₪ David Pescod's Late Edition April 3, 2006
OILEXCO INC. (T-OIL) $4.65 -0.05
INTL. FRONTIER RES. (V-IFR) $1.86 +0.16
If there is one market commentator that’s always entertaining
and enlightening, it’s Josef Schachter. On a day like today
when oil is up big time, because of further concerns about just
what the Iranian Navy can accomplish—checking out those
videos of their torpedoes, reminds us that they could in no
time, shut down all that tanker traffic in the Gulf of Hormuz, has
oil up and running today.
It’s interesting that just last week Schachter had written a
bullish report suggesting the correction was over, enjoy the
next bull market up-leg and suggested that his next target was
400 on the S&P/TSX Energy Index.
He wrote that the “TSX Energy Index corrected from a high
of 371 in early February to 317 later that month and now has
started the next up-leg in this ongoing bull market. Into the
summer driving and hurricane season, we expect to see a vibrant
market take this Index to new all times highs—this time
to the 400 level. If you are not fully invested in your favorite
names, do so on any down days ASAP.”
He is not concerned at all about natural gas either, which
has gone through quite a correction over the last few months
as there was simply no winter over much of North America.
He writes, “Natural gas prices are now lifting as concerns
about this summer’s hurricane season in the Gulf of Mexico is
beginning to mount. Some weather forecasters have noted
that the temperature of the water in the northern Gulf is warmer
than last year and warm water is a key factor in creating hurricanes.
It is conceivable that this warm water could make for an
even worse hurricane season this year, as even small deviations
in temperature can cause significant weather changes
offshore. If this occurs, production in the Gulf could get shutin
faster and for longer than last year which would drive prices
of both commodities materially higher.”
He also shows some charts showing some significant oil
and gas companies and the tough time they are having on the
production treadmill—to see the drops in production from
companies such as Petro Canada, Devon Energy and Anadarko
Petroleum, tells you that it’s not that easy anymore to replace
depleting resources.
As far as the all important stock picks, he once again talks
about Oilexco (OIL) and his target price is $6.44, but you can
see he is able to move that upward. Vero Energy (VRO) he has
big hopes for giving it a target of $11.52.
Off his watch is ENDEV Energy (ENE) as he writes, “we
do not see material upside from these levels over the coming
year. In 2005, ENE had $40 million in capital expenditures,
drilled 136 gross natural wells yet had a decrease in Q4/05
production of –19%”. Ouch!
He also features this month, one stock that we have been
writing about the last while and that’s International Frontier
Resources (IFR). At the bottom of the newsletter (and everyone
should take a look at it) he writes as a bottom line, “IFR
is currently drilling 2 wells in the NWT and in 2006/07, plan to
drill 2-3 exploration wells in the UK North Sea exposing
shareholders to ~$14 in NAV upside. Due to the uncertainty
surrounding gas facilities in the NWT and the long time
frames until production can be brought on, our 12-month
stock price target of $3.00 assumes modest success in either
the NWT or UK N. Sea”….For those with a little greed...and
we do have some of that!
GOLD: $589.30 +7.60
BRAZMIN CORP. (T-BZM) $ 2.45 n/c
Canaccord’s mining analyst Graeme Currie tells us,
“I’ve never seen a time before where we basically had
all the mining commodities going the same way at the
same time”. We’ve had, he suggests, “bull and bear
markets before, but we’ve never seen all metals participating
in the same direction and this time they are,
and they are all to the upside”. He also points out we
have yet to see any sign of a correction being imminent,
but in today’s Canaccord’s Junior Mining
Weekly, he writes, “valuation levels are now beginning
to reach in the stratosphere on a number of companies.
For example, we would reference our in situ
gold spreadsheet at the end of this report. The 44
companies in the list are well past the discovery stage
with many now entering or having already entered
into production...The average in situ value for the
week just ended is US$63.62. This represents a 100%
increase in our in situ value since early November”.
We have speculated a couple of times in the past just
when we get the usual spring correction you see in the mining
sector, but as Currie points out, “it’s not just the volume
of stocks going up, but also the value heading towards new
records, seemingly almost every day”.
Why worry about a correction? Shouldn’t one just go
with the trend?
With worried voice, we ask Currie if he could only buy
one stock today, what would it be?
BrazMin is his answer and the Brazilian-based explorer
has four significant projects and some analysts suggest as
many as three of them might inevitably be commercial, but
most importantly, the monsoon season is over in the Brazilian
jungle and they will be at work shortly and there should
be a stream of news coming out.
Meanwhile, one mining guy today points out that there
are several “junior” mining companies that sport billion dollar
market caps, despite no production, no cash flow, etc.
Disclosures: Oilexco Inc: Canaccord Capital covers this stock and has a Buy rating on it. (Buy: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.) BrazMin Corp: 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.)
Canaccord has recently led a financing for Oilexco Inc. and BrazMin Corp.
If you would like to receive a copy of Josef Schachter’s writing for Maison Placements Canada and his monthly comment, email Sandra Wicks at sandra_wicks@canaccord.com and if you also like to receive Graeme Currie’s Jr. Mining Weekly, courtesy of Canaccord, also email Sandra and she will send it off to you. |
