Keeping a Casual Eye on ASUR, Part III

As I mentioned in a previous post ("Keeping a Casual Eye on ASUR"), I closed out my positions in Asure Software (Nasdaq: ASUR) at .25, but I planned to keep a casual eye on the stock to see

if Red Oak succeeds in unlocking some shareholder value here. If so, it might be worth considering piggybacking on their next venture in micro cap shareholder activism.

David Sandberg and his associates have succeeded in ousting ASUR's management: "Shareholders oust Forgent’s board". Now it will be interesting to see if Sandberg can make the company profitable again and increase shareholder value. If memory serves, his average cost on this is about 18 cents per share.

Looking for Co-Authors for a New Blog about Small Stocks

Something I've realized: posts such as the previous one ("A Conversation with USEG Management") are valuable, because they offer original reporting/commentary on a stock that's not widely followed, but they won't have much of a place on the entrepreneurship/business-oriented blog I'm starting. Post such as that have also been fairly sporadic on this blog, partly because I don't have time to follow more than a few companies that closely. So here's what I have in mind: a team-written blog focused on stocks that aren't widely followed. I just bought a nice domain name for this new blog -- one that's relatively short, easy to spell, and lends itself well visually to a logo.

Guidelines for the stocks:

- Under $100 million market cap; preferably, under $50 million.

- Little or no analyst coverage.

- Must have potential multi-bagger upside, in the author's opinion.

Guidelines for the authors:

- Write about 1 to 3 stocks, no more. If you find a 4th stock you like better than the first three, kick one of the first three off of the list.

- Do original reporting. Call the company's management occasionally and post notes on your conversations. Call elsewhere. Be a sleuth. Don't regurgitate aphorisms from Warren Buffett. Save that for other sites.

- Post as often as you have something new or useful to write about your companies, but no more. Don't just post for the sake of posting.

- Engage with your commenters and seek out the answers to their questions.

- Don't run and hide if your stock tanks. If you're still a believer, explain why; if not, explain why.

If you're interested in contributing to this new blog, send me an e-mail with "Obscure Stocks" in the subject line. Thanks.

A Conversation with USEG Management

Today I spoke with U.S. Energy Corp. (NASDAQ: USEG) CEO Keith Larsen, CFO Scott Lorimer, and Director of Investor Relations Reggie Larsen, who initiated the call. Some notes from the conversation follow.

- The Brigham Exploration (NASDAQ: BEXP) is intended to make USEG profitable as an oil company alone. CEO Keith Larsen said the company looked at about a hundred oil deals, and looked closely at ten, before picking this one.

- Estimated cumulative revenue from the first six wells (assuming oil prices stay at about ~$70 per barrel) is $1.7 million to $2 million per month, dropping off to about $1 million per month after a year of production.


- USEG is close to a financing deal that will let it borrow $15 million against its Remington Village development at about 5.5% interest. This money may be used for follow up investments in the Bakken field with BEXP. Occupancy there has drifted below 90%, but the management is working to get it back up (by allowing pets, etc.).

- Keith Larsen predicted that USEG's investment in Standard Steam Trust would be a ten-bagger within two years. He noted the advantages of Geothermal versus other alternatives such as solar and wind (Geothermal's always on, so it doesn't need a back up power source), and mentioned that a Canadian geothermal company, Magma Energy recently raised over $100 million in an IPO.

- Re the molybdenum project, Keith and Reggie said that they've been moving forward with preliminary steps on it, but have eschewed publicizing most of them to avoid stirring up the vocal radical environmental opposition. They noted that local blue collar workers have stopped by their offices looking for work, expressing support in the mine project, and asking what they could do to help make it happen. With a weak economy, opposition to the creation of numerous high-paying jobs may lose some political valence.

USEG News

Shares of U.S. Energy Corp. (NASDAQ: USEG) rose about 32% today on about 13x average volume on the news that the company had entered into a drilling participation agreement with Brigham Exploration (NASDAQ: BEXP) in the Bakken oil field. From the release:

"We are delighted to be teaming up with one of the best and most technologically advanced operators in the Bakken oil field," stated Mark Larsen, President of U.S. Energy. "Brigham has proven itself to be one of the premier companies in the Williston Basin through the advancement of their multi-stage frac completions and their consistent improvement of production rates. We look forward to a long term relationship with Brigham and developing low cost reserves well into the future," he added.

