Wednesday, May 2, 2007

BLMC - Earnings Report

I don't want you to think I am obsessed with the company, but they released earnings and I wanted to review them since so few people pay attention to the stock and it is severely underanalyzed. The good thing about obscure stocks is that there are no expectations or guidance so it is impossible to miss expectations or guidance. The report was a little on the bearish side.

Here is a link to the news release on the company web site.

First Quarter 2007

Three items stand out in particular

1) Declining Production

The company reported that the combined gross daily production from 12 wells including those operated by TMR and Manti Jambi, Inc. was approximately 12.5 mmcf with net daily production accruing to the Company of approximately 1.6 mmcf. This was down from 21 mmcf with net daily production accruing to the Company of approximately 2.5 mmcf in the first quarter of 2006. The press release said that several wells run by Meridian Resources were shut in on March 31, 2007, which affected the quarters production. This is odd since the quarter ended on March 31, 2007, so it is hard to understand how a shut in of several wells on the last day of the quarter would hurt things so much. We would expect a normal decline rate on gas wells.

2) Drilling Delay

BLMC's new drilling subsidiary was to spud the first of five wells by March 31, 2007. This has been delayed to May 15, 2007 - 45 days. There was no explanation given for the delay. Maybe it was rig availability or they needed more time to study logs. Decline rates on existing wells are relentless and operators need to drill to keep production even with previous years.

3) No dividend

The company omitted its dividend for the quarter. It had hinted at it last year, and the shut ins and delays in drilling impacted cash flows enough that the company didn't make a payout. The dividend is one of the major attractions of the stock and I hope that it can resume a payout in the second quarter.

The good news is that the stock didn't budge from it perch at $34.00 per share.

It has ocurred to me that the day the wells were shut in was the around the same day I was pestering them with e-mails about setting up a meeting. That could explain why they did not respond.

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