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Drill, Baby, Drill! Interra’s Burmese Search For Oil
The completion of 11 oil fields since the beginning of 2014 has increased Interra’s production by 1079 barrels of oil per day.
Interra is one of the few companies to fare better than most of its peers in terms of profitability and management effectiveness.
A number of indicators like MA and momentum indicate that Interra is poised for a short bullish run.
Interra Resources is engaged in the business of oil and gas exploration and production which includes oil and gas production, field development and exploration. In central Myanmar, the Company holds 60 percent of the rights and interests to two of the onshore producing oil fields in Chauk and Yenangyaung under two Improved Petroleum Recovery Contracts (IPRCs).
Completion Of Eleven Oil Producers In Myanmar
As a oil and gas exploration and production company, Interra’s main operations revolve around drilling and completing oil fields to produce oil. Interra is constantly drilling on a number of oil fields in Myanmar. The spudding of oil fields are carried out under Yenangyaung, Tanjung Miring Timur (TMT) and Goldpetrol.
Since the beginning of 2014, Interra has completed the drilling of 11 oil fields.
These 11 oil fields are now producing oil on a daily basis as oil producers. The 11 oil producers produce 1079 barrels of oil per day. This is equivalent to 98,000 barrels per quarter. Interra produced about 181,611 barrels of oil in Q3 last year.
Interra is currently in the midst of drilling eight other oil fields in Myanmar. Interra estimates that the results of the drilling and completion should be available in approximately six weeks from the date of commencement of drilling. Interra will seek to announce the results as soon as they can confirm the backtesting results.
Interra’s First Quarter Results
Interra recorded US$11.81 million of revenue for Q1 2014, which was 4 percent lower than the preceding quarter Q4 2013. This difference in revenue came on the back of a decrease of sales of shareable production to 155,783 barrels from 159,822 in the previous quarter. However, in comparison with Q2 2013, revenue was up 63 percent from US$7.244 million in Q2 2013.
Earnings before divestment gain, interest income, exchange difference, finance cost, tax, depreciation, amortisation, allowance and impairment (EBITDA) from continuing operations for the quarter was US$7.19 million.
Interra’s total profit after tax for the quarter stood at US$1.21 million, down by 11 percent due to a US$0.858 million loss from discontinued operations.
One thing which caught my attention is the absence of debt on Interra’s balance sheet. Despite being an exploration company, Interra does not carry any debt to boost its operations. This is contrary to the industry average of 50.64 percent total Debt-To-Equity amongst its peers.
Slightly Above Most Of Its Peers
In comparison to its peers, Interra is still slightly above its peers in terms of profitability and management effectiveness.
Source: CapitalCube
Interra Resources is only one of few companies to post a positive net income. Although valuation shows that Interra has a rather high P/E ratio, investors might want to consider that Interra’s PEG ratio is merely 0.15. The lower the PEG ratio signals the more the stock may be undervalued given its earnings performance.
Many investors consider a PEG in the range near 1 as a bargain. If that is so, then how about Interra, which is priced at merely $0.15 for each dollar of earnings growth?
Source: CapitalCube
Interra Resources has the best margins amongst its peers. Most of Interra’s peers are recording negative margins, with a handful of companies that recorded positive margins. Even for those that are recording positive margins, their margins pale in comparison to Interra’s. On average, Interra’s margins are about twice of its peers.
In terms of management effectiveness, Interra also posted stronger positive figures than most of its peers. Heatec Jietong leads the field with double digit figures on its ROE, Return On Net Capital (RONC) and ROA. KTL Global is positioned behind Interra, albeit by a fair bit for its ROA and RONC.
Short Term Uptrend Highly Likely
Interra share price continues to stay above support level at $0.37. We can see that share prices have broken higher than the previous two months price movement. This is on the back of an increase in volume as compared to the previous trading day as well as the previous two months of trading.
At the same time, other signals are also indicating that Interra is poised for a short term uptrend. Share price has broken through the 20 SMA and 50 SMA which usually signals the start of an uptrend.
Furthermore, MACD rose sharply from the negative region into positive region, signalling a reversal. Upward momentum has just built up with the latest price now trading higher than the price 10 bars ago.
Williams %R shows that a new uptrend is present now that the price has recovered from oversold levels. Although Williams %R is traditionally used to identify overbought levels for signal to sell, an overbought signal in conjunction with trend identifying indicators like MA and momentum is a further confirmation to the short term uptrend.
Short Run #Bullish For Small Profits
Judging from the number of technical indicators pointing to a short term bullish run, I am inclined to take a short term bullish call on Interra to make some small profits.
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