Junior oil and gas companies trading at historically low multiples to cash flow

    CALGARY, Sept. 10 /CNW/ - A combination of steady cash flow and weaker
stock prices has led to historically low cash flow multiples for Canada's
publicly traded oil and gas companies, a report released Monday shows. In 2007
alone, the median market capitalization to cash flow multiple has decreased
from 5.6 times in the first quarter to 4.3 times at the end of the second
quarter. In contrast, the median market capitalization to cash flow multiple
reached 8.7 times in the third quarter of 2005.
    This is just one of the findings in the latest quarterly iQ Report by
Bryan Mills Iradesso, an investor relations firm based in Calgary and Toronto.
Bryan Mills Iradesso tracks the performance of energy trusts and junior oil
and gas companies that operate primarily in Western Canada and trade on the
TSX and TSX Venture Exchange. The comparison includes every trust that focuses
on conventional oil and gas production and every public company that produces
between 500 and 15,000 barrels of oil equivalent per day (boe/d). Bryan Mills
Iradesso's latest comparison focuses on the second quarter 2007 results of
78 juniors and 25 trusts.
    While only one company showed negative cash flow in the second quarter of
2007, junior oil and gas companies experienced a median decline of 15 percent
in their share prices in the subsequent two months of July and August. This
decline happened at a time when cash flow netbacks, similar to sales margins,
remained steady from the first quarter to the second quarter.
    Peter Knapp, president of Bryan Mills Iradesso, says the current market
offers significant potential for savvy investors.
    "Picking companies is easy when the market is rising, but the real
opportunities show up in a less favourable market," says Knapp. "For companies
with strong balance sheets, the upside of this market can be tremendous if
companies take advantage of the situation to scoop up assets at depressed
    The iQ Report helps investors pinpoint oil and gas industry trends and
companies or trusts that deserve further research. The report offers several
parameters for evaluation of the industry.
    Other highlights of the second quarter 2007 iQ Report include the

    -   Fewer trusts and juniors met the criteria for inclusion in the second
        quarter 2007 iQ Report than in the same quarter of 2006, with the
        number of juniors declining from 85 to 78 and the number of trusts
        declining from 27 to 25. Entities have been disappearing as a result
        of mergers and acquisitions while there hasn't been the steady influx
        of new listings that have characterized the past few years.

    -   Juniors' share prices held steady during the second quarter. When you
        count the following two months of July and August, however, the
        median decline was 15 percent. By comparison, the median energy trust
        returned eight percent including monthly distributions in the second
        quarter, but was down one percent when factoring in July and August.

    -   Based on enterprise value (market capitalization plus net debt)
        versus second quarter production rates, juniors are valued
        significantly lower than trusts. The juniors showed a median
        enterprise value of $48,411 per boe/d, while the trusts had a median
        enterprise value of $65,504 per boe/d.

    -   Net debt levels in relation to cash flow were unchanged for the
        second quarter compared with the first quarter. Juniors showed median
        net debt to be 1.4 times annualized cash flow while trusts showed
        median net debt of 1.5 times annualized cash flow.

    -   Based on August 2007 record date distributions and August 31, 2007
        unit prices, the energy trusts have a median annualized distribution
        yield of 13.9 percent.

    -   Depletion, depreciation and accretion (DD&A) expenses per boe have
        levelled out from the previous quarter. DD&A expenses are a telling
        indicator of the cost of finding, developing and acquiring oil and
        gas reserves, Median DD&A expense levels of $24.02 per boe for
        juniors and $19.18 for trusts, suggests the trusts are acquiring
        their reserves at lower prices than the juniors.

    Overall indicators for second quarter results showed lower trading
multiples along with stable cash flow and expenses for juniors and trusts.
"The Canadian energy sector is as dynamic as ever," says Knapp. "Opportunity
is knocking."

    Bryan Mills Iradesso's complete iQ Report is available free to investors
who fill out an online form on the following website: http://iq.bmir.com.

For further information:

For further information: Peter D. Knapp, President, Bryan Mills
Iradesso, 400, 805 10th Avenue SW, Calgary, Alberta, T2R 0B4, T: (403)
503-0144 x202, ircontact@bmir.com, www.bmir.com

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