Computer Modelling hangs tough in a rough environment

       Computer Modelling (CMG) is another one of the new companies that I am watching more closely now.On May 19 it released it's  fourth quarter and annual results for 2017.The report was interesting for it's operational results as well as the clear description of  it's activities and processes.Computer Modelling develops and runs reservoir modelling software for Canadian and international oil and natural gas companies.It also does consulting and training on the use of its' software.It states that it is developing new tools, one of which is simulating the entire hydrocarbon recovery process including  the production of hydrocarbons.
          Operational Mathematics

Both CMG and producers realize that simulation is less costly than discovering and extracting oil and natural gas.Especially if the well is a dry one.And CMG is constantly improving it's simulation tools as it spends 22% of total revenues on research and development.And 90% of revenues come from licensing it's software.But Computer Modelling has been able to remain resilient when oil prices have fallen by at least 60%since 2015. It's revenues and EBITDA have only fallen by 15% since 2015.This compares to most oil service companies whose revenues have fallen by 60 to 80%.One of the reasons for this resilience is that CMG has customers in both the Eastern and Western Hemisphere.Another factor is that it gets revenues from training and consulting.              It raised 600,000 shares of equity in 2017 for proceeds of about $6 million and now has 75 million shares.This caused it's e.p.s to fall only from $.32 to $.31 per share.And it's adjusted EBITDA fell only from $37.5 to $34.5 million or less than 8%.And CMG is in a pretty solid situation as it literally has no debt on it's balance sheet.

Recommendations

Computer Modelling does have a sizeable investment in Pulse Data.This blog does not know how big it is but it could easily increase it's investment as PSD present price is fairly low.The combination would help to make their reports less of a simulation and more the exact data clients need.Also CMG has special GEM software that is used for enhanced recovery (EOR).This blog recommends that more R and D be spent here.There should be a larger market for  enhanced recovery solutions (waterflooding and other liquid solutions) with these low oil and gas prices.Lastly this blog recommends that less emphasis be put on simulation techniques and oil recovered and all reports emphasize the additional dollars that can be earned.This is after all what the client needs to know.Most of these recommendations(if followed) should increase revenues for the next quarter.If CMG tightens up it's operation this blog expects revenues of $20 million in the next quarter and being on track to hit $80 to $85 million.This will put Computer  Modelling on the path to be trading at $11 per share by Labour Day.  use Workathon for business forecasts  ;use Workathon for business forecasts  use Workathon for business consulting    

Pulse Data needs to expand it's market

               Pulse Data is a stock I have started to follow more closely just recently.It's revenues and earnings have fallen a considerable amount since 2014 and even from 2015.It's big item is it's data library sales as there is less need for precise data on the size of oil pools when the oil price is down so much.But it appears to have bottomed out and taking a positive bounce upwards.Revenues have increased by 54% -from $1.8 million to$2.7 million for the quarter.Cash EBITDA has grown from $266,000 to $1.3 million while free cash flow is up from $255,000 to $1.3 million.So it is possible that oil and natural gas producers are starting to see Pulse as a way of cutting costs in a rough pricing environment.
       Financially Speaking
  Pulse has not been  dormant however;it has purchased and cancelled 584,000 common shares at an average price of $2.41 per share.It is now debt free and in fact has cash on hand of almost $8 million.These financial metrics are good but will not bring Pulse Data back to it's 2014 price level.In order to do that it must increase it's data library sales and introduce some new products.Just as Bombardier did by developing and introducing it's CRJ 1000 seen here in this picture.Pulse needs something  of a new revenue producer.        

