Thursday, March 23, 2017

Cub Energy reports year end earnings and gives operational update

Cub Energy website:

(snip)

Mikhail Afendikov, Chairman and CEO of Cub said: “2016 saw Cub Energy return to profitability with reported net income of $3.9 million or $0.01 per share. Cub’s cash position and working capital also improved in 2016 with an ending cash position of $4.6 million and positive working capital of $3.3 million as at December 31, 2016.”

Operational highlights:

Royalty rates for natural gas in Ukraine declined from 55% to 29% effective January 1, 2016
which materially improved the Company’s netbacks and net income.

Production averaged 1,152 boe/d (97% weighted to natural gas and the remaining to
condensate) for the quarter ended December 31, 2016, which decreased 15% as compared
to the 1,353 boe/d in the comparative 2015 quarter and relatively flat as compared to the
1,171 boe/d average for the third quarter ended September 30, 2016. The decrease in
production for the quarter ended December 31, 2016 as compared to the same period in 2015
was a result of the temporary suspension of the RK field on April 1, 2016 due to the termination
of a gas blending contract. The Company hopes to commission the Nitrogen Rejection Unit
(“NRU”) and resume production of the RK field in the second quarter of 2017.

Achieved average natural gas price of $6.39/Mcf and condensate price of $61.59/bbl during
the quarter ended December 31, 2016 as compared to $7.22/Mcf and $42.78/bbl for the
comparative 2015 quarter and $5.48/Mcf and $63.99/bbl for the third quarter ended
September 30, 2016.

On March 11, 2016, the Company’s Ukraine subsidiary was awarded a 20-year Uzhgorod
production licence covering approximately 75,000 acres in western Ukraine.

On December 28, 2016, the Company’s Ukraine subsidiary was awarded a 20-year Stanivske
production licence covering approximately 31,000 acres in western Ukraine. The Company is
exploring its alternatives for the licence, including potential joint venture partners.

The company earned $.01 per share and the share price is currently $.05. That is a P/E of 5 which is fairly low. Production has been slipping and that needs to turn around for the stock to move. The RK field that was discussed in the operational update should be back in production soon as the company was waiting on an equipment skid to be installed.

Obliviously any Ukraine based companies are going to be somewhat discounted due to the political and military situation in the country.

As we have seen in the past a change in perception from bad to slightly less bad can lead to a significant revaluation of a stock. That is what I think will happen with Cub in 2017.



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