Bobby and All/Overview of Canadian Oil & Gas Companies
I follow an estimate 350 Canadian oil & gas companies. All of
these companies are traded on either Toronto or Alberta Exchanges.
I avoid trading in issues listed on Vancouver Exchange. I began
monitoring companies and events about 2 years ago when the industry
was out of favor with most investors. This sector has again begun to
show strength, especially over past 6 months with renewed investor
confidence. I speak to several O&G executives frequently and they
will be the first to note that this change is taking place.
They are finding capitalization easier to secure through banking
institutions and private placements. The influx of several new Oil &
Gas Royalty Trusts are being greeted with enthusiasm, again a sign of
renewed vigor in the industry. Investors have been bailing out of
high tech issues and into defensive issues. Financial institutions
have been taking these steps over past 2 months. In theory, O&G
issues are defensive somewhat in a bear market-----but I look for
more than defense in a bad market climate. desire to find O&G issues
whose shares will appreciate in value, regardless of marketconditions.
In my opinion, there are numerous companies that offer value and near
and long term investment appreciation.
Expect a flock of great 2nd quarter earnings reports. Prices for
crude oil and natural gas have been on the rebound. Most companies
in the Canadian Oilpatch have budgeted and forecasted growth based
upon crude oil prices in range of $18.00 to $18.50/bbl(US) and
natural gas in the neighborhood of $1.50/mmcf. Crude oil prices
averaged much higher ($20.87) in the first six months. I do
anticipate softening of price throughout the second half, but the
average none the less will be higher than originally anticipated
for the year. Surprisingly, natural gas prices have remained high
year to date. Do not be misled by commodity price of $2.20 or
higher. Spot pricing for Alberta and US Rocky Mountain Region are
lagging behind. However, companies have appeared to appraised their
estimates (as above) pretty accuratly. Based upon most estimates I
have read over last 6 months, spot pricing will take up to two
years to catch up with what companies are experiencing in other
areas, such as Southeast US.
What companies (that are growing) are doing, are exploring for
new reserves with the drillbit with emphasis on a low cost basis.
Good companies must be successful with the drillbit to survive.
Growth via the aquisition route appears out of favor for the time
being. There is still room for growth in this manner if
objective is securing additional reserves at fair value with a
large amount of undeveloped acreage (in desirable exploration
locations) thrown in. Companies with current large undeveloped
acreage in an area they are familiar with, have a substantial
advantage over those that don't have the land currently. Cost of
acreage is becoming more expensive due to higher commodity prices
and increased competition. Also, the O&G Royalty Funds I mentioned
earlier are forcing cost of reserves to higher levels. These Funds
compete with oil and gas production companies for properties and
are buying at inflated prices.
I tend to concentrate on companies whose operations are in the
Western Providences of Saskatchewan, Alberta and British Columbia.
The only companies I like with International exposure are Talisman
Energy, Canadian Occidental and Ranger Oil. I especially like
Talisman Energy. I shy away from smaller companies taking the
internatinal route. Those that are lucky to find reserves offshore
usually end up diluting their shares substantially via share
offerings. They don't have the capitalization or a major partner
to support their projects. Examples of such situations are Arakis
Energy and Abacan Resources. There is also the constant risk of
political turmoil. It's tough for a small company to go
international by themselves. Those that do make it, take an
enormous amount of time to accomplish their objectives and while
doing so, shares decrease or remain stagnant in the marketplace.
I pay quite a little attention to the debt situation of a company.
I have seen quite a few good companies get into trouble because
they bit off more than they could chew. Harbour Petroleum is a
good existing example. I prefer to see companies inheriting no
more than one years forward cash flow, but will tolerate 1-1/2
years based upon current reserves, undeveloped acreage and
budgeted drilling situations. One important lesson I've learned
is to stay in contact with companies and their production rates.
Always ask and be aware of production declines in their active
areas. Unexpected production declines are disasterous to share
values for reserves are written down. f a company with sizable
debt runs into this problem, it's even worse than disaster.
Stay away from companies that are being touted or promoted with
share value based upon promise rather than proven reserves and
production.Without being specific, there are numerous companies
out there that are exercising this method of doing business.
Beware of the company that can't forecast cash flow over the
coming 12 month period. Check out Market Capitalization versus
Net Asset Value (NAV). Investigate into backgrounds of principles
and their accomplishments.
The following list are my top twenty choices for superior share
appreciation over the near and long term. They are listed in
stock symbol sequence. I have included some of Canada's largest
concerns along with micro-cap companies. My best selection to
date has been Berkley Petroleum whose shares have gone from $3.90
(point I purchased shares) to well over $20.00/share. You won't
find Berkley on my list because shares are fully valued at this
point in time. The only companies I've invested in where I lost
money was Canadian Pioneer and Northern Reef Exploration, both
since merged into other companies. I have made over 50 investments
into oil and gas companies and my current favcorite is Newport
Petroleum. My track record is excellent. However, after saying
this, I am not a professional analyst and are bringing these
companies to your attention for the sole intention of providing a
base for you to perform due diligence in determining merit for
investment.
When contacting these companies, ask for 1993/94/95 Annual
Reports, 1994/95/96 Quarterly Reports, copies of any Analyst
Research Reports issued in past 6 months and, ask to be be put
on their mailing lists.
You can pull news releases from either newswire.ca
(or) cdn-news.com . For free charts and
free past 90 day historical trading information, go to
wwwcanada-stockwatch.com . If you haven't visited the site,
go to capp.com .
TOP TWENTY LIST
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Alberta Energy (T) AEC..........Blue Range Resources (T)BBR.A
Barrington Petroleum (T) BPL..........Cimarron Petroleum (T) CIR
Genesis Exploration (A) GEX..........High Point Energy (A) HPE.A
Jordan Petroleum (T) JDN..........Lateral Vector (T) LVR
Morrison Petroleum (T) MRP..........Maxx Petroleum (T) MXP
Newport Petroleum (T) NNP..........Penn West Petroleum (T) PWT
Renassaince Energy (T) RES..........Richland Petroleum (T) RLP.A
Stampeder Exploration(T) SDX..........Talisman Energy (T) TLM
Truax Resources (T) TUX.A........Upton Resources (T) URC
Venator Petroleum (A) VTP..........Vermilion Resources (A) VRM
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Alberta Stock Exchange (A) Toronto Stock Exchange (T)
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If you should have any questions, please post them at this location.
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