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Conwest Associates L.P. (CWPS) - A dark pink-sheet limited partnership yielding 15%

8/3/2019

27 Comments

 
I found Conwest Associates L.P. (CWPS) whilst perusing through one of my old Walker's Manuals. It never ceases to amaze me how one can look through these books which are decades old and still find active value.
Information on this limited partnership is scant.

The OTC markets quote page on CWPS reveals virtually nothing other than a contact address and phone number. No market cap, no shares outstanding figure, no business discription, no website or even state of incorporation.

What it does tell us is;

Share price = $29.50 (Spread $28.00 / $32.00)
Dividend per share = $4.42

This gives us an annual yield of 14.98% at the current market price.


The stock is very illiquid with typically only a few hundred shares traded every other day or so.


Picture
OTCMarkets.com/CWPS

Thankfully we've got the Walker's Manual to provide us with a little more illumination.

Walker's reports that;

'Conwest Associates, a limited partnership, was formed in 1996 upon the liquidation of The Consolidated Royalty Oil Company. The corporation's interest in ongoing oil and gas production royalties was transferred to the trust for the benefit of its shareholders....The partnership collects and distributes royalty payments. It has no further business. Substantially all of the partnership's revenue comes from oil and gas royalties from three payors.'

Walkers also notes the following;

Number of units outstanding = 606,434 (This would give us a current market cap of $17,889,803)

Frequency of dividends = Quarterly

Earnings per unit for the period 1997-2001 were as follows;

1997 = $1.52 EPU
1998 = $0.78 EPU
1999 = $$1.13 EPU
2000 - $1.78 EPU
2001 = $1.71 EPU

Annual revenues and earnings for the partnership fluctuate from year to year based upon both the level of O&G production and O&G prices.

Given the global push to move away from fossil fuels this is unlikely to be a favourable long-term investment but the short-to-mid-term value seems reasonable. In order to get financials for CWPS I suspect one will need to provide proof of ownership and be added to the share register.

Here's a historical price chart for those of us who like to study them ;


Picture

Given the current Shiller P/E for the S&P500 stands at 29.8 for an implied annual return of -1.78%, CWPS might not be such a bad place to park your money whilst you wait for the bear to rear it's head.

Thanks for reading,

David

Disclaimer: I do not  hold fractional ownership in CWPS at the time of writing.

27 Comments
Daniel
8/5/2019 09:55:58 am

I don't think using running yield is the best way to determine whether this investment is attractive or not because the asset base is depleting. You would really require more information on the remaining assets and its expected life etc. Based on the current yield, if the life remaining is less than 6 years, you would lose money

Reply
David
8/5/2019 07:00:06 pm

Hi Daniel,

You raise some valid points regarding CWPS, without access to financials detailing the productive life-span of the O&G operations it is impossible to value it accurately.

I was really just writing it up based upon the little information I had gleaned from my old Walker's manual.

Sometimes when I write up these dark stocks people are kind enough to send me copies of the financials. If I learn any more I'll update the blog post.

Thank you for taking the time to read and comment on my blog, I really appreciate it!

Regards,

David

Reply
Mike
8/9/2019 08:19:32 am

Do you not receive financials as a shareholder? Usually, they have to provide these to investors.

Reply
David
8/9/2019 06:07:18 pm

Hi Mike,

I'm not currently a shareholder in CWPS, I don't tend to invest much in high dividend stocks and units. I'm sure one would be able to obtain reports by getting added to the shareholder register.

There is no website for CWPS so one would need to write to them and provide proof of ownership in the form of a stock certificate or perhaps a stockbroker holdings statement.

One of these days I'll get round to doing it but for now my time is spent trawling through the pink-sheets.

Thanks for taking the time to read and comment on my blog, I'm a small time investor who writes for other small investors so I always appreciate feedback.

Regards,

David

Reply
mike
8/11/2019 07:49:23 pm

BTW it seems that reporting OTC stocks have higher returns than dark stocks, if you control for liquidity. See this study on page 3:

"Controlling for differences in liquidity, we find that OTC firms that publicly disclose book equity have considerably higher stock returns than OTC firms that do not disclose book equity."

