(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long VLE.TO)
Market psychology is a funny thing.
Lots of questions about VLE these days as we await an update on the Yayli-1 testing program.
When the stock was hitting new highs, the thoughts of most were, "News must be good..."
With the stock selling off now, the thoughts of most are, "Uh, oh, maybe the test wasn't good..."
Confidence and doubt. Fear and greed.
Once I'm convinced on a stock, I don't pretend to know when to buy and sell any better than the next guy. Somedays I feel like the ever-patient Warren Buffett and other days I feel like Jim Cramer when he gets going with that sound effect board that he has...
In my mind, when in doubt, I always try to go back to the idea that I know the underlying business is sustainable... has been for years. In a nutshell, VLE's 1P (proven) NPV10BT is $0.71/share and the 2P (proven pus probable) NPV10BT is $2.02/share. No debt. Strong cashflow. High netbacks. It is run by a proven management team that has kept VLE's share count to just 58 million shares outstanding and appears to, at worst, be making significant progress towards the establishment of a basin-scale tight gas resource play in one of the most strategic energy corridors in the world, within a country that has virtually zero domestic supply. That country also has almost no storage capacity and will buy every gas molecule VLE can produce from its existing (and engineer-audited) resource base. VLE has plenty of wells to drill in inventory and the cash and cash flow to do it.
Nothing about the "bet" has changed, aside from a falling share price on modest volume in a weak tape.
When I think of it that way, the fear and doubt fade a little, and I find myself left back in the camp that I started in... looking at the data at hand, with a valuation that I understand, and hoping for good news.
We'll see what comes from from the deep (and shallow?) testing at Yayli-1 very soon. Prevailing wisdom is that the market will see a comprehensive news update on or around May 12th with VLE's Q1 reporting. VLE's share price hasn't reliably predicted news "quality" in its past, but who knows. When I think about what the chart is telling me, that thought process ultimately brings me back to my above views regarding the underlying business... the rest feels a lot like fear and greed.