₪ David Pescod's Late Edition April 26, 2007
CORRIDOR RESOURCES (T-CDH) $9.90 -0.39
We were along with a group that included a lot of brokers, mutual fund managers, analysts, big shareholders and corporate executives from Corridor Resources for an interesting visit to their McCully site in New Brunswick. To us, this continues to be one of those stories that sooner or later Hollywood has got to do a movie of.
Who would have thought that a potash company with a big problem with excess water from their mine, having to truck almost 200 trucks a day to get rid of the water, while drilling for disposal wells to get rid of the water as an alternative method and then discovers natural gas...in New Brunswick no less. And Corridor Resources owns the mineral rights.
They’ve had an interesting partnership over the past few years slowly developing whatever it was they got and now they are at one of those important phases in their development of what next...and you probably know the scenario by now as good as anyone.
Some time in the next four to eight weeks the gas actually starts to go to the Maine and New England Pipeline and cash flow comes in and that’s going to be important.
It will turn a lot of non-believers that still don’t think there’s gas in New Brunswick into potential believers. Those cash flow numbers (if it gets to multiples that other projects do in Alberta) suggest that this price might see even slightly higher prices. But then it gets really interesting.
Some time in about three months from now, they will be testing to see if the Frederick Shale (another big surprise in the evolution of the company) is commercial or not. Who would have thought there was shale of this magnitude—1000 meters, in New Brunswick. If it is commercial it adds another dimension to the company...and the stock.
The company executives aren’t exactly sure when they will get to the big bonanza (the big prize) which is the really deep stuff—the Dawson Settlement, way, way deep, but it will probably be closer to the end of the year. The suggestion has been by many followers of the company that if the Dawson Settlement is there, it could be three, four or even five times the size of the shallow zones and the shallow zones could have 1 TCF.
The question of course is, is it gas bearing, is it water, is it weird rock, or what is it? The one item new in the tour was discussion about possible further exploration to the north of the field as this fairy-tale story continues.
At the end of the tour, we did our usual favorite trick of asking everyone for their business cards and on the back of the business card put in where they think the stock will be a year from today. It was interesting to note how everyone was bullish—whether they were being persuaded to be so by the management team, we don’t know, but most of the numbers were quite interesting.
One prognostication by the one guy who has followed this story closer than most and has been the most accurate in predicting it, came up with a stock price forecast that we found most pleasing...
PACIFIC ENERGY RES. (T-PFE) $2.50 n/c
We have to admit being more than a little intrigued with the visit to some of Pacific Energy’s offshore facilities in California.
We’ve never been on offshore facilities before and they are big and complex.
But at this time in the history of the company they are currently long on shares outstanding (220 million outstanding) and short on production (less than 2000 barrels a day).
Over time, they hope to redevelop the offshore facilities and move production up to over 10,000 barrels a day in the next two years, but for those looking for pizzazz, it’s going to come from Wyoming. There they have a rather tough deal with Shell—the industry biggie, where little Pacific Energy is paying almost 100% to gain a 40% interest in the play. But this is an area of the world—Wyoming, where companies have made their fortunes, be it Kodiak Oil & Gas (KOG), Ultra Petroleum (UPL) or the like.
They have a huge target that has come up with a huge thickness that because of animal protection in the area, will not be tested until July. If it's there, it’s one of the typically enormous high risk/high reward plays.
For those looking at the stock in the short term, particularly after the recent run up in the stock, one point stands out. Next Monday, 63 million shares from a recent financing become tradable and it will be interesting to see what it does for the market, particularly since many of these good folks have experienced a double in a relatively short time.
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