A Pristine Balance Sheet

           Pulse Data has what is considered to be a pristine balance sheet.It has no debt at all and it has just reduced the number of outstanding shares on it's balance sheet.But it must find a way to increase it's revenues, and hence earnings to the level in 2015.With a conventional oil play an oil producer needs to know the size of it's pool only once ( or maybe twice) but many oil plays have extended pools that are associated with the main pools.Finding extended oil pools is much less costly than discovering a new yet nearby oil pool.Also there are in certain oil or gas bearing formations several layers of hydrocarbons.In these cases Pulse must be able to zero in on the dimensions and exact location of the pools on all layers.This may make the difference between a little or a substantial profit for the producer.Not only should Pulse do this but market it so that it's client base know of this fairly new profit-producing product.
                                     Outlook for 2017         

         This blog sees Pulse Data gradually rising to the $3.00 -$3.25 area in 2017.The next two quarters will likely see increases in revenues above the level seen in this quarter.It is also true that Pulse has a considerable amount of cash on hand and an unused $30 million revolving credit facility.This blog sees that it will likely put more invested cash into it's subsidiary DCM and maybe ENT or PRW.The prices of all three subsidiaries is at historically low levels and Pulse has lots of cash.       use Workathon for business forecasts use Workathon for business consulting  use Workathon for business consulting

WIN 20170525 10 37 18 Pro Northland Power (a different perspective)

Algonquin Power reaps the benefits of Liberty

  On May11 Algonquin Power released it's quarterly results and it was better than a good report.Quarterly revenues were $558 million compared to $342 million in 2016 and cash provided by activities was $84 million compared to $53 million in 2016.More importantly adjusted funds from operations (FFO) was$208 million compared to $122 million in 2016.Adjusted funds from operations is on track to hit $900 million for 2017. And adjusted EBITDA was $255 million for Q1 and is on track to hit $1050 million for 2017   

     Liberty Utilities
   Finally on January1, 2017 Algonquin Power acquired in full Empire District Electric.This acquisition was ongoing(getting regulatory approvals) for sometime and finally closed.It formed the backbone of their newly formed subsidiary called Liberty Utilities.On January 11,2017 Bakersfield II (a solar facility)achieved commercial operations. And in February Deerfield wind facility was added to it's stable.These two acquisitions added 160 MW of power.And on February15 another 50 MW of power was added by the Luning solar facility.These have all been added to Liberty Utilities.The total value of Liberty Utilities can only be guessed without a listing.
   An earlier Workathon Blog
   On December1,2017  my Workathon blog  gave some of the details of the details of the Empire acquisition.It cost $3.2 billion plus acquired debt of $.9 billion and an estimated further $2.0 billion for future renovations.This blog has suggested that AQN get a listing on the NYSE and now it suggests that it get a listing on the NYSE for Liberty Utility.This is an excellent source of cash from a secondary equity issue;perhaps as high as $1 billion U.S. Algonquin Power can afford to sell off a 25 to 35% stake in Liberty and by doing it gain some liberty for itself (financially speaking).This money could be used to diversify and improve other facilities (including other Liberty facilities).     use Workathon for business solutions ;use Workathon for business solutions ;  use Workathon for business solutions

Element Fleet Mnagement runs a steady race

          An earlier blog on Workathon discussed the competition between Element Fleet Management and DH Corp.Both are in the financial industry and both have specialty niches;they are not banks.A later blog talked about at this time DH Corp appears to have won the race.Its' earnings per share are bigger but it's assets are smaller.But EFN has done very well.In fact, DH just reduced it's dividend while EFN raised its.
       Highlights of 2016
   Element Fleet Management has had an eventful year.Most importantly it separated into two companies-ECN Capital and Element Fleet Management.And Element Fleet informs it's shareholders that it has made 4 major acquisitions since 2012 and  makes considerable income.Before tax income was $428 million but only $385 million was attributable to common shareholders.In order to make these acquisitions it has issued a lot of equity and has considerable earnings but e.p.s is only $1.00 compared to DH's $1.52 per share.EFN however has increased it's e.p.s from $.69 per share in 2015 for a 40% gain.
       The Split-up
     On October3, 2016 Element Financial split into companies;it had been discussed for some time and finally did split into Element Fleet Management and ECN Capital.The original price was about $13 a share and it trades at almost that now.EFN has taken large restructuring charges  in the last two quarters($238 and $203million) in order to complete the break-up.Steve Hudson, their CEO, says that EFN "has taken heavy integration and separation costs and intends to improve their performance indicators in 2017".
       Summary
   DH has been heading the wrong way and will likely divest assets in order to reduce it's debt.On the other hand,EFN has taken on a lot of debt also and has made 4 major acquisitions.So firstly EFN has considerably more assets,especially tangible assets,but it's return on assets is larger.In a case like this adjusted EBITDA is not the best measure of performance.EBT must be used and I (interest payments) must be deducted.Using EBT to calculate e.p.s. DH comes out a little better with EFN growing faster.That is why this blog thinks EFN is heading towards $14 to $17 per share  and DH is probably staying in a tight range around  it's present price.   

