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Gold/Mining/Energy : PetroQuest Energy, Inc (PQUE and T.PQU)
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To: Iknownothing2 who wrote (30)4/13/1997 6:55:00 PM
From: Ed Ajootian   of 686
 
Steve,

Your hopes will be rewarded this week when Optima puts out an update
on the production rates of the recent wells they have hit. Plus they
will mention the addition of some new plays they have farmed into in
Texas. Now an owner of Optima has true geographical diversification --
from the Alberta wastelands to the Louisiana bayous, and now also to the
heart of oil country, Texas.

I have had an opportunity to review the valuation of this great little
company now that they put out their 10K. The break-up value was $2.55
per share @ 12/31/96. The average O&G microcap trades right around its
most recent break-up value as adjusted for discoveries since the last
year end.

Since year-end they have found $.14 worth of oil in Louisiana via their
TMR joint venture and $.23 worth of oil & gas in their E. Haynesville
field, also in Louisiana. They also hit a well in Alberta but I won't
even count that since gas prices are so low up there.

So you are looking at a current value of just under $3, a healthy 20%
pop from here. And this does not take into account any of the 3.5 mboe
of probable reserves that they plan to drill out in the next 8 or so
months. These low-risk wells would add about $2/share to the company's
value if all successful.

As illustrated from the above, this is not the typical O&G microcap in
that it does not have the upside potential that most of the other such
companies have. However if you are happy with 40 -- 50% a year appreciation
this stock should not disappoint you. In the last two quarters they
have increased their boe production by 10% and 12% respectively.

One neat little upside on the horizon is that they are in active discussions
to sell their Alberta gas field and estimate that that could reap $.75
to $1 per share in cash. The market is not valuing this asset by anywhere
near this much right now. Look for news on this in the next 2 -- 3 months.

Granted if you look at the price chart for the last year you would
question whether this turkey is capable of making a sustained move up.
But I feel it is, based on the fact that all of the bad news is now out
and everyone who wanted out of the stock is more or less out, leaving
just the long-term holders. From here the stock should trade in line
with the news it puts out.
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