9,596 | $23,158 | $32,755 |
| Painted Pony | $6,173 | $16,976 | $23,149 |
| BlackPearl | $30,763 | $11,234 | $41,997 |
| DeeThree | $2,401 | $2,793 | $5,194 |
| Sure | $20,185 | $2,570 | $22,754 |
| Bellamont | $41,061 | $977 | $42,038 |
| Angle | $2,190 | $(1,235) | $3,425 |
| Intl Sovereign | $6,411 | $(2,795) | $9,206 |
| Terra | $3,354 | $(4,641) | $7,994 |
| Canext | $26,527 | $(6,515) | $33,042 |
| ProspEx | $11,146 | $(7,530) | $18,677 |
| Culane | $11,875 | $(7,703) | $19,578 |
| Triton | $6,935 | $(7,798) | $14,733 |
| Zargon | $18,584 | $(7,940) | $26,523 |
| NuLoch | $51,004 | $(8,615) | $59,619 |
| Anderson | $10,680 | $(8,970) | $19,650 |
| Storm | $12,276 | $(8,985) | $21,261 |
| Yoho | $5,731 | $(9,395) | $15,126 |
| Ironhorse | $1,601 | $(9,407) | $11,008 |
| Redcliffe | $32,724 | $(9,826) | $42,550 |
| One | $14,468 | $(10,204) | $24,672 |
| Wrangler West | $1,430 | $(10,235) | $11,665 |
| Breaker | $3,401 | $(10,441) | $13,842 |
| Rock | $7,779 | $(10,447) | $18,226 |
| Dejour | $49,651 | $(10,671) | $60,323 |
| Midnight | $25,137 | $(10,938) | $36,075 |
| Diaz | $9,952 | $(11,400) | $21,352 |
| TRUE | $6,132 | $(11,738) | $17,870 |
| Orleans | $1,241 | $(12,324) | $13,565 |
| Midway | $2,052 | $(12,581) | $14,632 |
| Cinch | $16,800 | $(12,730) | $29,530 |
| Canadian Phoenix | $38,500 | $(13,076) | $51,576 |
| Cequence | $6,460 | $(13,694) | $20,154 |
| Twin Butte | $13,987 | $(13,928) | $27,915 |
| Second Wave | $7,508 | $(14,395) | $21,903 |
| Petro-Reef | $12,086 | $(14,579) | $26,665 |
| Berens | $17,456 | $(14,585) | $32,041 |
| Monterey | $9,465 | $(14,664) | $24,129 |
| Crocotta | $658 | $(14,894) | $15,552 |
| Vero | $275 | $(15,057) | $15,332 |
| Twoco | $8,843 | $(15,234) | $24,077 |
| Delphi | $1,858 | $(15,289) | $17,147 |
| Stonefire | $3,923 | $(15,914) | $19,837 |
| Result | $11,085 | $(16,102) | $27,187 |
| Open Range | $5,319 | $(16,429) | $21,747 |
| Arsenal | $16,301 | $(16,594) | $32,895 |
| Great Plains | $21,803 | $(17,005) | $38,808 |
| Bonterra | $19,240 | $(17,303) | $36,543 |
| Seaview | $28,476 | $(17,477) | $45,953 |
| Fairwest | $8,120 | $(19,311) | $27,431 |
| Zapata | $2,717 | $(19,779) | $22,496 |
| Buffalo | $14,500 | $(20,057) | $34,557 |
| Freehold | $41,048 | $(20,811) | $61,859 |
| Fortress | $9,262 | $(21,777) | $31,039 |
| Arcan | $9,687 | $(25,716) | $35,403 |
| Argosy | $1,629 | $(27,538) | $29,167 |
| Action | $8,836 | $(33,700) | $42,536 |
| EagleRock | $6,210 | $(38,433) | $44,642 |
| Average | $16,141 | $(9,549) | $30,871 |
As can be seen, due to the low valuations or market capitalization and the high debt loads that companies have taken on, the enterprise value per BOED for half of these companies is negative.
The average enterprise value per BOED, $30,871, highlights the fact that there is a problem with the Juniors. Right now, the average Find and Develop (F&D) cost to bring a Barrel of Oil Equivalent (BOE) on line is $16. If the average proved reserves is 8 years then the total cost to bring on a BOED is $16 X 365 days X 8 years = $46,720/BOED. It's less expensive for companies that are looking to acquire production to just buy up these Juniors since the difference between the enterprise value and the actual F&D costs are $12,793. Of the 60 companies listed, there are 55 that have enterprise values lower than $46,720. 92% of the juniors enterprise value is lower than the average F&D costs per BOED, which means that they are undervalued.
I assume that there are several reasons why a lot of these companies have not been acquired and the two that stick out are; lack of access to capital, high debt loads that the juniors are carrying. Acquiring companies probably do not want to take on the debt that the juniors have incurred. Also, as the old saying goes, give them enough rope and they will hang themselves. I think a lot of the juniors have a long enough rope, it is just a matter of time.
I still think that we will see some of these companies get themselves into problems financially since they are carrying a significant amount of debt compared to asset value and banks will start calling there financing. In fact it just happened to one of the juniors listed, Action Energy, where National Bank called the outstanding money owed to them, which was $31.6M. You can see the story here.
At the end of the day, large debt loads and low valuations combined with numerous other factors such as the current market conditions, the low prices of natural gas and such, will be crippling to some of these companies.
These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.
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