₪ David Pescod's Late Edition 6/30-7/04/08
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David Pescod's Late Edition June 30, 2008
BNP RESOURCES (BNX’A ) $1.57 +0.07
We are here with Greg Bilcox of BNP Resources, many analysts and followers of the stock suggest that BNP is one of those stories that could have a very interesting year because of the Jensen play in Alberta which could have a huge impact on the company.
David Pescod: Greg, you and your team from CNQ look like you’re onto a pretty interesting play at this point?
Greg Bilcox: Yes, we think it’s a really significant situation for a small company like BNP. We have 3 wells into the play each with over 30m of light oil pay. The play is defined by 3-D seismic. The last few months we have had a lot of rainy weather and we’re about 7 kms off a main high grade road so our operations are affected by rain and poor weather. It has cleared up and dried up now, and we’re back in there doing a few things.
D.P.: Now a lot of people are suggesting that Jensen is a look-alike to several possible situations on the Montana side of the border. Is this your take on it?
G.B.: There are several pools on the Montana side and one actually is a significant pool, about 12 miles away. Its been on production since 1947. It’s on the same fault trend that we’re on and it looks like its got similar geology. It has produced in excess of ten million barrels during that 60 year period.
D.P.: Now if Jensen is what you think it is, the suggestion is that it is one of those pools that are not high rate producers, but once it is starting to produce it could be producing for 40- 50 years.
G.B.: Yes, I think that is how we’ve seen it right from day one. It is not high rate on a per well basis but long-term stable production, and is something that is still attractive to many companies these days.
D.P.: Amen. The Calgary Herald did a piece on you awhile ago and the suggestion was that there are people who think that this pool has as much as 40 million barrels. What kind of numbers can you toss around this early in the game?
G.B.: It is early but at the same time you probably saw our reserve report that GLJ did at the end of ’07 which incorporated two testing wells that we had drilled into the pool at that point in time. The reserve report gave it 1.1 million barrels of oil in place for each of the LSD’s associated with those wells. So there were seven LSD’s that they gave reserves to which equals 7.7 million barrels in place and we see another 25 to 30 LSD’s, based on 3D seismic so you can do the math and if you do get into those kinds of numbers. However we caution that we do have to do more work to prove everything up.
D.P.: Now you have completed three wells into Jensen and you hope to do 6 more by year end, what do you hope that these wells will tell you?
G.B.: We need to confirm the extent of the pool. Right now we are looking at nine quarters and that would be nine wells, 3 existing wells and 6 more drills. We think these nine wells will capture the majority of the pool. It is really a question of getting those wells completed and on production, confirming production and taking it all to GLJ at the end of the year and getting the reserves recognized to capture significant shareholder value.
D.P.: Would it be correct if this were categorized as high-risk high-rewards?
G.B.: I think everything has some risk these days, I mean with all the things that are going on in the oil industry, nothing is easy and nothing is really a slam-dunk. There is always some risk to everything. However, as far as this pool goes the risk is moderate. The pool is only 1300m in depth and defined by 3-D seismic.
D.P.: I guess you’ve learned that over many years in the oil business.
G.B: Yes, I think the first thing you learn is not to take anything for granted. You know, it’s just the way it works in this business, so we always caution people and put out disclaimers and things to make people aware that there is always risk no matter what.
D.P.: Okay now we better get our math right, we might have gotten wrong the number of shares outstanding that BNP has right now and also we should ask about production from other sources.
G.B.: Shares outstanding are just a little over 16 million on the A side and you can get all of this right off our website if you would like to check and get the exact numbers. We have two classes of shares, the class A and the class B standard share structure. There are 922,500 class B shares outstanding. Then we have a preferred class B share with a little over 2 million shares outstanding, These can convert to A’s within a three year period on a one for one basis.
D.P.: Production from the other projects which is...?
G.B.: It is coming along nicely, we were under 100 barrels a day and we continue to tie in and equip more wells. We still have a couple more to go. We want to get into that 200-300 barrels a day range as soon as possible.
D.P.: Now back to the Jensen again, because there has been talk that underneath the pool that you are shooting for there might be others?
