₪ David Pescod's Late Edition July 13, 2006
CONNACHER OIL & GAS (T-CLL) $ 3.90 +0.11
PETROLIFERA PETROLEUM (T-PDP) $12.73 +0.63
The summer doldrums is an excuse being used by many of
us to explain the lethargy in the Canadian stock markets these
days as we’ve gone from one extreme of record setting volume
to a state of almost illiquidity.
Nothing made us more aware of it than the announcement of
July 11th by Petrolifera Petroleum, where they announced their
current light gravity crude oil production from the Puesto
Morales/Rinconada Concession in Argentina is approximately
6500—7000 barrels a day and they point out that is primarily
from four wells, from 1002, 1003, 1010 an 1011. These were
wells drilled in late 2005 and early 2006.
Petrolifera has hit the road running and gone from almost
zero production to this level in record time. What was intriguing
about their announcement was that they suggested they have
now identified up to 54 Sierras Blancas/Punta Rosada locations
for drilling on the two blocks of their 95,000 acre concession. If
a person did some very aggressive mathematics, you could
hope for huge production increases from this company, but
rather than do that we go to someone we have always thought
of as fearless who loves the challenges of the high risk plays
and that’s Andy Gustajtis of Dominick and Dominick.
“Sure, it’s the summer doldrums” he says when asked how
come with the news of such significance as Petrolifera announces
and yet the market is up all of ten cents? Sure he
could postulate some ridiculous numbers for potential production
for Petrolifera, but he says “why not come up with a number
of say, 14,000 to 15,000 barrels a day for this time next
year.” It’s possible and yes, he notes that the growth of Petrolifera
in the last 12 months is nothing less than sensational.
“What the company has accomplished is amazing,” he points
out as the company just recently did an IPO that raised $25 million
and $18 million is still in the bank as cash flow has paid for
much of the recent drilling, which has been phenomenally successful.
If the company does hit that 14,000 to 15,000 barrel a
day rate, he suggests that would be cash flow numbers of $3.00
plus.
When we ask about ongoing questions about political stability
in South America and in particular for Argentina, he asks the
question, “well, why couldn’t you assume that some of the surprises
in politics in Argentina couldn’t be on the positive side?”
He points to the natural gas market in Argentina where the
government has just signed a contract to buy natural gas
from Bolivia at $5.00 an mcf, while they are paying the domestic
producers a mere $1.00 an mcf. Why can’t they increase
the rate that they’re paying the domestic producers,
Gustajtis asks and makes it even a better place to be looking
for oil and gas.
When we ask him about the two companies, Connacher
which still owns a big stake in Petrolifera and Petrolifera
itself, Gustajtis feels that they are both doubles. Connacher
has been hit over the last few days because of the general
sell off in all heavy oil producers, but Gustajtis says “they
are both good buys.”
While he points out that Connacher is currently in the
development phase of their SAGD project, which might not
illicit all that much excitement in the market, once they are
closer to actual production, the market might care much
more.
As to Petrolifera, Gustajtis suggests there is going to be a
lot of eyes watching on how successful their next six wells
will be as a clue what to expect from the next 22-50 odd
wells they hope to drill.
LATEEGRA GOLD (V-LRG) $ 0.89 +0.08
AURELIAN RES. (V-ARU) $20.85 +0.78
We’ve mentioned summer doldrums in the article just
above and over the last few weeks the illiquid resource
markets that just can’t get going, despite any kind of
news, echoes that feeling big time. In a couple of days
like this where oil and gold responds smartly, and even
when some junior stories have good news, the market
simply goes no where and volume on any of the market
is just disappearing. If a person did have some courage
left, one story to at least follow is that of Lateegra Gold
because of the neighborhood they are getting involved
in. There’s been no bigger discovery we can think of
than Aurelian Resources and Lateegra certainly seems to
be coming up with some intriguing land positions in the
right neighborhood. Of course being in the right
neighborhood doesn’t guarantee you anything, but in
the old days, if you had the right land in the right area,
area plays used to count for something. |
