₪ David Pescod's Late Edition March 15, 2007
FALCON OIL & GAS (V-FO) $3.13 +0.05
CAIRN ENERGY (London:CNE) $1537.00 +20.00 pounds
One oil and gas guy that has led probably one of the most intriguing
careers we can find anywhere has been Allan Laird, who is currently
based out of Calgary, Alberta.
He was there when Ultra Petroleum was founded and we can remember
him well on some of the first bus trips with analysts and
brokers went down to Wyoming to discover what this unconventional
gas theory was all about. Allan was one of the technical guys
that could explain what the possibilities were at a time when to most
people…it was “just a theory”.
We can also remember him on one of the bus trips saying at the
end of the technical presentation, “And folks, for the last hour that
the bus has been traveling you’ve been on land owned by Ultra Petroleum.”
Shortly thereafter Ultra (which at the time was going through financial
woes) was taken over by Mike Watford and needless to say
staff cuts was a big solution to the problem of the day. Allan remains
a huge fan of Ultra despite the changes there, and Mike Watford
in particular.
Laird was also there at the founding of Falcon Oil & Gas and was
probably one of the guys that did much of the technical work. We
were trying to catch up with him the other day to ask a couple of
cynical questions such as: Do you think that they will have cash
flow this decade or for that matter this century? How soon do you
think they’ll have a billion shares outstanding? And just when will
the Hungarian Government ask that Falcon should have more oil and
gas people then investor relations people?
Laird wouldn’t have none of it and is still a fan of the potential for
Falcon, despite the fact that he is no longer with the team that he did
so much to get established.
While he won’t answer some of those questions as well as some of
the tidbits he does give us, he won’t let us publish…either to get rid
of us or to be nice to us (plus he has other things on his mind, like a
family trip to Tahiti) he comes up with one of our preferred alternatives…
a stock pick. He writes, “An oil and gas story with great potential
for big reserves in a very attractive geographic location... my
new favorite will not be a quickie and so there will be lots of time for
people to do their own due diligence and decide if they like it. But I
think the company is doing everything right and I believe that it has
the potential for at least a 200-300% gain by 2008, with a decent shot
for 500% and the elusive dream (if absolutely everything goes right)
for a sexy 10-bagger. Is it another predictable tight gas story from
Allan...(Laird is a huge fan of unconventional gas and Basin Centered
gas plays)…Nope, not this time? Ohmigawd it's oil! What?
Yes, I have been digging into this company and I absolutely love the
Cairn Energy oil play in India (CNE on London). In my humble opinion,
it's a buy and hold for 1-2 years...”
NATURAL GAS (April Contract) $6.959 -0.124
TUSK ENERGY (T-TSK) $2.07 +0.02
We’ve seen this cycle several times over the last
couple of years—natural gas prices hit new highs,
which gets the drilling people super busy, which
means they bring on more natural gas despite higher
servicing costs and as the gas prices weaken suddenly
there are cut backs in drilling, weak companies
fall by the wayside, and finally those who have the
bucks or stability are able to take advantage of the
natural gas players that haven’t survived or at least
suddenly when land and opportunities are cheap
someone in the right place at the right time can
pounce.
Anyway, that’s the theory we are a believer in and
there are lots of other gas guys that think that we are
on the verge of another chance such as that sometime
this spring, but there is one fly in the ointment…...or
maybe that’s an elephant in the ointment. Big believers
in gas like Bobby Lamond send us charts every
week showing the dramatic drop in drilling in Canada
which means with high depletion rates these days,
stocks in natural gas might be ready for a boost.
Unfortunately, that’s the story in Canada. In the
United States it’s quite different (and natural gas is a
North American commodity) in that service costs
never did go through the roof and drilling remains
active. Bringing this point home today is a comment
by Andrew Bradford of Canaccord in the “Weekly Oilfield
Review” where he notes, “We still see no tangible
indication that US drilling is slowing. This week’s
US land gas rig count is 1380 (which is near record
highs) which is nine higher than last week, but 13 less
than the average of the prior three weeks.”
“We are concerned that a slowdown in US drilling
is about two months overdue, and that absent this
slowdown, US land-based gas production will continue
to grow to a point where it becomes problematic
for North American natural gas prices, ultimately elongating
the Canadian downturn” (for both gas prices
and oil field drillers). |
