Saturday, August 19, 2006

Avoca Reports Another Solid Quarter

Avoca Inc, the tiny owner of a 16000 acre island off the coast of New Orleans, which generates the bulk of its revenue from natural gas royalties, recently reported second quarter earnings. You won't read about that anywhere else, because Avoca no longer files with the SEC--only to shareholders. We've reported on Avoca previously, it was our first venture into the world of companies that delist their shares, avoid SarBox and SEC filing, yet continue trading on the pink sheets.

Avoca reported revenue of $2.6 million for the second quarter, netting $1.75 million, or $217.61 per share ($1.3 million, $830K, $102.95 same period last year). For the six months period, revenue was $6.43 million, with net income of $1.98 million, or $527.32 per share ($2.1 million, $1.5 million, $187.40 same period last year).

The balance sheet continues to improve, with cash and short term investments of $7.63 million, and long term investments (mainly debt) of $2.63 million. On the liability side, there is $3.1 million in income taxes payable, which represents nearly all of total liabilities.

One piece of negative news was that Avoca well No. 6-1, which represented 29% of net royalty income for the six months ended June 2006, was recently taken offline. Production from this well had been declining, and it is believed that the resevoir may no longer be capable of commercial production.

Still, Avoca results are way ahead of last year. Since this company is a royalty trust, much of net income will be paid out in the form of dividends. Last years annual dividend was $400 per share. Given results of the first six months, we expect the next dividend to be in the $700 to $1000 range. Revenues for the next six months, however, are highly dependent on the price of natural gas, and the gas wells ability to deliver.

Avoca Inc
Ticker: AVOA
Price: $5600 bid/$8000 ask
Shares Out: 8,059 (actual)
Market Cap: $45 million
Yield: 7%

Please see our previous posts on Avoca:


*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.

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