G.B.: We are just evaluating that opportunity right now, there are some zones that we would like to complete and we are in the process of doing that to confirm it or not. But I cannot confirm it at this point , we have to wait for a little more completion information. But it is in progress.
D.P.: I guess an obvious question is how come Encana, that previously owned the property never drilled it after all it is suggested to be an obvious seismic target?
G.B: We’ve never asked, but we’re glad they decided to evaluate the deeper potential in this area through farmout.
D.P.: For a company with say 20 million shares outstanding and only doing 200 or 300 barrels a day some can argue that this is a situation where if Jensen somehow doesn’t work out there are lots of downsides and if Jensen does works out there are tons of upsides?
G.B.: Yes, I think that’s a fair assessment, although we have other things on the go that may capture some of that downside and reduce it , but I guess we will leave that up to the shareholders and the future completions and drilling results to determine.
D.P.: Now how soon do you figure you’ll have a handle on Jensen? Is this a story by September/October?
G.B.: I think we’ll have a pretty good handle by then, certainly within the next 6 months we’ll have it all figured out.
D.P.: The rumour mill of course suggests that you hope to prove it up then sell it for a buying price then go into a brief retirement?
G.B.: No we haven’t made any decisions like that. We want to take this company as far as we can, you know there’s always options and things happen but right now there is nothing firm along that line. We just want to get it all up and running, capture the share price that reflects the value attributed to similar pools..
D.P.: How does the trio like working with a small company after all those years spent with a big, big but very successful company like CNQ?
G.B.: I think the way we approach things is a lot like CNQ, it’s just on a smaller scale. Not a big adjustment in terms of how we do our day to day work, but actually I prefer it over the big company.
D.P.: You being in the oil and gas patch, what are your thoughts on oil and gas prices these days where just about anything could happen tomorrow?
G.B.: Hard to predict, I sat down with a group of CFA’s a while ago that made some predictions in terms of oil prices in the upcoming year and nobody was even close. It’s one of those things that we’ll just have to roll with the punches and see what happens. So long as we conduct our business in a prudent manner, we know we will be okay. I mean I can remember in the early eighties when Dome & the Gallagher and Richards people were around predicting $100 oil, and you know it only took about thirty years to get here. So I mean you know it’s a hard one to predict.
D.P.: If you had to predict prices for oil and gas a year out what would they be?
G.B.: I don’t even want to go there, because you know after 30 years in the business I’ve seen things change so rapidly and there are just unpredictable things out there that you can’t foresee.
D.P.: Okay, one last question, we always ask of people, if you could only buy one stock other than your own what would it be?
G.B.: Oh it would be CNQ?
D.P.: You still think the big guy has a lot more running to go?
G.B.: I would never rule those guys out, they have an incredible group of managers over there and if you just look at what the stock has done in the last two or three years it’s unreal. We still own CNQ stock personally and we’ll buy more.
D.P.: Okay you’ve now posted on your website a presentation you recently did for those who want an update on the company?
G.B.: Yes we did, we did update it, we used the presentation that we had at our AGM on June18th and it is now on the website. It is about as current as we can do right now.
D.P.: Thank you very much Greg.
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David Pescod's Late Edition July 2, 2008
OILEXCO INC. (T-OIL) $18.68 -0.78
WESTERNZAGROS RES. (V-WZR) $2.78 -0.20
STERLING RESOURCES (V-SLG) $2.86 -0.13
With Oilexco hitting ever new highs, it was obviously time again to visit with Oilexco’s most prominent advocate, Josef Schachter. As always, he is pretty excited about some of the stories he is keen on, pointing out that Oilexco should have additional results in on their drilling on their Moth Project within the next three weeks.
WesternZagros Resources will be starting a rather significant program shortly. Sterling Resources, a favorite of his of long standing, should finally be starting work on one of their first projects and they will be busy for the next six months with high risk/high reward plays.
An additional story he liked a like recently has been Accrete Energy (Ray Dobek and Peter Salamon aren’t that aggressive on the golf course, are they?).
