₪ David Pescod's Late Edition November 10, 2006
SPECIAL LATE EDITION ISSUE: THE BIG PLAYS:
They are the big “high-risk” oil and gas plays, where you wonder if you are insane to take a “punt” on them, and if you are told the chance of success is only 1 in 10, some people think you are just throwing money away.
On the other hand, the oil and gas company involved aren’t spending millions or tens of millions, because they think it’s impossible…But, for the effort and the money they put at risk...they are hoping for a big reward! Time for updates on some of the plays that we think could make big differences.
CORRIDOR RESOURCES (T-CDH) $6.60 n/c
The chart to the left shows you something very unusual – a gas stock that has tripled in the past year, while many have been whacked by much lower gas prices. Their McCully discovery in New Brunswick (of all places) just seems to get bigger and bigger and now they are only three months away from pipeline completion and some significant cash flow. But, the excitement probably starts around mid-November. As they drill deeper to the Dawson Settlement zone, a target structure that could be many times the size as what’s already been found. Andy Gustajtis, one of the few analysts that follow this story, suggests that it will take a while to delineate it, but if its there it could make Corridor worth somewhere between $15.00 and $50.00.
INTL. FRONTIER RES. (V-IFR) $1.15 +0.04
GULF SHORES RES. (V-GUL) $0.57 +0.02
OILEXCO INC. (T-OIL) $7.10 +0.19
Laurel Valley is one of the sweetest spots in the North Sea surrounded by no less than six fields within 40 kilometers. They include the Goldeneye, the Ivanhoe and Rob Roy. Also, the Claymore, the Scapa, the Scott and Buzzard. The Buzzard is particularly interesting because there are several executives that worked on that play that have come to Oilexco that seem to think it’s a look-a-like. The Laurel Valley is targeting a seismic suggestion of three zones that could have a potential of 500 to 600 million barrels. The Oilexco rig will probably shut down for Christmas, but the hope is that they should spudding this play by the first week in January (always subject to weather and whatever else can happen, though).
TRITON ENERGY (V-TEZ) $1.60 -0.20
Shell is the leader in the exploration play around Tay River and recently had to reduce their reserve numbers in the area. Nevertheless, they knocked on Triton’s door, as this junior has land in the area, and offered to pay 100% of the well with Triton having a 20% carried interest. In the area, a well is doing 80 million cubic feet a day. This is deep at 5,300 meters so you have the geological risk of gas not being there as well as the problem of drilling difficulties. It is expected to spud shortly and it’s deep so maybe 90 days to drill and test if not longer. There are few shares out, so there is leverage but one look at the chart suggests that the easy money might have already been made. This is actually not the biggest of plays, we would describe it more cute than big, but it is interesting and it’s harder to find potential doubles these days. For an interesting report written by Martin Pelletier, contact Sandra at Sandra_wicks@canaccord.com.
DELTA PETROLEUM (US:DPTR) $27.26 -0.16
Delta actually has several high risk/high reward plays on the go – visit their website at www.deltapetro.com – but the play that attracts the attention the most is the Basin Centered Gas play in Washington State. It has taken almost two years for the first drill to go down along with partners EnCana and Shell, but results are expected by Christmas. One look at the chart, though, tells you that people care about this play as lately it has been hitting ever new highs despite gas prices that have been disappointing. It’s been a pick of Eric Sprott of Sprott Asset Management and it’s one of the biggest holdings of their Mutual Fund.
PACIFIC ENERGY RES. (V-PFE) $1.42 +0.09
It’s a tough deal! A very tough deal! Pacific Energy is paying 100% to earn a 40% interest with industry biggie Shell in the Green River Basin of Wyoming - just 30 miles away from where Ultra Petroleum has had such success over the years. Seismic suggests that if its there it could be up to four trillion cubic feet of gas, so 40% of that is considerable. Spud date is expected be to December 1st and the suggestion is, 50 to 60 days plus or minus for some drilling and testing.
TG WORLD ENERGY (V-TGE) $1.90 +0.02
It’s about a year away, but TGE and the Chinese National Oil Company are now drilling on one of the Rift Basin’s in Africa and Niger. Some rift basin’s in Sudan and elsewhere have been incredibly proliferous. After equipment delays, shipping delays and of all things a severe rain storm in the Sahara Desert they are two weeks into drilling the first of three exploration wells.
How to play the high risk/high reward plays?
We like to get in early and cheap and then sell some on the way up as a high profile play eventually attracts attention, but sometimes delays occur. Witness TGE and Laurel Valley, which are now a year behind what we had expected would be spud dates.
Should a person then just watch them and get in if the hit? Well that probably makes sense. Anyway, we love this game and currently own shares in all but one of the plays that we have mentioned. Mind you owning that many of these high risk plays just questions ones sanity!!
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