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Compton petroleum (CMZ) & Crown royalties


1.At year-end 2006, the firm boasted 882 billion cubic feet of natural-gas equivalent in proved reserves versus 271 
   billion at the end of 2001.
2.Compton petroleum annual drilling activity is expected to increase from 330 wells in 2006 to 1,000 wells in 2010.
3.Production averaged 199 million cubic feet of natural-gas equivalent per day in 2006.

4.Compton petroleum has debt - debt is 50% of total capital.
5.Compton petroleum has negative cash flow.  

Royalty Review

The Government of Alberta recently announced proposed changes to the Crown Royalty structure for the province. The changes will come into effect on January 1, 2009 and relate to royalties payable on production from Crown mineral rights owned by the province. Although all details relating to the new structure are not as yet available, we have assessed their impact on Compton based upon current publicly available information.


In very general terms, royalties will be calculated on a sliding scale basis giving effect to well production rates and commodity prices. At current price levels, Compton would realize a reduction in Crown royalties on shallow gas production from that currently assessed up to a price of approximately $9.00 per mcf. Higher productivity wells will attract higher rates even at current price levels. There is no change in royalties and mineral taxes relating to production from freehold mineral rights. Looking forward, the increase in royalties for higher productivity wells will be somewhat mitigated by a deep gas royalty reduction based upon the measured depth of the well.


Based upon our assessment to date and subject to further clarification by the Department of Energy as to the details of the program, we believe the new royalty regime will have a relatively minor impact on the Company. We estimate that we will experience an increase in royalty expense in a range of 3% to 5% at current price levels. As more details become available, we will update our assessment and advise accordingly.


PS:Compton petroleum lost 10% in after hours trading because decreased his 2007 forecast of drilled wells by 14%.
By GordonGekko at 2007-11-02 01:55 | Stocks | CMZ | GordonGekko's blog


RE: Compton petroleum

pelcmarek:

Do you own Compton in real life?  Why did you take it out of your StokBlogs account?

I actually really like the stock.  It has HUGE upside potential.  I will look into it further...


-theo
By Theo at Mon, 2007-11-05 02:44 | login or register to post comments

Theo


I own this stock in real life.To be honest I think UUU is better,but these two stocks are definitely bargains.

I took CMZ from my stokblogs portfolio because I put everything into DFC. Why?

There is one thing about volatility that is in no value book.It hurts and we have to get used to it and at the end our return should be much higher.

The same problem I have with patience - I know I have to wait and that average period is 4 years.But when CMZ is complaining about weather and no other company has problem with that I wanted to sell it.

Anyway,to hold DFC here, should give me a lesson in volatility,in concentrated portfolio,in holding and in virtual losing.

I loved your Dorfman portfolio. He bought it and was losing and after holding he started winning.

How easy ! His dividends were so powerfull !Smile 

If you write december dfc options you get 1.25 premium.It means your price will be $3.75/share incredible!!!

 
By GordonGekko at Mon, 2007-11-05 18:47 | login or register to post comments

RE: Theo

pelcmarek:

I think you would still get a lesson in volatility with just 2 stocks Tongue out.


-theo
By Theo at Tue, 2007-11-06 02:11 | login or register to post comments