Friday, February 12, 2010

National Inflation Association (NIA) Stock Suggestion

NGAS Resources Inc. (NGAS)
Currently: $1.38
Web site:

We are currently experiencing one of the coldest winters in decades and there is a good chance you are using natural gas to heat your home. Our new NIA stock suggestion is NGAS Resources Inc. (NGAS), a natural gas exploration and production company based in the eastern United States, principally in the southern portion of the Appalachian Basin. NGAS has specialized for over 20 years in generating their own geological prospects in this region, where they have established expertise and recognition. Although NIA has been very bullish on many companies in the gold, silver, and agriculture industries, we believe one of the most undervalued commodities right now is natural gas.

In our opinion, our first natural gas stock suggestion - NGAS - is the most undervalued and oversold natural gas stock at the current time. Since the beginning of January, NGAS has seen a steady and steep drop from as high as $2.15 to its current price of only $1.38. If NGAS were to head back to the high of just one month ago we could potentially see gains of about 56%.

NGAS currently has a market cap of approximately $46 million yet generated revenues over the most recent twelve months of over $64.8 million. NGAS previously grew revenues from $70.2 million in 2007 to $84.4 million in 2008 with net income of $2.9 million. NGAS had about $69 million in debt at the end of the last quarter, which it recently reduced. NGAS had a book value at the end of the last quarter of $3.77 per share.

NGAS’s core assets include 77.9 billion cubic feet equivalents (Bcfe) of proved reserves, 400,000 acres and interests in 1,400 oil and gas wells! During 2008, NGAS achieved record production of 3.7 Bcfe, up 13% from the prior year. They also increased their estimated proved developed reserves at the end of 2008 by 18.7% to 57 Bcfe, with an additional 21 Bcfe of proved undeveloped reserves. Their undeveloped acreage position of nearly 250,000 acres in the Appalachian Basin provides them with an extensive inventory of low-risk, repeatable drilling locations for future growth.

Furthermore, NGAS is diversifying their asset base with similar unconventional plays outside the basin. As part of this strategy, they are aggressively developing their New Albany shale play within the south central portion of the Illinois Basin in western Kentucky where they have successfully drilled 37 wells in their new field discovery, Haley’s Mill. They currently hold 46,000 acres there for development.

We believe NGAS is set for a bounce in the near future and could see major revenue growth over the long-term. Oil futures are currently 14 times more expensive than natural gas, while historically the ratio has averaged 6 based on the energy equivalent basis of the two commodities. NGAS is leveraged to the upside potential of natural gas, which we believe could become one of the best performing commodities of this new decade.

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