Here are some random thoughts that I've had over the weekend:
- All this negative talk about the fact that AIPN has not drilled a hole is getting very stale. Of course they havn't drilled a hole!!! They just got the license from the Kazakstan government last week!! More to the point though is that it is my understanding, and always has been, that AIPN has neither the resources nor the intention of doing any drilling itself.That doesn't bother me. The plan is to partner with a large oil producer with the deep pockets necessary to take the project forward. I see nothing wrong with that...after all Triton did the same thing with, I believe, British Petroleum. Does anybody here realize that, according to Value Line, Triton only has a 9.6% interest in the Cusiana field in South America? I'd be quite happy if AIPN retained that percentage interest after partnering with a major.
-Speaking of Triton Energy, I did a little research. Much has been said about AIPN's record of diluting shares to raise funds. Well, it seems that Triton did the same thing. In 1980 Triton had 5.13 million shares outstanding.By 1987, when they supposedly had seismic data indicating potential oil in Cusiana, the outstanding shares jumped to 15.99 million. By the time they drilled the first well in 1988 (according to a previous post) there were 19.97 shares outstanding.By 1995 Triton had 35.93 million shares outstanding. So, this seems to be a practice common to small exploration and production companies. Another interesting point about Triton is that from 1987 (when presumably seismic testing had indicated the presence of oil...maybe)to 1995 the company lost money (negative eps) every year...and yet the stock traded in a range of $4 to $60/share.
-All these warnings about not being sure there is oil until you've drilled a well, while appreciated, seem overly alarmist to me. Everything I have heard indicates that Kazakstan is almost litterally floating on oil. Estimates of the size of the reserves put Kazakstan in a league rivalling the Saudi Arabian fields. This being the case, I find it really hard to believe that the area licensed to AIPN/MED Shipping will turn out to be completely lacking in crude especially after Huddleston & Co. concluded that there are potential (yes, I understand what that means in oil biz jargon) reserves of 1.1 billion barrels. Sorry, given Huddleston's reputation for under-reporting results of their assessments, it defies logic to think that there is a strong possibility that the assessment will turn out to be a 100% false reading. On the other hand, I do not believe for a minute that AIPN or its future partner will eventually find reserves of 1.1 billion barrels...that also defies logic. Frankly, I would be happy if only 10% of those potential reserves turned out to be "proven"...that would give AIPN about the same proved reserves as Triton Energy...and that would be just in 60% of the license area.
-The question as to why Kazakstan gave this alledgedly valuable license to MED Shipping instead of to one of the majors might have a very simple answer. MED is a German-based consortium that includes a number of Kazak businessmen with close ties to key players in the Kazakstan government.It seems logical to me that any government of a developing country would be more inclined to favor a foreign company that includes its own nationals over one that does not. Yes, it might be unfair but it is the kind of thing that goes on everyday in the developing world. Add to that the rumors I've heard that there is friction in the relationship between the Kazakstan government and Chevron and you have an easy explanation for why MED got the edge over the US, French, and British companies.
-I disagree with those who claim that the company has been misleading people. When the company speaks of the estimate of 1.1 billion barrels it clearly uses the word "potential". Nowhere in the press release does the company state that there are definitly 1.1 billion barrels in the assessed part of the License Area. They do not use the words "probable" or "proven". Furthermore, the company never made any claim that it would be drilling for this oil itself. Rather, in last week's release concerning the financial terms of its acquisition of 70% of the license, the company clearly states that it will finance its obligations from proceeds of the sale of its South American operations, cash flow from the Refinary that is being retooled and is expected to become operational in September of this year, and, most important, "from partnerships with industry groups". So, all this talk about how the company has no money and will be unable to afford the costs of further exploration is meaningless. Furthermore, the company sold its SA operations for cash and 4.4 million shares of MIP, the acquiring company. The last I heard those shares were trading for about $1.5 on the Toronto Exchange and are not restricted. So that's $6.6 million in cash equivalents right there.
-Finally, it occurs to me that companies that are alledgedly misleading shareholders do not usually make it a habit of inviting fund managers, analysts, brokers, etc. to a meeting on Wall Street where they will be grilled by very knowledgeable individuals...and, yet, that is exactly what AIPN is doing on July 28. If they were hiding something, why would they go to all this trouble to set themselves up with the financial community? I think the very fact that they are holding this meeting on the 28th is a very strong indication that they are being straight with the public. Scam companies usually hide in the shadows. AIPN seems to have no qualms about voluntarily walking right into the spotlight which they are well aware will be very bright given the activity of the last few weeks. I applaud them for their willingness and eagerness to face the skeptics in public. More power to them!!
This could very well be a very exciting story that has just begun to be told.
Cheers....Faris |
