I have been investing for the past 4 decades often with great success. During that time I’ve studied thousands of companies’ financial statements, in search of value that others had missed. I know we’re in the age of the Tech Giant and value investing is out of vogue, that’s often the case in frothy markets, but in the long run the market always returns to value. This is why I’ve taken a position in Trillion Energy CSE:TCF OTC:TCFF (sponsor). Listen to my interview and hear CEO Art Halleran explain that there is about US $300 million in natural gas production assets (drill rigs, platforms, pipelines, processing plant, etc.) that is completely absent from Trillion’s balance sheet.
Art is a petroleum geologist with 38 years of experience who’s built a number of successful energy companies. He’s never been more excited than he is about Trillion. And in this cynical investor’s opinion, he’s a straight-shooter who tells it like it is. If a mid-tier natural gas producer wished to acquire the SASB asset, Art said they would pay at least $100 million, or slightly less than $1 per share (as of Friday share price was 11.44 cents and the market cap was about $14 million). But the company isn’t for sale, for the simple reason that in Art’s opinion its value is far greater. That’s because the SASB natural gas field that it’s currently developing is worth several times that number. Art has the experience and the ability to bring that field into production, as well as numerous other promising targets in the area. Best of all, there’s very little capex required, since the platforms and necessary infrastructure are already in place.
Most of Trillion’s assets are in the Black Sea, in Turkish waters. However, they’ve been dealing with the Turkish Government for over a decade and relations have been extremely cordial. They are partners with the Turkish State Oil Company (TPAO). Trillion’s expertise in drilling underwater wells is well demonstrated and they provide skills that aren’t easily obtainable. Right now, the majority of Turkey’s natural gas comes from Russia. All of the SASB production will be purchased by TPAO to reduce the country’s reliance on imports.
Trillion already has cash flow coming from existing oil wells in the area. It knows how to effectively operate in this part of the world. Perhaps most important, Trillion’s gas sells from $6-8 per million btu’s, unlike North America where the same gas is selling for $2.77 per million btu’s. Equally as important, global natural gas consumption is steadily rising, which means future returns over the years could increase greatly. For all of the reasons above, I’ve taken a position in Trillion and I’m very excited about its future.
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