But Schachter has some interesting commentary on the general market right now suggesting that the overall market now considered by most to be in a bear trend, is exceedingly oversold. He has his handful of favorite technical commentators and he suspects 11,000 on the Dow Jones is probably the bottom. He figures sooner or later, there comes a time where the financials and high-tech stories have to be looked at.
Meanwhile, as he points out for potential bottoms for other sectors, he also mumbles that maybe it’s not a bad time to have a wee bit of cash for the oil and gas sector and he suggests that if there’s no hurricanes coming up in the hurricane season, there could be some corrections.
Interesting where he points out that companies such as Suncor and Canadian Oilsands might be the type of stocks that could be most affected by a $20.00 drop in the price of oil while many of his more risky stories, he doesn’t think would be as hurt.
Meanwhile, Schachter moved his price target on Oilexco up to $30.00 some time ago and it’s nice to see the other analysts start jumping on board by raising theirs as well...
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David Pescod's Late Edition July 3, 2008
RYLAND OIL CORP. (V-RYD) $1.89 -0.11
One could visualize many people trying to figure out what exactly was going on in the markets yesterday, when oil hits yet a new record high and yet oil stocks participated with gold stocks in getting clobbered on Toronto, where the Index was down 430 points. Like, what gives?
The common answer being given is that with the American market in a bear market stance, maybe a lot of people were using the opportunity at the end of the quarter to wrap up any profits they could find anywhere. That might explain what was going on, but in the meantime, oil is still at an unbelievably good price although as we said before, we are more than overdue for a correction in the commodity.
Meanwhile, as we look at some of the oil stocks that have corrected, we look at Ryland Oil Corp. and we find ourselves asking the question—is this the next Oilexco which we have followed for the last three years? Or is this the next Ultra Petroleum?
Needless to say, this is way too early to be asking those questions and knowing Ryland’s brief history, but the most important thing those previous companies had, was huge land positions.
Although Ryland doesn’t yet have a big following, what it does have now is 360,000 acres, the bulk of it in southeastern Saskatchewan on prime Bakken land. The Company has two huge problems of course. Number one is that they’ve got a huge amount of shares outstanding now of 160 million shares and they almost no oil and gas production.
On the other hand, they have an interesting Chairman in Dick Findley, a previous “Oil Man of the Year” in the United States for his success in finding opportunities in the Bakken and secondly, their land holdings are enormous. Potentially, they have thousands of locations to drill in the coming years.
Is it the next Oilexco?
GOLDSOURCE MINES (V-GXS) $14.75 -1.75
BITTERROOT RES. (V-BTT) $0.50 -0.07
It was about two months ago now that we did an interview with Eric Coffin of the Hard Rock Analyst and they were first on the story of Goldsource Mines, the little junior mining company that was looking for diamonds in Saskatchewan...and voila...they came up with something a lot more interesting these days and that was coal.
So far they’ve only done two holes widely apart, but they found some better quality coal than you usually find in Saskatchewan and they were at huge distances apart so there’s potential for big chunks of coal.
Since that discovery, there’s been a genuine area play as every second day it seems, there’s a new junior explorer saying that they now own chunks of land that could have coal exposure in Saskatchewan...some of these stories are as much as 100 miles, but hope springs eternal.
On Tuesday, Canaccord analyst Wendell Zerb asked them hard questions about the play and today those hard questions were picked up in a rather major article in the Financial Post. The headline screamed, “Coal Play May Burn Out Early” analysts warns, although I don’t really know whether that’s all of what he said.
His report focuses on one key statistic and that’s the coal market going forward in Canada. The Government of Ontario has decided that coal is naughty stuff and they don’t want to see any electricity derived by coal production by the Year 2015.
That means suddenly, there is a big dent in the amount of coal that is going to be needed in Canada. Once again, that’s 41% less. So what happens to coal prices? Well, I suspect that’s just one comment in the entire coal scenario, as there are still lots of folks in Asia that need coal, but what are the costs with rising fuel prices to train in to Vancouver and then ship it over to Asia? The same could be said about the United States where 50% of their electricity is derived by coal and of course it’s getting harder and harder to find the easy coal that just might be found by Goldsource.
