David Pescod's Late Edition February 15, 2006
ACCRETE ENERGY (T-GZ) $8.55 +0.05
NATURAL GAS $7.09 -0.048
Ray Dobek, Peter Salamon and their experienced crew at Olympia Energy had so much fun that when they got bought out, like many experienced oil and gas guys, they decided to do it again. If anything, they’ve had more success at Accrete Energy!
Notice the quick start as they began with next to no production, they’ve built it up to today, where they have roughly 2700 to 2800 barrels VP Dobek tells us with about 400 to 500 additional barrels behind
pipe.
One of the constraints Dobek tells us is the availability of facilities to increase those numbers. Also he points out that some of their facilities at Harmattan have so far, forbidden to see co-mingling of different zones for production, so numbers could be higher if that changes as well. He also adds that weather has been a factor.
The chart was very much like a rocket taking off for much of its brief history, Dobek tells us that the company is 70% gas and as gas prices have plummeted in the last two months, it’s starting to affect Accrete.
But of most intrigue to those of us who have followed the Accrete story is two things. First, they’ve done so well because unlike so many natural resource companies these days that issue so many shares and severely dilute their story, they’ve been very careful and so far, have issued only 17 million shares. That’s why those that have been along for the ride have done so well. (That’s why we say so often, the first question investors should be asking—how many shares outstanding)
The second point of interest is that when they established Accrete, the suggestion was that they expected to sell the company within two years. Dobek jokingly suggests that means on June 11th of this year, theoretically, they might be gone. He jokes! (But it would give Dobek more time to ride that motorcycle!)
While it might be a little tougher to sell junior oil and gas stories these days as the trusts are having a little tougher time raising money, what with this sudden drop in gas prices and correcting oil prices, and the money men suddenly not too sure about what’s next...
As far as the drop in gas prices, Dobek tells us that he remains a bull and suggests “a couple of weeks of cold weather could change inventory numbers dramatically”. We’ll we’re not so sure about that as inventory numbers are simply huge—way above one, three and five year averages—and if you are counting on weather, well, what’s to say that we don’t have a cool summer, which would mean no demand for airconditioning. Usually a big user of gas delivered electricity.
Dobek suggests that “when the weather is warm, no one seems to be bullish and right now, oil and gas looks like it’s just going sideways with the uncertainty”. Anyway, it is going to be interesting just to see if there is a reason to celebrate in a big way the second anniversary of the history of Accrete!
ATNA RESOURCES (T-ATN) $1.97 +0.07
What kind of a junior market are we in these days? We don’t have to go any further than the drilling results posted by Atna Resources today to tell you exactly what kind of a market we are in—it’s a correction and people suddenly don’t care as much. Suddenly, there is a lot more fear than greed. Atna posted some amazing results today from their Ogee Zone underground drilling—how about 27 feet of 1.24 ounces gold per ton, or 61 feet of .505 ounces gold per ton, or 81 feet of .89 ounces gold per ton. On a scale of ten, we would have to rank these close to nine out of 10. And what does the market do? It does absolutely nothing, although at least it shows some volume for it. This is the new reality—a little more fear than greed right now. Of course part of the problem is that so many companies in the resource sector issuing so many shares to get some deals done.
It’s a different world to be investing in these days, because suddenly you have to know what the political environment is like in places you’ve never heard of like Kazakhstan or for that matter, exactly how bad things might be in a place like the Democratic Republic of the Congo. You probably don’t know a lot about the DRC, but could probably guess what life is like there! Another country though with a significant mining history and relatively affluent (at least by standards of some South American countries) is Peru. Not as politically mature as Chile, but definitely more so than immature Venezuela. Peru has some elections coming up that like neighbor Bolivia, could very much affect what’s next for its important mining industry. I suspect if you own shares in Peru Copper (PCR), Bear Creek Mining (BCM) or Newmont (NMC) you want to be watching what's next in the election in April. Click on the link below for the election polls and the ultranationalist who some folks are quite nervous about is Ollanta Humala.
weblogs.elearning.ubc.ca
Disclosure: Atna Resources : Canaccord Capital covers this stock and has a Speculative Buy rating on it. (Speculative buy: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the stock may result in material loss.)
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