₪ David Pescod's Late Edition November 24, 2006
DELPHI ENERGY (T-DEE) $2.60 +0.14
OILEXCO INC. (T-OIL) $6.98 +0.07
Here in Edmonton we have white-out conditions and a
wind-chill factor of -25 degrees Celsius. Winter has definitely
hit with a vengeance, but unfortunately as we look
out at the rest of North America they are golfing in the
Maritimes, its wet in British Columbia and in the main…
well, its simply still summer!
It’s getting tougher and tougher to be bullish on natural
gas prices, as we get farther and farther into the season
and still no need for natural gas. How concerned should
one get? While one is aware that it only takes two weeks
of real winter conditions through a big swath of North
America to change the fundamentals overnight, right now
the only numbers we know is that we’ve got record inventory
and it’s tougher and tougher to be bullish on gas
prices.
Meanwhile, what happens next to some natural gas
prices is open to debate. Josef Schachter was on ROB-TV
on November 15th and gave a great take on Delphi Energy.
He showed the incredible leverage that the company offered
to the price of natural gas and how if gas prices
fared well, Delphi could be a top performer. The bottom
line though, was that Delphi is up against its debt limits,
has had to pass on a joint venture with Encana and is cutting
back on its exploration program. Schachter is bullish
on gas so he gave a fairly lofty target for Delphi and needless
to say, we hope he’s right.
Meanwhile, another long-time fan of Delphi has
changed his targets and isn’t quite as aggressive. Fred
Kozak of Haywood Securities, who previously had a target
of over $7.00 has adjusted his target downward to $4.00.
And his major comment is, “Balance sheet is highly leveraged”.
He writes, “With the prospect of low natural gas prices
through H1/07, Delphi management is focused on not
spending more than cash flow to manage the Company’s
debt...we still expect modest production growth through
2007 from current volumes of 5500 barrels a day to a 2007
exit rate of 6700 barrels a day.”
Kozak continues, “We note however, that despite longlife
reserves, Delphi has an extremely leveraged balance
sheet, which affects valuation and rating.”
What we really find interesting though was on
Schachter’s interview on ROB-TV—when asked for his
number one top pick, he suggested Oilexco Inc. Today
when we talked to Kozak, he also suggests Oilexco.
Kozak suggests because of delays caused by the
divers strike and tough weather conditions in the
North Sea, production from the Brenda and Nicol field
play is late and probably won’t start now until mid-
December with full production some time in early
January.
Kozak notes specifically that his top pick is an oil
stock and for a good look at his report on Oilexco with
its $12.00 target, just e-mail Sandra at Sandra_
wicks@canaccord.com.
PACIFIC RODERA ENERGY (V-PRD) $0.62 +0.225
Pacific Rodera is the junior oil and gas explorer run by exhockey
player Tiger Williams and teamed up with International
Frontier (IFR) on some interesting high risk/high reward
plays in the Canadian Arctic. Which is the good news.
The bad news is some of the more significant plays will not
be drilled this winter, but have been delayed until next winter
which explains the slide the stock has experienced over
the last couple of months.
Today they announce a financing of 11 million units at
$0.32 a unit and of interest is just who is taking up a big
chunk of their stock. Michael Greenwood is buying enough
stock that he is going to have about a 19.9% interest in the
company.
Who is Greenwood? Glad you asked. He is the former
President, Chief operating officer and Director of Canaccord
Capital from 1997 until 2006 and we have to admit that we
are a fan of his.
It’s going to be interesting to see that in his new capacity
as Director, Chairman and Chief Executive Officer of Pacific
Rodera, exactly what it is he may have in store for this little
company.
If you would like to receive the Late Edition, email Debbie at debbie_lewis@canaccord.com |
