Author Topic: GXE - Gear Energy  (Read 40247 times)

Wilson-TPC

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GXE - Gear Energy
« on: September 15, 2015, 09:20:56 PM »
Anyone else look into GXE.TO?

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influx

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Re: GXE - Gear Energy
« Reply #1 on: September 16, 2015, 12:42:01 AM »
Anyone else look into GXE.TO?

Me, but not yet in full details
Due to the link with Peyto founder
Similar approach for monthly PRs

Packer16

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Re: GXE - Gear Energy
« Reply #2 on: September 25, 2015, 07:34:41 PM »
These guys have done some pretty incredible things in terms of capital efficiency (<$10k) and 100%+ RoR on incremental production at today's prices (see September report):

http://www.gearenergy.com/monthly-reports

Packer

notorious546

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Re: GXE - Gear Energy
« Reply #3 on: September 29, 2015, 06:29:18 AM »
Credit line doesn't seem to have much capacity left on it. i wonder if the lending base is already tapped out? some companies leave room to increase or for a buffer for a potential cut to credit lines, while others use it all up!

Packer16

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Re: GXE - Gear Energy
« Reply #4 on: September 29, 2015, 06:49:02 AM »
They have $8 million as of 6/30 on $90m line and paid down the line $11m in Q2.  Given that they pulled the rig in Q3, I would not be surprised if the line is paid down more in Q3.  The coverage is like 22x ($66m EBITDA (1H annualized) on $3m in interest expense) and leverage is 1.2x, very modest levels.

Packer 

Cardboard

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Re: GXE - Gear Energy
« Reply #5 on: September 29, 2015, 08:25:49 AM »
Gear Energy demonstrates a key risk that Penn West does not have: re-determination of the credit line size twice a year by lenders based on reserves values, etc. This is a pain because even if you meet covenants and make all payments on time, the banks can always decide to reduce their book of energy business to reduce their risk and cut your line of credit. Some players will have trouble with this, this Fall.

Gear had a $130 million credit line on March 31 which was reduced to $90 million following the June 1 bank review. Next review is November 1.

These guys produce heavy oil and pricing in Q3 has been brutal so netbacks will come down quite a bit. Reserve values will also head down.

While I firmly believe that this is a nice find by Packer and that the risks of getting in trouble should be close to nil, flexibility is not great. As long as they stick to their core business and live within their means they will be fine and the banks will walk along. Making an opportunistic acquisition would most likely require share issuance meaning dilution or worst entering into a poorly financed stupid deal like Manitok. Therefore, it needs higher energy prices for the stock price to go up and for them to expand or like most.

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investor-man

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Re: GXE - Gear Energy
« Reply #6 on: October 01, 2015, 08:00:41 PM »
I just finished reading everything on their website, and WOW! I can't believe I get to invest in this company at these prices! Love how the September update begins:

Quote
As far as capital investment goes, Gear is probably having its best year ever.

Ferengi Rule of Acquisition #3 "Never spend more for an acquisition than you have to."

Cardboard

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Re: GXE - Gear Energy
« Reply #7 on: October 05, 2015, 12:55:10 PM »
I am starting to gather more information about the company and one concern of mine that has arisen is the low level of reserves at Wildmere and Maidstone or the two areas where they are focused and have close to 100% working interest. Only 6.75 years and 4.8 years respectively based on Q4 2014 production rates.

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Wilson-TPC

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Re: GXE - Gear Energy
« Reply #8 on: October 05, 2015, 02:18:02 PM »
I am starting to gather more information about the company and one concern of mine that has arisen is the low level of reserves at Wildmere and Maidstone or the two areas where they are focused and have close to 100% working interest. Only 6.75 years and 4.8 years respectively based on Q4 2014 production rates.

Cardboard

I recommend contacting Ingram Gillmore himself for additional info on that.

Email me if you want his contact info. I also would like to add you to a group of guys that I'm working with closely in analyzing the Canadian E&P space.
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Wilson-TPC

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Re: GXE - Gear Energy
« Reply #9 on: October 16, 2015, 03:56:16 PM »
No Pain. No Gain.