₪ David Pescod's Late Edition May 1, 2007
PETROLIFERA PETROLEUM (T-PDP) $16.96 -0.25
We are just back from trips to the East Coast to visit Corridor’s facilities in New Brunswick, followed by a trip to California to see some of the production facilities of Pacific Energy, and we have to admit we admire both stories...and own a chunk of them.
When you are on trips like these and bump into so many other oil and gas people, talk inevitably gets to—where is the next big play going to be? And just how big that big play might be. It’s becoming apparent that one of the biggest of those big plays is Petrolifera Petroleum for their two plays in Peru that are probably going to be drilled some time in the first quarter of 2008.
Because of the feedback we got from other oil types, we’ve just completed an interview with Petrolifera President Gary Wine and hope to run it within the week.
Already a “Cinderella” story—the company went from zero to 10,000 barrels a day in lickety-split time before the recent correction, but it will be interesting to watch the drilling in Peru because of some of the truly out-of-this-world targets some people have for these plays...which always carry the typical exploration risk...(Connacher Oil & Gas owns 26% of Petrolifera).
S&P/TSX VENTURE COMPOSITE INDEX: 3227.10 -38.82
We’ve noted a few times here over the last few weeks, that this is the time of the year that the S&P/TSX Venture Exchange usually takes a drubbing.
Over the last five years, we’ve seen a spring correction of anywhere from 11% to 30%, so traditionally it’s a time of year to make sure there are no margin problems and that you’ve got some cash on hand for some bargain shopping down the road. Remember the old phrase, “Sell in May and Go Away.”
Today Canaccord Adams in the “Junior Mining Weekly” points out... “We would note though that spot gold is flat on a 12-month comparison. Yet when we review some of the underlying companies, we pause to ask ourselves if there is some evidence of a divergence in performance as the TSX Gold Index is down 10% from the beginning of the year and down some 16% from the highs seen in April 2006.” “Over the past several quarters many of these companies (intermediate producers) have begun to under-perform the market and even the general trend in the price of gold.”
“The divergence may be a result of speculative money flowing towards corporations with focus on better performing commodities such as copper, moly and nickel.”
They continue, “Our concern remains that in the past four years a corrective phase in the junior mining sector has occurred. Is the decline in some of the more advanced-stage junior gold stocks a precursor to a correction in 2007? Or is it just further evidence of a marketplace that continues to place greater interest on other better performing commodities and the companies exploring for such minerals?”
To ourselves, we ask the question, what would precipitate a sell off in the Venture Exchange...something happening in China? A correction in some commodity prices? Or maybe it’s something as obvious as there has been so many financings and so many new companies floated on the Venture Exchange, that we’ve approached a time that there is probably more shares outstanding than the market can handle in the sector.
CAPITOL ENERGY (T-CPX) $7.78 -0.07
It was Jim Welykochy, formerly the senior oil and gas analyst at Genuity Capital that suggested Capitol Energy to us as a buy some time ago, and we wrote it up many times.
Much of Jim’s expectation was that the company’s water flood at Dixonville would develop into something significant, and sooner or later a Trust Company would want to buy them out. Then of course, they changed the rules for trust companies.
However, the water flood so far at Dixonville has been working out well and the stock has benefited greatly with many analysts having to up their targets in recent months.
But what next? Jim has currently just started at PI Securities and can’t make a comment at this time and Monty Bowers, the President of Capitol Energy just says that “their annual meeting is coming up May 10th and to expect news at that time.”
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