₪ David Pescod's Late Edition December 15, 2006
PACIFIC RODERA (V-PRD) $0.67 +0.03
NATURAL GAS $7.409 -0.146
It was just a few days ago and it made that national press that Mike Greenwood was picking up almost 20% interest of Pacific Rodera, the small oil and gas company led by ex-hockey player Tiger Williams.
As we mentioned in a brief comment on November 23rd, Greenwood for the years between 1994 and 2006, was the President and one of the head men at Canaccord Capital. We’ve been a fan of his and in a business that brings some people hard work and long hours, Greenwood was the epitome of that animal. Some suggest the work habits came from years growing up on the dairy farm—where the cows had to be taken care of before hockey, BB guns or whatever...
The joke was that he would start early Monday and leave very, very late...on Friday. A workaholic over the years that has at least benefited him financially with an 18,000 square foot house in Mexico, a Ferrari, a huge house in Vancouver...oh yes, that’s right, one of the reasons for finally catching up with Greenwood was to find out what it is he’s doing in life now and what he is expecting out of the markets.
That house in Vancouver and his Ferrari has just been sold because of what he thinks happens next. He’s expecting a recession, possibly an ugly one, but he’s also thinking that commodity cycles these days change so quickly, that he wants to be involved with an oil and gas company that can pick up assets quickly, because he wouldn’t be surprised for the next oil and gas cycle to be a mere 18 months in length.
Selling the house tells you that he thinks real estate prices are going to get swacked, selling a Ferrari tells you that he thinks even the toys of the wealthy could see a markdown in values as well. But as far as oil and gas, he seems more of the same and asks, oil was recently as low as $45, why can’t we see it there again? Natural gas just a few months ago was $3.80, why can’t we see it there again?
He hopes to see Pacific Rodera be able to become a fairly significant little oil and gas company, not waiting for the five years that it might take to see a pipeline built to the Northwest Territories to get their potentially big projects up there on stream. He would like to see something done like right now!
He feels over the next few months, it’s time to be shopping for producing assets, including oil and gas production that was selling for as much as $70,000 or $80,000 a flowing barrel a few months ago that just may be going for $25,000 to $30,000 a barrel shortly. For that to happen, we would obviously be in some sort of bad times.
What would get us into this mini-recession? He is pointing to what he believes is a weakening global economy, but particularly in the United States. He worries about financial decisions that might be made in Europe to increase interest rates at the perfectly wrong time. He points to the American economy that imports so much of the goods made in China that if suddenly they don’t want to buy those goods, so much for the Chinese economy.
Once again, having said that, he thinks the cycles just become that much shorter and the next 18 months (an incredibly short term in history) could see a top, a bottom and yet another top. “Cycles will be shorter and much more volatile” he suggests.
Either way, it’s going to be interesting to see what the developing team at Pacific Rodera does over the next while and of course, there is always the chance that Mike’s scenario for commodity prices over the next while is wrong, after all, right now, we suspect the majority of analysts believe most commodities should remain quite high. (Except for worries about natural gas!)
TRUE ENERGY TRUST (T-TUI.UN) $8.05 -0.34
ENCANA CORPORATION (T-ECA) $57.70 -2.99
The good news for True Energy Trust is that so far in 2006 they have drilled 97 wells and only two were dry and abandoned. The bad news is that 73 of those wells were natural gas wells.
As we face the prospect of no winter and natural gas inventories at record highs, we’ve already seen many gassy oil and gas stocks get swacked 40%, 50% or even 60% and the question is if we don’t get any winter, how much lower can they go?
If we see gas again down at $4.00 an mcf this coming spring, a lot of gas companies are going to be even lower. Yesterday, EnCana, North America’s largest natural gas producer, announces cut backs and a lot of financial engineering — buying back stock, increasing dividends, but less drilling for gas.
While this might look pretty ugly for gassy stocks going into the spring when demand is very weak and gassy stocks could get even cheaper - that could be setting us up for the long term investor for a great buying opportunity……..
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