BPZ Energy (BPZI) -- This is now my largest position by far and I predict (hope?) that this stock will be the biggest E&P story for '07.
BPZ, which is a US company and Houston-based, is in the process of monetizing a truly massive amount of stranded gas in offshore Peru (shallow water). To quantify, their engineering firm has certified 133 BCF proved, 805 BCF probable, and 3 TCF possible reserves, just in one of their concessions (none of these reserves qualify as proven for SEC purposes since there is no committed financing in place to sell the gas yet). In addition to this, they have some acreage with great, high-potential oil potential, in the hundreds of millions of barrels. About a week ago they announced a term sheet with the International Finance Corp (IFC) for a $120 M financing package. This amount of funds would be enough for BPZ to not only complete Phase 1 of its gas to power strategy, but also to keep its rig going nonstop for at least another year.
There are 3 impending price catalysts that I see occurring with this stock, each of which is expected in the next few weeks:
1) Initial flow test results of its first well. I'm expecting some monster flows here, in the 30-50 mmcf range;
2) IFC Board approval of the financing package (per the 12/4 PR this is expected in mid-December, and it probably can't happen until #1 has happened);
3) Approval for listing on Amex (now that they held their shareholders' meeting they have met all Amex listing requirements).
I know Mama said never buy Pink Sheet stocks but tell Mama that this Pink Sheeter is fully reporting with the SEC, has a currently active S-1 registration statement, and has pubicly announced that they have applied to be listed on Amex.
Regarding economics, the company has stated in at least one of their presentations that they expect to get the equivalent of $3-$3.50/mcf for their gas serving as feedstock for their electricity plant. Under these economics if you use a buck an mcf for the value of gas in the ground you would probably be in the ballpark. So with 4 TCF potential gas resources we are looking at a potential 10-bagger, and that totally ignores their significant potential oil resources.
BPZ has raised $55 M in the last year, and their main financier has been Morgan Keegan. Unusual for a Pink Sheet stock, their stock is mentioned regularly in MK's "Cooler Talk" piece that comes out regularly (see Yahoo reports for BPZI). This kind of stock is exactly the kind of stock that Subash Chandra, of MK, loves and does very well with. In recent years I saw how he almost single-handedly hyped up the stock prices of Toreador Resources (TRGL) and Mission Resources (since sold out to HAWK). Especially in the case of TRGL, you had a company with massive blue sky potential, and he was able to communicate this to his audience and the result was a tremendous ramp up in the stock price after the initiation of coverage. I would expect Subash to initiate coverage on BPZ within a few weeks of its getting on Amex. |
