COMPUTER MODELLING GROUP $12.85 - Toronto symbol CMG

COMPUTER MODELLING GROUP $12.85 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgl.ca; Shares outstanding: 78.5 million; Market cap: $1.0 billion; Dividend yield: 3.1%) sells software and services that help conventional oil and gas producers create 3-D models of reservoirs. That lets them squeeze more out of those reservoirs using advanced recovery techniques, such as injecting steam or chemicals. Typically, only 25% to 30% of oil and gas is recovered during primary production.

Unconventional producers using hydraulic fracturing, or fracking, of oil and gas-bearing shale can also use Computer Modelling’s software to determine optimal drilling locations and depths.

In the three months ended March 31, 2015, the company’s revenue rose 2.0%, to $20.4 million from $20.0 million a year earlier. Software licensing revenue (89% of the total) rose 2.8%, and consulting and professional services revenue (11%) gained 9.6%.

Overall earnings rose 2.8%, to $7.9 million from $7.7 million, while per-share profits were unchanged at $0.10 on more shares outstanding.

The company makes mostly recurring revenue from software licences and maintenance contracts on 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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