Wednesday, December 28, 2011

Eagleford Energy (EFRDF) Shouldn't Waste My Time

Hey, here's another so-called winner from one of Tim Fields' old Untapped Wealth mailers.  This one was about Eagleford Energy (EFRDF), an exploration company looking for oil in - you guessed it - Texas' Eagle Ford shale region.

Can you guess by now what their financial results have been like since 2009?  If you guessed anything other than negative net income, retained earnings, and free cash flow, you haven't been reading my critiques long enough.  I'm looking in SEC's EDGAR . . . was there even a 10-K published in 2010?!    Oh, wait, I found something that looks like a financial statement on a page about their annual meeting.  Check out the table on page 8 for the most important thing you need to know:  Net losses increased as revenue increased.  That means they can't control their variable operating costs.  The more they drill, the worse they'll perform.  I can't believe there's an analyst somewhere giving this a Buy rating but maybe some sell-siders really are desperate for attention.

The management team reads like a grab bag of dudes thrown together from some miscellaneous acquisitions.  I could probably find a couple of homeless people in San Francisco who could fill out any empty slots they have.  Eagleford can't afford my finder's fee.

The company touts its projects for being adjacent to the producing properties of larger competitors.  Folks, I've lived in San Francisco adjacent to multimillionaire neighborhoods for over seven years but that doesn't make me one.  Read phrases like "working to develop a number of potentially high volume oil targets" as really meaning "we haven't produced very much oil yet."  Wait, I take that back, they did hit something in June of this year but it's not clear how much.  That was their last press release for 2011.

I shouldn't even bother writing any more about this one.  Investors who bought the stock in late 2010 when I got this mailer paid well over a dollar for something now trading at twenty cents.  In a just world, Trinity Investment Research would have to explain its touts to investors after the fact.

Full disclosure:  No position in EFRDF, ever.