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I have a stock that I am trying to look into called SOG.V or Strategic Oil and Gas LTD.

I believe it is a company based in Alberta, Calgary (Canada).

The company got hit quite hard from the oil market dropping so much, as it is an oil company. This has made the 52 week high-low gap very large as it is 0.54 (high) and 0.10 (low). Right now it is at 0.14. Besides the fact that it seems like a good discount right now, I still want to be sure that it will go back up (and essentially not go bankrupt). Therefore, I would like to fundamentally analyze the stock via the quarterly earnings report. Which I think can be found here: http://www.sogoil.com/index.php?page=investor_financial_report.

My problem is that I don't quite understand the financial reports enough to be able to tell if it is a strong company.

Is there any clues in the financial reports you would look for to see if it is strong enough to invest in (I am hoping it will go back up to $0.50 or higher)?

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    Anytime I see inventory quadruple I would worry. It's spent money just sitting there dieing. That said, it's an oil company, there will always be a demand so that's not as ominous as one would think. Also, their liabilities went down despite the drop in business which means that someone is paying the bills. Im not an expert by any means but nothing stands out to me. – Anthony Russell Mar 12 '15 at 15:11
  • But there total liabilities have gone up in the Q3 2014 Financial Statements - 139,665 in September 2014 from 138,540 in December 2013. – Kelsey Mar 12 '15 at 15:30
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    Thats if you include the long term liabilities. That increase is due to decommissioning expenses. Decommissioning means they are getting leaner which will decrease expenses. – Anthony Russell Mar 12 '15 at 16:02
  • Can you find a similar company to benchmark performance against? – user26485 Mar 20 '15 at 1:16
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+50

a) Nothing would support this company going back to $.50 per share

b) Fundamentally the market for this sectors has been obliterated and the fundamentals don't look like they will improve. Similar companies experience what this one is and will be going through, they borrow the hilt and hope they can pump enough oil and sell the oil at a high price. Oil goes below, WAYYY below the price they can sell it at and even break even, so they are burning cash until they declare bankruptcy.

This company is not an exception. So here is what to look at on their balance sheet: assets and liabilities. Liabilities are debt. Their debt is over 50% of their assets, that debt has interest and there is NO WAY they are making a profit.

Their website's last financial statement is from September 30th.. LOL, so they haven't even released a quarterly financial statement in two quarters straight, so have they released anything?

Given what we know about the dire state of the entire oil drilling industry, lets see if these guys are the exception to the rule (spoiler; they aren't)

February 15th, 2015

http://www.marketwatch.com/story/strategic-oil-gas-ltd-provides-operations-update-2015-02-19-16173591

The Company prudently elected to stop the winter Muskeg drilling program in order to preserve capital.

So now they aren't even getting new assets to resale, they aren't making any money from that operation, their debt still has interest payments though.

Approximately 700 Boe/d of production has been shut-in by suspending operations at Bistcho, Cameron Hills and Larne, which are not economic at current commodity prices.

Predictable.

Also, you should notice from their actual financial statements (from 6 months ago, lol) (when the price of oil was over 100% higher than it is today, lol), this company already wasn't a good performer. They have been financing themselves by doing private placements, by issuing shares to investors that are not you, and diluting the share value of ALL OTHER SHAREHOLDERS.

Dead in the water. I got this from skimming their financial report, without even being familiar with how canadian companies report. Its just bad news. You shouldn't be married to this investment.

  • Great information and a very thorough answer. However, I don't quite understand how doing private placements could dilute share value (perhaps it is the accompanying debt?). Wouldn't the price of oil going back up dramatically increase the price of nearly all oil company shares? – Kelsey Mar 20 '15 at 2:53
  • @Kelsey the price of oil going back up would increase the price of the REMAINING oil company's shares, what would cause the price of oil to go back up? Do you realize that this entire continent is literally running out of places to store oil? By June they'll be dumping it in the streets for free (exaggeration). It isn't the private placement, it is the COMPLETELY NEW SHARES MADE UP OUT OF THIN AIR, that lower the price of the other shares. Lets say this company was worth $100, and had 5 shares. Each share was worth $25. Then the company issues 5 more shares out of thin air, now worth $10/share – CQM Mar 20 '15 at 11:22
  • Very interesting points. Well, if oil goes back up in, say, 2016, this company may be able to survive the bust, since they are not producing anything. Don't you agree? (And once they do, this company's share prices will zoom up.) Who are they issuing these (in theory) 5 more shares to? Themselves? – Kelsey Mar 20 '15 at 21:06
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    @Kelsey It is less likely this company is able to survive because their debt has to be paid off. If they are not producing anything, then they are going to become late on their payments. You need to check what their other wells are, but basically they are producing LESS and able to sell LESS at LOWER prices. They already weren't exactly profitable when the price of oil was high! You sound like an investor, stop trying to rationalize it and move away from this company, the show is over. The shares are issued to other investors, doesn't matter who.. existing investors get less. – CQM Mar 20 '15 at 23:23

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