However, see also this, liquidity makes a big difference, p32:
"The premium for illiquidity in OTC markets is an order of magnitude larger than in listed markets."

https://www0.gsb.columbia.edu/faculty/ptetlock/papers/Ang_Shtauber_Tetlock_May_11_Asset_Pricing_in_the_Dark.pdf

https://alphaarchitect.com/2013/09/23/otc-stock-performance-study/

Reply
David
8/11/2019 09:21:29 pm

Hi Mike,

Thanks for the links.

For me personally I favor dark stocks since one can gain an edge from information arbitrage. Ideally I want to find ones which are at an inflection point emerging from the darkness or those which have been forming a long-term base.

I generally like tiny illiquid stocks with a low absolute share price;

Market Cap < $10 Mil
Share price < $1
Common < 10 Mil

My approach is heavily influenced by Dan Schum @nonamestocks.com and the book 'How to make the stock market make money for you' by Ted Warren. This is a niche in which I feel comfortable and there are plenty of interesting investments for me to choose from.

Regards,

David

Reply
Mike
8/13/2019 09:46:55 am

Yes, I also follow Dan Schum. His performance is very impressive. The study above probably explains why. There is a very large illiquidity premium for tiny OTC stocks. Further, there is only little correlation betweent listed and OTC stocks.

If you buy stocks with a MC <10 Mio. etc. you will certainly pick the illiquide stocks. Probably I would prefer OTC stocks over listed stocks.

Mike
9/16/2019 08:13:52 am

Another stock with a record high dividend yield of 16% is Global Trans. However, this is not a tiny stock. I think that the highest yields are currently paid in Russia.
https://deepvalueinvestments.wordpress.com/2019/09/15/new-investment-global-trans/

Reply
David
9/16/2019 09:05:02 pm

Hi Mike,

Yes, I saw that one, looks interesting but I'm not much of a dividend yield investor and I prefer to stick with tiny companies.

Reply
Chris
9/18/2019 06:06:38 pm

Thank you for posting about this rather obscure company. Does anybody have the phone number or email of anybody at the company? I wanted to request financial statements from them, but I can't find the contact info. Thanks.

Reply
Ryan
11/17/2019 07:05:16 am

I'll give you a hint. Its asset is an override on conventional oil wells that aren't located in TX, OK, CA, CO or ND :)

Reply
Chris
12/26/2019 10:25:50 pm

The asset is the Salt Creek Field in WY, as Ryan alludes to.

The short history is that the field has been in operation since the 1890s and has been through several production cycles. In the most recent one, product began to uptick in the 2000s due to injecting CO2 into the well to increase pressure. Looks like production is declining at roughly 3% per year for the last several years based on the WY oil & gas data.

I did a few quick DCFs and this does seem like decent bet for 7-10% returns based on a terminal multiple of 5 and varying when the decline begins to accelerate to the mid or high percentages from 3.

That's a pass for me but someone else might find interesting. I'd be a buyer in the low 20s, high teens in the next 1-2 years but I doubt it will get that low in the present environment.

Reply
David
12/29/2019 03:54:38 pm

Hi Chris,

Thanks for the information, much appreciated.

Reply
IJW
11/18/2020 10:36:17 pm

Well it is at $16 now, are you a buyer?

Reply
Sjoerd
11/23/2020 09:28:00 am

Hey Chris,

You seem to know something about this company. Is there anything else you could tell about it?

No problem if you do not want to do it publicly We can talk offline.

Looking forward to your reply.


Kind regards,

Sjoerd

Reply
Chris
8/20/2021 11:04:42 pm

Sure, anyone who wants can find me on twitter @chrisvirnig

This info is just from research. I dug some into old local newspaper records to ID the field, and also used state O&G resources. It was fun tracking down the asset and doing a bit of valuation based on Ryan's hint.

Sorry for the delay, I just never checked the box for an email for new comments.

