Why Blackbird Energy is one of Marin Katusa’s top stock picks

Left to right, Garth Braun, Craig Wiebe, and Don Noakes after a successful afternoon touring the progress made on the Blackbird Energy facility equipment. Source: Blackbird Energy Inc.

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By Peter Kennedy

Left to right, Garth Braun, Craig Wiebe, and Don Noakes after a successful afternoon touring the progress made on the Blackbird Energy facility equipment. Source: Blackbird Energy Inc.

British Columbia-based newsletter and resource analyst writer Marin Katusa has named Blackbird Energy Inc. [BBI-TSXV] as one of his top stock picks. During the recent Cambridge House Vancouver Resource Investment Conference, Katusa said he has more than $10 million invested in Blackbird.

Blackbird Energy is an innovative oil and gas exploration and development company focused on the condensate and liquids-rich Montney fairway near Grande Prairie, Alberta.

On January, 26, 2018 the shares traded at 32.5 cents, in a 52-week range of 72 cents and 31 cents.

In a short interview with Resource World Magazine, Katusa attributed his interest to the company’s Montney land position, where Blackbird holds a 100% working interest in 132 gross sections of highly prospective oil and gas rights.

“The company has no debt (rare for any Canadian oil company in today’s environment), and has built a dominant land position in the Montney with 75 net sections of land,” Katusa wrote in his Katusa Research newsletter.

Aside from the Alberta assets, Blackbird’s holds a 10% interest in STAGE Completions Inc., a private Canadian technology company which has developed fracturing technology, which promises to increase oil and gas well productivity and reduces costs. When Blackbird bought the 10% interest in Stage for $3 million last year, it disclosed that Blackbird Chairman, CEO and President Garth Braun is also a director of Stage.

Also, Blackbird director Sean Campbell is President and a director at Stage. He also holds an indirect controlling stake in the company.

When the deal was announced in December 2016, Blackbird said it was making the investment in order to be in a control position on costs while also having the ancillary benefit of being a shareholder of disruptive [well] completions technology. As a shareholder, Blackbird gets preferential pricing and access to the system as it rolls out.

“With the use of Stage’s proprietary sliding sleeve completion systems, Blackbird believes it can achieve cost savings of between $1.5 million and $2 million per Montney well, compared to competing sliding sleeve plug and perf technologies,” Braun said at the time.

Stage recently entered into a trial agreement with Saudi Aramco, Saudi Arabia’s national oil company. Aramco will be rolling out Stage’s sleeve and completion system this month (January), Braun said. Royal Dutch Shell [RDS.B-NYSE] and Chevron Corp. [CVX-NYSE] are also testing the system in Canada on two major wells, he said.

In the year ended July 31, 2017, Blackbird produced 5.2 billion cubic feet per day of natural gas, 665 barrels per day of condensate, and 78 barrels per day of natural gas liquids for total production of 1,609 barrels of energy per day.

A key focus for Blackbird in 2017 was the continued applications of high intensity completions to its wells on the condensate-rich Pipestone/Elmworth Montney corridor.

Canadian condensate is used as a diluent that is blended with heavy crude oil to meet pipeline specifications by easing the transport of heavy oil through the pipeline. Condensate pricing generally tracks U.S. WTI, but with a premium for the cost to transport US condensate to Alberta.

Looking to 2018, the company said its financial position remains strong with positive working capital of $21.3 million. It also said it continues to evaluate a number of non-dilutive options to facilitate future growth and development, including access to an expended credit facility.

Additionally, with improved run time, Blackbird said it expects to benefit from a more meaningful and consistent stream of revenues from its producing assets.

Speaking to the Cambridge House Conference in San Francisco recently, Braun said he expects that rather than heading back to the US $100 a barrel level, oil will trade between US $50 and US $70 a barrel for an extended period of time. He said that is partly because improvements in technology, including fracking, has allowed North America to become a major player in oil and gas production.

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