₪ David Pescod's Late Edition September 27, 2006
CAPITOL ENERGY (V-CPX) $4.60 +0.15
Oil prices had a run early this year and most oil and gas stocks had a great run! Take a look at Capitol Energy though—not even a budge……...flat as a pancake! Lately, oil and gas prices have dropped significant and most oil stocks are down 20%, 30% or 40% and once again take a look at Capitol Energy—still flat as a pancake.
We had interviewed Capitol Energy’s President Monty Bowers sometime ago, because of a potential waterflood that was on the horizon and today they announce that the EUB has given approval for their waterflood pilot program on their Dixonville Montney “C” pool. Why is this significant? Well the Dixonville pool was one of the biggest sweet oil discoveries in Alberta in decades, containing almost 200 million barrels, but a productive reservoir it wasn’t.
Usually waterflooding increases production, the question is by how much. The pilot waterflood should tell us within about three months how its going and if it is working well it would be extended to the whole pool. Why is this interesting? Well with almost 200 million barrels in this pool, if they can produce 20% to 30% of that pool at $60.00 oil—that’s a lot of zeros! People might care! If you have not had a chance to read Monty Bowers interview, email Sandra Wicks at sandra_wicks@canaccord.com for the September 5th Late Edition issue. The pilot waterflood starts in three weeks, and one should have an idea if its working within three months.
CANARC RES. CORP. (T-CCM) $0.76 +0.01
ENDEAVOUR SILVER (T-EDR) $3.63 +0.14
Fresh from the Denver Gold Show, Brad Cooke of Endeavour Silver and chairman of Canarc Resources was more than willing to do a little hand holding with us on gold and silver prices. Gold and Silver, along with most other commodities, have had much more than a little correction over the last few weeks…….
Cooke suggests the following four reasons why gold will be bottoming shortly:
1. This is the time of year that physical demand for gold starts increasing (as we get closer to the high demand period of September/December for gold) as jewelers up their interest, because of the busy Christmas and Ramadan holiday seasons. All of a sudden, he says, you expect a big shift to the demand side and already he points out that the demand in India has spiked significantly in just the last week.
2. On the physical supply side, the banks are still big holders of gold and continue to unload it.
Many of the international banks have continued to be big sellers, particularly Holland and Belgium. September 30th is yearend for those international banking agreements he suggests, that the banks (that have been the big sellers) now just might be out of the way for a while.
3. Hedge Funds are big players in commodity markets these days and not all of them have done all that well. Witness the Amaranth Funds dropping 5 billion, which has gotten a lot of press, but there is many other big commodity hedge funds that have done poorly as well. Cooke suggests that these hedge funds have become some of the biggest players in commodities and are basically momentum players so that if all of a sudden momentum switches upwards you would expect them once again chase these commodities upwards.
4. If the American economy is slowing and Cooke mentions the much talked about housing bubble and concerns about Fed? rate hikes and suggests that would create a lower U.S. dollar. A lower U.S. dollar usually means higher gold prices.
Housing Boom or Housing Bust:
You’ve heard a lot about the housing bust and just how it might or might not affect the American economy of late — in fact it’s been hard to escape this discussion…...
Needless to say, with mortgage rates having gone up recently in the United States, there are a lot people who financed houses with the no money down scheme that are probably being haunted by that decision!
But, when we see Jeffery Rubin (who has made almost a career out of calling housing booms and busts) suggesting that there is nothing to worry about…...and we’ll bet that he is right and while economies might slow down a bit, the housing boom is not a bust!
The housing bust may not be as serious as some people think, though, but obviously some housing builders have been hit big time! Notice the add for D-R-Horton, which is one of American's largest builders…...I’m sure you don’t decide to have a sale and offer your houses up to $85,000 cheaper, because you want to!
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