As for buying - I would have but wasn't tracking the price that closely. Possibly still interesting at 23 or in the fallout of 15c-11

Tom Simons
4/13/2022 11:55:29 pm

After folks passing away I inherited over a thousand shares of CWPS. Very loosely familiar with it. I retired in the "20-teens" as a geologist; over half my career in Prudhoe,though. Any reason why there has been zero price move in over a month?

Reply
Chris
4/14/2022 02:03:33 am

Hi Tom, as of last September, the SEC no longer allows publishing bid/ask for stocks that don't report financials to the SEC or to OTC markets. Functionally, virtually all brokers have taken this as their signal to disable buying these stocks. The only remaining buyers with the ability to bid are a handful of specialists offering very low prices.

So, you will not see any price changes, except once in a great while when someone is willing to take the very very low prices on offer from specialists. For example, I have another stock in this situation, which is liquidating, and the last trade is maybe one third of the liquidation value.

If you'd like to sell, you could probably get a better bid here than in the 'public' market.

Reply
Sjoerd
4/14/2022 10:08:47 am

Hey Chris, is the stock that is liquidating HRST?

Chris
4/18/2022 09:16:31 pm

Yep, that's the one.

Sjoerd
4/14/2022 10:07:42 am

Hi Tom, sorry to hear about your folks. CWPS pays a very good dividend and with current O&G prices, I see them paying out about $4-5 in dividends for this year. So option is also to just hold and real the dividends.

Reply
Tom Simons
4/18/2022 09:00:56 pm

Thanks, Chris, Sjoerd, for enlightenment. Somewhere in the distant past I knew this was the Salt Creek field. 'Not working in the patch around here for a long time...forgot all about it 'til recently.
Dividends from CWPS allowed my mother added comfort for years, but have the strong sense it won't continue a whole lot longer, since it appears "brokers" are pulling their horns in.
Currently, stock is held with Raymondjames and have yet to learn their disposition re: liquidation. Are you guys suggesting my only real option would be the "public market"?
When I first took possession of the stock I started receiving letters from others wanting to buy. Is that what you mean w/ "public"?

Chris
4/18/2022 09:22:04 pm

We mean selling via your broker - that will not get you much because of the SEC regulations now. You may be better off negotiating a private sale with an interested party. These too will be seeking a steep discount most likely.

If your broker allows limit orders for these stocks, you can try to sell to the market at a price you think is fair, but I'm not sure the buyers are there.

Data on the field's production is available well by well on the Wyoming O&G commission's website if you want to check it out.

Tom
4/18/2022 11:15:50 pm

Thanks, Chris. Hope to speak with broker soon. I live in Casper, Wy, and have learned their are owners of CWPS hidden around here. What about putting a notice in the local paper?
Being an independent geo, and doing my own long term investing from the ground up, this stuff is certainly new to me!
Regards

Reply
Sjoerd
4/19/2022 12:40:02 pm

You can see production of Salt creek here:
http://pipeline.wyo.gov/Fieldprod.cfm?oops=ID9316&nFC=3197

Also the Big Muddy field:
http://pipeline.wyo.gov/cntyFieldprod.cfm?oops=ID10385&nFC=2165&cnty1=009

The Grass Creek field:
http://pipeline.wyo.gov/cntyFieldprod.cfm?oops=ID10385&nFC=2165&cnty1=009

Relay stable, low decline production. With current O&G prices you have a very good dividend.

I am very in buying your shares, but as a Dutch nation this might be complicated..

Reply
Ryan
1/16/2024 05:44:50 am

Tom, would you have any interest in selling your shares? I have bought these in the past from individuals directly. Happy to reach out if so. I’m interested.

Reply
Gregory Halter
2/1/2024 03:48:45 pm

We have some shares we may be interested in selling.

Reply



Leave a Reply.

    David J. Flood

    UK based Investor. I focus
    ​on Net-nets, Pico/Nano caps, AIM/OTC/Dark stocks & Special Situations. Balance sheets & Long-range price charts are my guide. Looking for inflection points. Do not construe my blog as investment advice, always conduct your own due diligence.  Caveat Emptor!


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