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GBR REPORT
New Concept Energy, Inc. (NYSEMKT: GBR) is focused on North American oil and gas drilling and exploration projects and the current properties are concentrated in the Appalachian Basin and Utica Basin. Business development, finance, engineering and planning, land management, human resources, and technical support are coordinated through company headquarters in Dallas, Texas.
Through its subsidiaries, GBR owns and operates oil and gas wells and mineral leases. The company’s subsidiaries; namely, Mountaineer State Energy, Inc. and Mountaineer State Operations, LLC, owns and operates oil and gas wells and mineral leases in Athens and Meigs Counties in Ohio and in Calhoun, Jackson and Roane Counties in West Virginia.
As of December 31, 2015, GBR had 153 producing gas wells; 31 non-producing wells and related equipment; and mineral leases covering approximately 20,000 acres.
The Company reported a net loss of $164,000 for the three months ended September 30 2016, as compared to a net loss of $75,000 for the similar period in 2015.
Defying rising sentiment that oil markets remain oversupplied, stocks like GBR continue to strengthen in the recent past. In fact, trading volume in the stock has rose significantly. On 24th March 2017, the listed average daily trading volume for GBR was 94,142. However on the same day, over 1.59 million shares of GBR have traded hands. Therefore, there is a possibility that company might announce some major change/development in the business over the near term.
Description & manufacturing set-up:
Founded in1991, New Concept Energy, Inc, is an oil and gas company. The Company, through its subsidiaries Mountaineer State Energy, Inc. and Mountaineer State Operations, LLC, owns and operates oil and gas wells, and mineral leases in Athens and Meigs Counties in Ohio and in Calhoun, Jackson and Roane Counties in West Virginia.
Major divisions:
The Company has two verticals: oil and gas operations, and retirement facilities. The Company has approximately 153 producing gas wells, over 31 non-producing wells and related equipment and mineral leases covering approximately 20,000 acres.
GBR leases and operates Pacific Pointe Retirement Inn (Pacific Pointe) in King City, Oregon. Pacific Pointe, a retirement center, has a capacity of approximately 114 residents and provides community living with basic services, such as meals, housekeeping, laundry, around the clock staffing, transportation, and social and recreational activities.
Moreover, the company is looking to expand through brown field method; it is willing to acquire controlling interest (subject to satisfactory due-diligence) in several projects that fit the following parameters:
- Onshore and offshore projects with current production or shut in wells
- Projects should be in the $10M to $30M range
- Low to minimum risk exploration projects
About the management:
GBR’s business profile derives strength from the longstanding experience of its management. The company’s president & CEO, Mr. Gene S. Bertcher, has significant industry experience. Furthermore, a competent team under the leadership of an experienced senior management manages company’s day-to-day affair. The company’s ongoing projects are likely to benefit from the robust track record of its management.
Recent updates:
During the past few years the exploration, development and production of natural gas has resulted in an oversupply of natural gas which has resulted in a substantial reduction in the market price. Management of the Company believes that this oversupply will last for some time and does not anticipate an increase in the price it can receive in the market place.
Potential risk factors & key stock Influences over the near to medium term:
The company’s operational risk profile is marked by poor profitability & sub-optimal operating efficiency. GBR has incurred significant losses in the past few years. Therefore, its ability to ramp up operations while improving profitability would remain a key business sensitivity factor.
During past few years the exploration, development and production of natural gas have resulted in an oversupply & therefore a substantial reduction in the market price. In fact, GBR’s revenue has declined on YoY basis, due to decline in oil and gas price. The sub-dued prices continue to impinge the overall business & yield of the company.
GBR is burning through cash & do not have ample liquidity. As of September 30, 2016, the company’s current liabilities exceed its current assets and the company has a net loss of $593,000 for the nine months ended September 30, 2016. GBR is in the process to sell its land held for investment and is in discussions with the holder of certain non-bank long-term debt to settle the amounts due or modify note to more favorable terms. Management believes that, if its plans are successful, the Company will be able to significantly improve its liquidity and its working capital.
Expected Contingent liability: In December 2006, Carlton Energy Group, LLC (“Carlton”) instituted litigation against an individual, Eurenergy Resources Corporation (“Eurenergy”) and several other entities including New Concept Energy, Inc., Management’s preliminary analysis of these developments suggests it is reasonably possible that the claim will result in an unfavorable outcome. Management notes that in connection with the original appeal, the individual defendant deposited alternative security with the court to supersede the judgment, which the court determined to have a value in excess of $56 million. Management believes that the maximum exposure would be in an amount significantly less than the amount on deposit. Accordingly, management believes that any adverse outcome is fully secured by that deposit.
Earnings Review
For the three months ended September 30, 2016, the Company recorded oil and gas revenues, net of royalty expenses of $190,000 as compared to $232,000 for the comparable period of 2015. The decline in oil and gas revenue was principally due to the price the Company was receiving for its oil sales in 2016 as compared to 2015.
The Company recorded revenues of $653,000 for the three months ended September 30, 2016 from its retirement property compared to $772,000 for the comparable period in 2015. The decrease was primarily due a drop in occupancy at the facility caused principally by the opening of a competing facility in the community where our facility is located.
Profitability:
The Company reported a net loss of $164,000 for the three months ended September 30 2016, as compared to a net loss of $75,000 for the similar period in 2015.
Liquidity & capital resource:
At September 30, 2016, the Company had current assets of $682,000 and current liabilities of $1,581,000. Cash and cash equivalents at September 30, 2016 were $530,000 as compared to $473,000 at December 31, 2015.
Stock Performance
On Friday, March 24th, 17, GBR shares surged by 58.82% to $1.62 on a total volume of 1.59M shares exchanging hands. Market capitalization is $5.01 million. The current RSI is 65.45
In the past 52 weeks, shares of GBR have traded as low as $0.75 and as high as $6.10
At $1.62, shares of GBR are trading above its 50-day moving average (MA) at $1.55 and below 200-day MA at $2.39.
The present support and resistance levels for the stock are at $1.09 & $2.07 respectively.
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