OILEXCO INC. $16.27 (Toronto symbol OIL; SI Rating: Speculative) (403-262-5441; www.oilexco.com; Shares outstanding: 221.5 million; Market cap: $3.6 billion) reported cash flow of $0.64 a share on revenues of $172.4 million in the three months ended March 31, 2008. (All figures except share price and market cap in U.S. dollars). The company’s shares now trade at 6.4 times annualized cash flow based on the latest quarter.
Year-earlier figures are not relevant as production only started up in June, 2007 at the company’s 100%- owned Brenda and 70%-owned Nicol oil finds in the UK North Sea. Production averaged 20,714 barrels of oil per day in the latest quarter.
Oilexco estimates that production from the three wells in Brenda and one well in Nicol will average 30,000 barrels of oil a day by next year. Combined with expected output from its 100%-owned Shelley field and its 40% Huntington interest, 2009 production could average over 54,000 barrels per day. That should give the company annual cash flow of around $6.30 a share. The stock now trades at just 2.6 times that estimate.
Oilexco is now working on a range of development and exploration projects to add to production. This includes its recent discovery of oil and natural gas bearing zones at its Moth project in the North Sea, where it holds a 50% interest. Its partners on the project are BG Group, Hess Oil and British Petroleum.
Oilexco’s market capitalization of $3.6 billion discounts considerable cash flow from its ongoing exploration and production efforts. But we think the company has a good chance of continued success.
Oilexco is still a buy for aggressive investors.
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