₪ David Pescod's Late Edition July 20, 2006
GRAND PETROLEUM (V-GPP) $4.61 n/c
NATURAL GAS $6.091 +0.229
There are concerns about what next for natural gas and the oil
& gas sector in general and one person we have to visit with
would be Andrew Hogg.
He is currently the President of Grand Petroleum, which has had
a good run for the last two years, at least until recently like many
other oil & gas stocks. Before Grand he spent five years as an oil
& gas analyst.
When we quiz Hogg about the current gas situation, though, he
suggests that the Canadian supplies of gas are up and south of
the border the American supplies are not down as much as many
people think…. He also points out that despite the low prices, it
takes a while for a drop in natural gas drilling to translate into an
actual drop in natural gas production.
He points out that companies have to plan long in advance for
the projects that they will be drilling and working on at any given
time, so this past few months Grand’s team have been quite
happy drilling in Southeastern Saskatchewan where they have
gone 12 for 12 on their drilling program and better yet……they
were all oil wells! They are part way through a 30 well program
which should continue into 2007 with at least another 30 wells.
“But, that was a project that was started almost two years
ago”, he said, “and for some companies to change plans it isn’t
easy!” As far as availability of rigs, he suggests that “Yes, there
are companies that are cutting back on some of their natural gas
exploration, but they are maintaining control over the rigs and
currently only planning to delay drilling rather than make actual
permanent cut backs!” These delays, though, are making the rigs
currently held by the majors available for some juniors to pursue
their drilling programs.
To show the problems facing the oil patch at this time, we ask
Hogg the one question most are intrigued with, where would you
see oil or gas prices by Christmas? His answer has a huge spread!
$70 to $75 is the most probable answer, he suggests, but if something
goes wrong in the Middle East, maybe the range becomes as
low as $70 and potentially over $100. It’s that kind of a world –
both for the average folk in the Middle East these days and for an
oil and gas executive trying to make budget decisions.
As far as gas, he also comes up with a huge range, with some of
it based on weather. Anywhere between $6 and $12 would be possible
by Christmas, he says, so we budget for $6 and hope like
many others for $12.00...
OILEXCO INC. (T-OIL) $5.88 +0.02
With two rigs going non-stop over the next few years, Oilexco
is going to have a lot of drilling news to talk about, out of the
North Sea. One never knows, though, whether it’s going to be
good news, bad new or whatever, but one can hope for the best.
Meanwhile, if you are watching Oilexco (like any oil and gas
company) you also have to keep your eye on the oil price. Anything,
anywhere near current prices should be quite nice, thank
you very much! And, speaking as a shareholder of Oilexco
shares and a story that we have written about many times, we
figure that there is a big event coming in the next three or four
months - that’s when they push a button and production starts!
There are investors/speculators that prefer only to invest in
companies that have actual cash flow and production should
attract a different type of animal to this story. But every once in
a while, it’s not just oil prices or exploration success that make a
difference in the short term every once in a while there is a little
bureaucrat thing that could also make a difference.
With all the takeovers and mergers going on in some of the
mines in other sectors these days, one wonders if the S&P/TSX
just might make little Oilexco a company with a billion dollar market
cap part of the TSX Composite Index when it meets sometime
in September. If it does, that means all of a sudden the index
funds would have to own Oilexco and that could create a significant
chunk of buying.
With so much money in index funds these days, and let’s
guess at any one or a few of a dozen or so companies might
qualify one would do well to guesstimate the potential size of
that new buying for Oilexco or for that matter, for whoever,
might qualify for the TSX. Our rough guesstimate was rather
large...if...
Once again….that’s if they decide to include Oilexco. Seeing
that this meeting is for this explicit purpose of looking at the
TSX, and it should occur in early September, its one other factor
one should be aware of. |