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DH Corp .might win the race with Element Fleet Mgmt.

      A  blog done on Workathon on March 6 asked the question "who will win the competition between DH and Element Fleet Management"?Well DH just reported it's annual results on March 6.And it did pretty well.The results are listed below.
     Annual Results
 DH reports that it's performance was at the upper end of  gyuidance for 2016.Revenues increased 11.5% to $1.679 billion from $1.506 billion.Primarily due to a full year of operations for  it's GTBS  segment acquisition and growth in their Land IC segment.Adjusted EBITDA decreased 5% to $450 million from $475 million.However there was a consolidated net loss of $94 million or $.88 per share compared to a net loss of $68 million or $.63 per share;this was primarily due to an impairment of goodwill charge.On the other hand, net cash from operations  increased by 33% to $293 million  from $221 million.Debt was down to $1.9 billion from $2.1 billion.And in fact they repaid $31 million in the fourth quarter and $131 million since the acquisition of Fundtech.Total debt to EBITDA was 3.276x in December31,2016 compared to 3.451x in April30,2015(after acquiring Fundtech).In addition they reduced their dividend from $.32 to $.12 per share for a quarter.
     Strategic  Review
      There will be no guidance on the future direction until the process is complete.There are a number of options open but one is to seek financial guidance.Another option ( and one preferred by this blog) is to divest assets for which a capital gain is embedded.The proceeds would be used to reduce debt further;a good goal would be 3.00x EBITDA.In order to aid this goal DH will provide it's 2017 results in segments or subsidiaries with segment revenues and EBITDA. This will help to point out the weaker segments.They will provide the EBITDA outlook for 2018 also.                     

 Our Forecast

It is not likely that DH will accept a firesale price as the stock price has recovered from a low of $14 in November of 2016.However allowing a financial institution of some kind to take a small but substantial share is not out of the question.Should the price not be to DH's liking then the most likely step is to unload one of their older acquisitions that has some capital gain built in.In other words it is likely that they will have a small change in direction not a big one.DH may trade between $22 and $27 per share for most of 2017.Element Fleet Management is recovering from the split from ECN Capital and has made a major joint venture.This blog sees EFN moving up to the $15 to $17 level by mid-2017.                          use Workathon for business forecasts;use Workathon for business forecasts

Northland Power expands it's investment in the North Sea

     On March 10 Northland Power gave a press release stating that it will undertake a new wind farm project in the North Sea just offshore the German mainland;it will be called Deutsche Bucht.It will be about 125 kilometers from the mainland and the total cost will be $1.2 billion Euros.This will nicely expand the Northland Power footprint in the North Sea.It should  be completed by mid 2017 and dovetail nicely with the coming onstream of their Nordsee One (332 MW) project.Deutsche Bucht is in advanced development stage but NPI will  need to add a further $500 million to aid in it's completion.This blog believes that if Northland does a good job here and helps to delivers 252MW of power to the German mainland that this could be  helpful in getting regular approvals required to begin full commission of Nordsee One.Nordsee One is expected to come onstream in mid-2017. It may even help speed up  full approval of Nordsee Two and Three that Northland Power is expected to  build later in the North Sea area.                    

    More work to Do
      Northland expects more work will have to be done on installing the turbines and the offshore cable.The additional construction costs may go as high as $400 million.NPI's previous experience should be useful here.Northland intends to use it's Gemini (another North Sea project) contractor and it's supply vessel to help;Van Oord was very effective in building their Gemini project on time and should be able to meet the mid-2017 schedule.Once the project is operational Deutsche Bucht should be immediately accretive with a fixed feed- in tariff for 13 years.Once completed and financing arranged Northland will own 100% of this third wind farm.      use Workathon for business news;use Workathon for business news