COMPUTER MODELLING GROUP $10.24

COMPUTER MODELLING GROUP $10.24 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgl.ca; Shares outstanding: 78.8 million; Market cap: $806.5 million; Dividend yield: 3.9%) sells software and services that help conventional oil and gas producers create 3D models of reservoirs. That lets them squeeze more out of those deposits by injecting steam or chemicals. Without the technology, they typically recover only 25% to 30% of the oil and gas. Producers using hydraulic fracturing, or fracking, methods also use Computer Modelling’s software to determine the best drilling locations and depths. In the three months ended December 31, 2015, the company’s revenue fell 15.8%, to $21.2 million from $25.2 million a year earlier. Software licensing revenue (94% of the total) fell 13.8%, while consulting and professional services revenue (6%) fell 40.0%. Overall earnings declined 28.5%, to $7.9 million, or $0.10 a share, from $11.0 million, or $0.14 a share. Most of the company’s revenue is recurring from software licenses and maintenance contracts for its products. Its renewal rate is over 98%, and most of its clients are major oil and gas firms. That gives it longterm stability, even when oil and gas prices are falling. Computer Modelling is a buy.

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