Investors shun Maverick’s 205% profit rise

Investors shun Maverick's 205% profit rise

Maverick to ramp up drilling in the 2013 financial year

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published August 28, 2012 4:37 pm AEST

What's wrong with investors?

Shares in Maverick Drilling and Exploration Limited (ASX: MAD) have fallen by more than 4% at the close of trading today to end at $1.22, despite the company reporting a 205% increase in profit for the full year to US$6.6 million. Revenues were up 101% to US$22.2 million, while proven resources have increased by 725% to 102 million barrels.

Obviously, it's hard to please some.

Just over a year ago, shares were languishing at just over 21 cents, until the Motley Fool and others brought the company to investors' attention. Since that time, Maverick has been one of the best performers on the ASX, with the share price rising close to 500%, beating other high fliers including Syrah Resources Limited (ASX: SYR), Environmental Clean Technologies Limited (ASX: ESI), Lindian Resources Limited (ASX: LIN) and Clean TeQ Holdings Limited (ASX: CLQ).

Revenues were driven higher by the commencement of production operations on both Boling Dome and Nash Dome during 2012, bringing the company's oil producing fields to three, and resulting in higher oil production. Maverick also achieved a 12% premium over the WTI price on oil sold from its Blue Ridge Dome operations.

As previously mentioned, proven reserves stand at 102 million barrels, while probable reserves have increased by 267% to 192 million barrels. Notwithstanding the increase in reserves, the company also increased its exploration acreage by 200% to 14,459 net acres, with more than 42% of it yet to be independently evaluated and assigned reserves.

With a proven track record of hitting pay dirt, and a high success rate of wells dug for positive results, this news augurs well for the company to increase its reserves substantially – again. The increase in number of drilling rigs from 8 to 14 should also speed up that process.

With a net cash position of almost US$20 million, plus a recent placement for US$50 million, the company looks well placed to fund its drilling program and well development. The biggest risks are of course, like most explorers, failing to find resources while chewing through the cash available.

Given the company's experience and past successes, we see no reason why the positive results can't continue.

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Motley Fool writer/analyst Mike King owns shares in Maverick. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool'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). Authorised by Bruce Jackson.

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