"Our patient search for a sound investment in oil and gas has now come to light with today's announcement," stated Keith Larsen, CEO of U.S. Energy Corp. "At a time when natural gas appears to be poised for an extended period of low prices our main focus has been to expand our oil production and reserves. This agreement does just that by providing us with the potential to rapidly expand our oil production and increase our reserves by participating with an experienced operator that has a track record of lowering its finding and development costs. Furthermore, I am confident that our drilling schedule for the balance of 2009 will allow us to reach our corporate production goal of 7,000 MCFED or approximately 1,200 BOED by year end," he added.

This is a pretty large commitment by USEG -- according to the press release, USEG's "expenditures are anticipated to approximate $17.6 million for the first six initial well program." That's a little less than half of USEG's remaining cash and Treasuries, going by the company's most recent balance sheet. Judging by the relative performance of USEG and BEXP today though, without drilling down further, I'd assume this deal is on pretty favorable terms to USEG. Which would make sense, since it appears that BEXP had a more acute need for the cash than USEG had for the participation deal. I'd venture that some BEXP shareholders bought into USEG today.

I got a voice mail about this today from Reggie Larsen at USEG, but we didn't get a chacne to speak. If he and I connect tomorrow, I'll update this post accordingly. Investor relations via social media: just like in those trendy marketing books.

Running Against Wall Street

In post back in June ("Lessons from the European Parliament Elections") I wrote,

A third area where (some) Republicans may be able to draw a favorable contrast with Democrats, if they are willing to do so, is by running against Wall Street, or more accurately, running against the incestuous relationship between some major Wall Street firms and Washington. I suspect New Jersey's GOP gubernatorial nominee Chris Christie will try a version of this while running against our incumbent governor, former Goldman Sachs CEO Jon Corzine.

Today I got an e-mail from the Christie campaign which included this video:

Life Imitates Science Fiction, Part II

In a previous post ("Life Imitates Science Fiction"), I mentioned hearing about a new gadget that was similar to a futuristic device imagined by the science fiction writer Michael Swanwick. Today I found out about something like another one of the machines mentioned in a Swanwick book.

Swanwick's novel Stations of the Tide mentioned machines called "surrogates" -- robots, essentially, that a person could animate and control remotely. An image of the person's face would appear on the video screen the surrogate apparently had in place of a head; the person could speak, see, hear through the surrogate, and move it around as well. The link above goes to an excerpt from the beginning of the novel, where surrogates are first mentioned. In keeping with his typical M.O., Swanwick doesn't waste much exposition describing the technology, he just mentions it and lets you fill in the details on your own from the context.

See the video below, for something similar to Swanwick's surrogate: the "Chungbot", named after U.S. Army Major Kevin Chung, a physician specializing in the treatment of burns. As he explains in the video clip below (which includes some graphic footage of recovering burn victims), the robot enabled him to check in on -- and assist in the treatment of -- patients stateside while he was deployed in Iraq.

Answering Requests, Part III

NDL11 asks, pithily,

PNDMF

In response, I offer this recent correspondence between me and Aaron Edelheit, from Aaron's blog:

1. DaveinHackensack Says:
August 14th, 2009 at 1:09 am

Aaron,

I saw your comment on the company formerly known as PhotoChannel on the VIC. Do you have an updated target in mind for when the company will start consistently posting positive EPS (not just cash EPS)? Just curious.

2. admin Says:

August 14th, 2009 at 1:48 pm

$2.50 to $3 per share in the short run. If some of their growth prospects such as getting Wal-Mart, the stock would be much higher. They will post positive eps in the December quarter.

amortization blocks it because the company made two acquisitions.

3. DaveinHackensack Says:

August 14th, 2009 at 2:33 pm

Do you envision they will be profitable consistently from the December quarter forward?

4. admin Says:

August 14th, 2009 at 2:40 pm

The march quarter may be their last negative eps quarter because of seasonality. But again, all I care about is cash flow.