Hi Teevee
I'm in the play the same route you are. I bought into the company years ago and had written off the stock mentally. I really lucked out that these guys came along and picked up the company.
I think the upside is still significant for all companies --with a successful well that approximates the original estimate. If they announce an estimate 1/2 tcf of recoverable reserves, share prices should advance admirably. That's what I'm hoping for.
The exciting information which should follow will be the announcement as to how long it will take to tie in the initial well and a schedule of drilling step out development wells. From what I understand, based upon the size of the structure and its characteristics, there will probably be another 5-6 wells drilled. From an investor viewpoint, I would like to see the companies agressively pursuing the follow-up drilling of two wells at a time. That's rather expensive - about $25 million each pair. That's without suffering to many problems in the progress of such drilling.
As for potential upside and downside for shares of the 4 public companies - the little companies in the early stage will be the larger winners or losers. This pertains to High Point Energy and Nation Energy because they are in their early stage of corporate growth and this is almost their entire menu of operations. Actually, it is Nations only activity and High Point has just a little bit more going for themselves.
I think the most upside situation with all companies is Nation Energy. They had one prior project going in Wyoming which didn't turn out to be a good one. They wrote off the project and got into this play to replace it. They had a public offering in December where 5 million shares were sold at US$0.20 each. Their shares are at US$0.85 now. If the field is approximately 1/2 tcf, this would translate into a net asset value of US$26.45 million. That's a per share value of US$1.65.
Using this same logic, I figure HPE.A's upside is in the CDN$0.75 to $0.85 per share. This basically is on the theory that their net asset value will be impacted about CDN$0.50.
The larger juniors, Meota and Olympia, have several projects going in addition to Smoky/Bolton. This project could be a big bust and shares will fall - but by late 2003, shares will be back to this level. So, the downside can be limited in terms of time while the upside remains huge.
I particularly like Olympia's potential upside over the next two years because of the large 44% earned interest in the exploration play. There is potential of $15.00 to $20.00 per share by the end of 2003.
In conclusion, the upside potential over the short term may be with Nation Energy while the longer term favors Olympia Energy. However, one assumes an overload of risk with Nation while the downside is minimal for the patient investor holding Olympia shares.
We, with High Point, have not been dealt an empty hand. We have proven management with a corporation in the infant stage. Meota shareholders also have a lot going for them. In addition to being a successful company too date, I would foresee potential takeovers occuring over the near future.
Keep in mind, all these comments are speculative in nature and everything dependent upon a good outcome of this initial well. Again, I'm excited over the prospects developing here. I also have a cautious attitude - I've been disappointed before. Tis the nature of the industry to take us in either direction.
That's my two cents worth at this time - til next time. Remember just one person's thinking on this matter. |