Of course we are getting way ahead of the story here in that there’s still only two holes drilled and we have no idea what the size, grade or characteristics of the coal are, but today’s action on the market and an ongoing ugly mining market, it remains interesting.
For those who would like a see the report of what Wendell Zerb wrote in the Weekly Junior Mining, simply e-mail Debbie at debbie_lewis@canaccord.com.
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David Pescod's Late Edition July 4, 2008
OILEXCO INC. (T-OIL) $18.10 +0.16
One of our favorite commentators and I suspect yours as well is Josef Schachter and it’s been a while, but he is back on BNN TV today in the afternoon. It’s time to ask him a few questions folks...He has been one of the biggest fans of Solana Resources and undoubtedly his telling of the story helped create many of those fans.
It was just a while ago though, he told us and we printed it, that he thought Solana had gone so far and had done so well and its production was so far down the road, that maybe it was time to take a little money off the table. I wonder if someone asked him about Solana and if that’s his same stance.
Meanwhile, there is no one better for following the Oilexco story than Schachter and we wonder when he thinks their extra 5000 barrels a day of production comes on stream and of course, what is their latest news out of their Moth play, which over the next few days/weeks, will be all-important.
Meanwhile, hopefully someone asks him about Questerre (QEC) and Junex (JNX) because there are a lot of folks in western Canada that are not up to snuff or have yet to hear about the Quebec shale play which has huge potential. Let’s make that really, really big! So it will be interesting to see if he will touching on that play as well.
Hopefully, someone asks Schachter how come oil is trading at $145 and most oil stocks as if it is trading at $90.
ANTRIM ENERGY (T-AEN) $3.39 +0.19I
ITHACA ENERGY (V-IAE) $2.87 n/c
Today, Antrim Energy announces another successful well in the North Sea called Causeway and the market couldn’t care less. The chart shows you how those small guys in the North Sea (Antrim and Ithaca) have been doing...diddlysquat.
Oilexco has their own rig, they are always working on something, they have a constant flow of news. The little guys however, you have to wait 6 or 10 months for the next project and despite oil prices doubling, many of these companies have halved.
So what next for Ithaca? When an offer was made for Endeavour International, Fred Kozak wrote on the impact: “Short-term positive. With this unsolicited offer, the market has reacted positively increasing Ithaca’s share price closer to the proposed bid price.
The deal is also a long-term positive for Ithaca’s shareholders as the combined company would have a well diversified asset base that is well financed and positioned for further growth. Additionally, the combined company would have ongoing cash flow to fund future exploration and development programs. This would alleviate any potential future financing risks given the ongoing tightening of the UK credit markets. For example, the acquisition reduces the financing risk of bringing the Athena field onstream, as the combined company will be able to finance a portion of the project through existing cash flow.”
TATA MOTORS (NYSE:TTM) $8.90 -0.50
With gasoline prices in the United States now averaging about $4.10 a gallon, you know what it’s done for car sales...and particularly pick up trucks and heavy vehicles...they have gone off a cliff. Suddenly, no one needs them anymore.
Meanwhile the stocks of the people who make those automobiles have also gone into the tank as General Motors has seen its stock hit levels not seen in 55 years.
Meanwhile, Chrysler Bonds are purportedly trading at as little as $0.50 on the dollar. And the analysts who are ever helpful that had GM as a buy previously at much higher prices, are suddenly saying sell and other astonishing thoughts like maybe they might run out of money by Christmas, that they will have to financings to stay alive and the like. It’s spooky out there!
Meanwhile, Tata Motors out of India, who are famous for working on developing a new car that could be sold in India for $2200 a vehicle (an incredibly cheap price) is also having a wee bit of a problem. They have come up with an incredibly cheap car, but with gasoline going for these prices, could a person afford to feed that ultra-cheap vehicle?
To receive the Late Edition and be on our daily circulation simply e-mail Debbie at Debbie_lewis@canaccord.com and give your address, phone number and e-mail and we’ll have you on the list tonight. |
