Olympic fever has caught on at Fool HQ. Not satisfied with the Aussies’ ‘haul’ of one gold medal to date, we’re going in search of our own investing gold.
Yes, we’re seeing value in the precious metal we’ve spent the last 18 months warning readers to avoid like the plague.
Are we off our rockers? Have we succumbed to the sleepless nights watching sporting drama and excellence?
Read on Fools…
We haven’t mentioned Maverick Drilling & Exploration in a while.
It seems a few Fool readers were getting a little tired of us mentioning the company.
Fair enough. Perhaps we were a little over-zealous in celebrating our greatest stock picking success story to date…a company that has seen its share price soar from 22 cents to $1.30 to date in 2012, a gain of almost 500%.
High impact Maverick
The MAD story has a long way to run. The company recently raised $50 million to fund their development and exploration program over the next 12 months, and this includes drilling a number of high impact wells “where the positive results of such drilling can impact the Company substantially more than a traditional development well”.
If nothing else, it promises to be an exciting ride. Let us count the ways…
1. Maverick is currently a profitable producer, although it must be noted the average barrels of oil per day (bopd) fell in the quarter to June 2012 as the company reduced its drilling activities.
2. Compared to its current $500 million market capitalisation, Maverick has massive oil reserves, and huge acreage.
3. With its plan to drill over 60 “high impact” wells in the coming 12 months, Maverick has the potential to significantly add to those already impressive reserves.
A line to Texas
As long-time Fool readers will know, we are in contact with Maverick Executive Director Brad Simmons, our line to Texas.
For us, the one niggle hanging over the investment case for Maverick is their production profile.
Reserves are great, and the lifeblood of an oil company, but production puts the dollars in the bank, and in the long-run, companies are ultimately valued on the discounted value of their future cashflows…with apologies for the jargon.
We put this point to Brad last month, asking for comment on Maverick’s production profile over the next 24 months…
“Bruce, impossible to say due to the new prospects and their increased prospective impact.
Each of the ‘high impact’ wells we are targeting, albeit with varying layers of additional risk, have the ability to replicate many of our current producers with just the one well.
It comes down to the people driving the bus and whether you believe in their commitment to excellence and making the right decisions and having the experience to keep it on the right track. We have one of the best teams making those decisions that could be assembled for this mission.“
It’s the people, stupid
When we invest in companies, we invest in the people running those companies. To date, the seasoned executives at Maverick have not put a foot wrong. In terms of shareholder value, the runs are on the board. And, excitingly so, there are seemingly multiple opportunities to keep growing shareholder value.
Listed investment company Contango MicroCap (ASX: CTN) recently said they expect Maverick to grow production from current levels of below 1000 BOPD to around 2000 by year end, saying they value the company “conservatively at $1.80/share.”
That’s a further 40% upside from here.
We’ll continue to follow the Maverick story, both for the Fool readers who took our advice and bought shares, and for ourselves, as I am a happy and satisfied shareholder, stating the obvious.
The next Maverick
We’re always searching for the next Maverick, the next big winner.
And right now, especially in the beaten-down resources sector, we’re seeing some very interesting opportunities.
We’ve generally avoided the over-heated sector, and certainly have steered well away from high profile yet high-risk investments in companies like Linc Energy (ASX: LNC), Mirabela Nickel (ASX: MBN), Flinders Mines (ASX: FMS) and Aquila Resources (ASX: AQA).
Call us old fashioned, but we don’t care much for losing money…and the four companies mentioned above have each plunged 50% or more in 2012 to date.
Going for gold
But we’re seeing some interesting stocks that have been thrown out with the bathwater. Sure, there’s risk, and some are risker than others.
But with the share prices of some companies being beaten down and forgotten, we’re happy to pick up the pieces, and to hopefully profit.
And, to whet the appetite, and shock the gold bugs we’ve so consistently mocked, we’re even seeing some value in gold…and we’re not just talking Olympic gold medals. Stay tuned, Fools.
Bruce Jackson is the General Manager of The Motley Fool Australia. He owns shares in Maverick Drilling & Exploration. Take Stock is The Motley Fool Australia’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).