Connacher from Pescod's Letter - 03,04,05 - best effort cut and paste. PM me an email and I will send it to you:
CONNACHER OIL & GAS (T-CLL) $1.14 -0.05
BIRCH MOUNTAIN RES. (V-BMD) $2.69 -0.25
CGX ENERGY (V-OYL.U) $0.93 +0.08
Back on December 2, 2004, we did a feature on Connacher Oil & Gas, the junior Canadian oil and gas company that had a bit of a problem in its operations in Saskatchewan. That was the bad news. The good news was with higher oil prices the potential for their heavy oil deposit, the Great Divide, was suddenly looking a little interesting. It was Kerry Sully that we featured as the guy that insisted we should be taking big interests in this story at the time. Sully is formerly the President of Ranchmen’s Resources which he sold to Total for over $300 million back in 1995, when $300 million was real money. He’s the President of CGX Energy, which could create a little interest when its starts drilling onshore Guyana shortly. (If and when they ever drill those offshore
turbidite targets, CGX will create a huge interest). Now all of a sudden, the icky, ugly, boring heavy oil is suddenly sexy stuff, so it’s time to go back to Sully to see what his thoughts are at this time.
“Kerry Sully and David Pescod’s Question Period”
Pescod: What do you think has triggered all this interest in Connacher all of sudden?
Sully: The UTS—PetroCanada deal is probably the triggering event for the big share price jump in Connacher. The UTS deal was both creative and it attracted an awful a lot of attention in the press. Look at the volume in the stock!
Pescod: One question still remains for down the road is, do you see Connacher going with a partner for the huge expense of building the Great Divide or financing it all themselves?
Sully: While Connacher could at some point go with a partner, the beauty of this situation now is that they can do it by themselves. Therefore, if a partner were to come in it would be under much more attractive terms for Connacher shareholders today, than it might have been before.
Pescod: Drilling is on-going on their properties, have you noticed anything of interest on those developments?
Sully: The first three wells drilled in January supported the company’s prior interpretations. The 14-well test in March will not only prove up Pod 1, but what could get one excited is that it will hopefully confirm one or two more Pods for a total of 4 Pods. In the consultants reports to date, three of the four Pods were given no economic value at all. So needless to say, if two of the additional Pods suddenly have merit, there is significant further upside.
Pescod: Another situation that’s changed is some of the
evaluation work done on Connacher’s assets, was based on
lower oil prices, correct?
Sully: While I don’t recall all the specifics in the prior evaluation, but the crude price was about $30.00 and that was about what some of the work was done at. With higher prices everything looks better.
Pescod: One question for the company remains—about pipeline
access. Suddenly there is a lot of plants being built and
moving the crude to Edmonton for refining might be become a
problem?
Sully: Pipeline access? Who knows! At least their access is
closer to market than those at the northern end of the line.
Pescod: You had some aggressive targets on the stock before,
figuring some time in 2006, we could see $3.00. What are your
thoughts now?
Sully: I think I could comfortably increase my prior target by
33% to 50%. With higher commodity prices and greater certainty
as possible reserves move to proven from the probable
category. |
