₪ David Pescod's Late Edition March 22, 2006
EXXEL ENERGY (V-EXX) $4.30 +0.25
It’s hard not to dwell on the Ultra Petroleum story, even after all these
years. It’s just that the money created by this stock, which has gone from
roughly $1.00 to $130 over the last eight years has created such wealth and
some of the personalities involved were so intriguing, so interesting, plus a
few other characteristics. The story itself created more than a little passion
in some of the little tiffs that occurred that it would make a great movie.
I’m not sure where the women, sex and violence would come from, but
there is certainly enough money and personality to make it into an intriguing
movie.
We’ve written up Falcon Oil and Gas (FO) a couple of times because of
two of the characters involved in that story—Marc Bruner, one of the first to
catch onto the importance of basin-centered gas plays and Allan Laird, one
of the first engineers to figure out how to get the heavy fracs done to be
able to economically recover the gas. Then there’s Ben Law, the scientist
with the U.S. Geological Service who first came up with the concept and
who is now a consultant with the group that is currently working with Falcon
on their Mako Trough play in Hungary.
Once again, they do create interest as Falcon yesterday reached a market
capitalization fully-diluted of almost a billion dollars, yet they have no cash
flow, no production and not even a well to tell them whether their concept in
Hungary works! I suspect there are more than a few in the market place that
don’t yet understand that they’ll probably be two months before their deep
well hits total depth.
But there is another play from the ex-Ultra people that probably going to
be creating just as much interest, and you have some of the same worries.
Exxel Energy, which sees the former Ultra President John Hislop in charge
and Marc Bruner again, is one of the big investors has another play that in
some ways could be described as a “lottery ticket”. Almost 100 million
shares outstanding, no cash flow, but three intriguing plays.
Maybe having three lottery tickets gives you better odds than having just
one that might be cashed in, but having sat through a presentation today, it
looks like they guys have come up with some intriguing plays and basincentered
gas is again, the target—those large, deep targets that are so rich
in gas, they force the water out of the area and so prolific that production
numbers are the stuff oil and gas men pray for. Once you hit one, you tend
to have not one or two, but potentially hundreds if not thousands of locations.
What’s on Exxel’s plate is a BCG play in the Piceance Basin in Colorado
where they have a small chunk of land (6400 net acres) and a 75% working
interest. Currently starting a 10-well program there with a $20 million US
budget to see if there chunk of land contains some of this BCG goodness.
It is in an area that has been well drilled, so it should have better than the
usual one in ten odds. The great basin play in Nevada is another hypothetical
play and again, they have huge land holdings—183,000 acres with a
100% working interest.
But if you are following Exxel and you are looking for a big return,
it’s because of the Columbia River Basin. Encana is currently
drilling two wells in the area on yes, yet another BCG play
and those are probably two of the most-watched wells currently
drilling in the Mainland, U.S.A.
It was drilled many years ago by Shell and Shell BN 1-9 came
up with 12 gas zones for 157 feet of potential play and a one five
foot pay section produced 2.4 mmcfd. This was back in 1980
when gas prices were a fraction of today’s prices and costs
were higher and production technology was of another era.
Ironically today, Jim Letourneau always onto the hot plays of
the day in his “Big Picture Speculator” suggests that Exxel is a
buy and was bought for his portfolio.
He suggests, “The Piceance Basin supports the current
share price” and he point out that “The big upside lies on the
potential of the Columbia River Basin”.
He also quotes Dr. Ben Law, who he figures is the world’s
leading expert on BCG’s and says “In my opinion, the CRB will
be the next giant gas discovery in North America”.
Once again, not for those that are afraid of high risk plays.
www.exxelenergy.com
Be sure to visit their website and see their corporate presentation under investors.
ELDORADO GOLD CORP. (T-ELD) $4.77 -0.06
In the last while, we’ve seen a lot of take-overs in the
mining sector, mainly precious metals as the suggestion
remains that it is cheaper to buy ounces in the
ground by buying out competitors than it is to actually
go and explore for it. Barrick (ABX) is taking over
Placer Dome (PDG), Yamana (YRI) is taking over RNC
and Desert Sun (DSM), Inco is taking over Falconbridge
and Goldcorp (G) is taking over Virginia (VIA)
and Wheaton River (WRM.U). So what’s next. If you
believe some of the rumors of the day and we suggest
you don’t—there is the talk that Barrick may be looking
at Bema Gold (BGO) and doing some sort of
merger, that Kinross (K) is currently on the block, or
that Yamana (which has been quite a shopper of late)
may be about to take a run at Eldorado Gold. Once
again, these are all rumors, but Eldorado, in a good
gold market has been a bit of a dog. We would be
glad to see an offer come across our table!
Eldorado Gold
www.eldoradogold.com
Disclosure: Eldorado Gold : Canaccord Capital covers this stock and has a Hold rating on it. (Hold: The stock is expected to generate riskadjusted returns of 0-10% during the next 12 months.)
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