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Gold/Mining/Energy : Big Dog's Boom Boom Room

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From: Big Dog	5/11/2006 8:59:08 AM
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RBC on PDRT Investment Opinion PDRT's shares were down 25% following results from its first commercial well with Gasco. Though the news was not the best case scenario, it was not the worst case either. Shares are likely to settle into a holding pattern over the next couple of months as investors await timing/results of the second well. Stock Opinion Maintaining OP rating and $8 price target (25x our calendar '07 EPS estimate). Positive view continues to be driven by efficiencies PDRT's system can bring to operators. Results from the Gasco well proved the application is viable and that it can increase penetration rates much greater than conventional methods. Equipment issues encountered are fixable and as with any new technology, hiccups should be expected during an initial commercial trial. Key Points Core of the system/technology was a success, i.e. penetration rates were 3.6-6.5x faster than conventional methods. Further evidence, Gasco is bringing the system back for a second well. Surface equipment issues expected to be remedied in sixty days. First revenue in September quarter and cash flow generation in the December quarter. Cash balance sufficient to get PDRT through the second well. Issues Addressed Injector system: Manufacturing new system, expected to be completed/tested in June. New system has a smaller footprint, requires less pressure (will not need a frac pump) and is less expensive than prior. Shot recovery system: Removing system and implementing a new process that will separate steel shots from cuttings/mud. Rig integration: Addressed on location with no issues encountered on final two days. Other Call Highlights PDRT expects cash flow positive with two units operating. Second system could be on the ground in Aug/September. Company is in talks with other service companies regarding licensing the technology for international markets.

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