₪ David Pescod's Late Edition October 6, 2006
CORRIDOR RESOURCES (T-CDH) $5.51 +0.01
CONNACHER OIL & GAS (T-CLL) $3.34 -0.07
CGX ENERGY (V-OYL.U) $0.29 -0.02
This was the week of COPIC, where some of the major Canadian oil producers get together and tell their stories on Bay Street to some of the big money managers. It’s also a time for industry veterans to get together and exchange gossip in the boardrooms and bars.
Our man on the scene was Kerry Sully, the ex-Ranchmen’s boss and we went to him today for an update on some of the stories he follows and likes best and also his feeling for the industry right now. We were hoping he was going to give us a little handholding because this has been more than a correction we’ve been going through. It’s been downright ugly! But instead of doing a little hand-holding, Sully disappointed us and suggested that “with the big inventory for both oil and gas, we could see three to five months of this before the economy runs through that excess supply.” Unless there’s some geopolitical event!
“Patience might be the key,” he suggests and he reminds us that even $50.00 oil—”most companies should be able to make a lot of money” and he wouldn’t be surprised if most oil and gas producers these days are being priced as if oil was $50 anyway!
As far as stories that he follows, he suggested the news out today on Corridor Resources is pretty important as they finally get their okay to build their pipeline in New Brunswick from their McCully play. “This is important as this should give them some production and cash flow starting February,” Sully suggests. He also suggests that being so close to Boston and New York means they should be getting better prices for their gas than many of the Western Canadian producers with the big pipeline costs.
As far as trying to find a cheap, but potentially exciting story at this COPIC like he did a while ago with Connacher Oil & Gas, he suggests Redcliffe Exploration (REL.A/B) is an interesting story and although it currently has no production and no reserves, they are currently drilling some wells that could give this company some credibility quickly. “The company is just listed, but has some significant backing by some of Bay Street’s brokerages” Sully suggests.
As far as Connacher, which has been one of his favorite stories, he simply suggests that “there is getting to be so much value there” that when we press him to make a prediction on Connacher and where it might be by Christmas of 2007, he suggests that “it will be taken out by Christmas 2007 at probably $10 a share.”
There’s always a chance he could be right and needless to say, we hope he is.
As far as his own company CGX Energy, which has been locked up for almost seven years now in a border dispute between Guyana and Suriname, he suggests “they are not too far away from a final solution to this border dispute” and it’s an important story as they have some targets offshore Guyana that are in disputed areas that could come close to a billion barrels. At least that what the squiggly lines on 3-D might suggest.
They also have other targets offshore Guyana and what could become even more interesting to CGX in the 9 million or so acres offshore Guyana, is the significant discoveries being made on the Venezuelan side of the Guyana/Venezuela border and one might wonder if that border comes into doubt at some time as well.
Sully tells us that “sometime in December, you should see the last formal step in the process for the U.N. Law of the Sea discussion that should come up with a decision and put these problems to rest, finally.” CGX does have close to 100 million shares outstanding and it would be interesting to see what kind of deal might take place. “One of the benefits of the current lower oil & gas prices is suddenly, if you need services, they are suddenly becoming available and prices are not as tough as they were just a while ago as well,” Sully suggests.
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