₪ David Pescod's Late Edition June 18, 2007
OILEXCO INC. (T-OIL) $13.61 +0.34
HERITAGE OIL (T-HOC) $55.00 +5.00
STERLING RESOURCES (V-SLG) $ 2.40 -0.09
If you were involved in the oil and gas business, there are just so many things that can go wrong, one wonders why you should even try. First of all, with those high risk/high reward wells, particularly in the International field, when they say your chances of success in a wildcat is only 1 in ten, they are not kidding. Even with all the fancy new high technology they have and the new equipment, a 10% chance of success on a wildcat is about as good as you can get.
You can always drill a little closer to proven fields and you can always do this and that to narrow the odds, but hey, that’s the way it is. But besides the hole being dry, there are so many other things you’ve got that can go wrong such as even if you get a decent well, or maybe even a barn-burner, it can always water out. Then there are always problems with joint venture partners where somebody might suddenly run out of money or different partners have different ideas about how to go about exploration, or even if and when you find something, develop it.
Then of course there is the country you are in where they might change the taxation policies or for that matter, just decide that heck—they own everything! Then there’s always stuff like availability of rigs which is a big problem in the North Sea where with high oil prices, it’s once again a great place to be, but if you don’t have the rigs to drill there and there’s not many, you are just out of luck possibly for years.
Another problem of course is weather. In the North Sea when you can get terrible weather in the winter and waves that are four-stories high, that can definitely delay things sometimes for months and it’s a real problem. Weather is also a problem in places like the Canadian Arctic or Alaska where winter seems to be increasingly short and not as cold and without those cold, frigid conditions for freeze-up and the chance to move over tough terrain, you have a problem with a shorter window of opportunity.
But having said all that, with higher oil prices, obviously there are plays that have been definitely rewarding.
Once again, it’s probably a good time to mention Oilexco, which has had more than its fair share of problems along the way.
Oilexco over the last while has had real problems with weather which has delayed them plus the usual problems of getting a joint venture project on-stream, but boy have they come up with a pleasant surprise in Huntington where they’ve come up with one thing that can occasionally happen in oil and gas and that is a discovery that is much, much bigger than had been expected and that is Huntington.
However, there hadn’t been many oil and gas analysts following the Oilexco story, but thank goodness we have steadily done so. But a couple of reports on Oilexco that have hit the press in the last couple of days that are probably must-reading.
Canaccord’s own Fred Kozak has been following the Oilexco story for the last two years and it’s helped make his reputation and he’s had to (over the years) steadily increase his targets upward.
Another guy that’s followed this story on an ongoing basis is Josef Schachter. Yes, we had been starting to take some profits until Huntington hit, but now maybe people should make darn sure they read the two reports out before decisions are made. To receive either report, just e-mail Jennifer at Jennifer_lagdamen@canaccord.com.
In his latest report just written for the CAPP Conference, Schachter takes a look at Oilexco and some of his eight other favorite stories (He now has a new target on Sterling Resources of $5.00 a share, so for shareholders you should definitely take a look at this) and his new targets are of interest.
Schachter has a $20.00 target on Oilexco and Kozak’s target is $17.50.
The one thing we find of interest when we contacted Fred Kozak today is that it looks like he has a new girlfriend, or should I say new favorite oil and gas company which he has just written up today and it is having quite a day on the markets as Heritage Oil is up $????, but it is definitely one of his two favorite stocks as of today.
We don’t know how to describe this new girlfriend, but I’m sure we will get to know her well over the coming times but it is definitely an International player and it’s mainly the excitement in Uganda that is appealing to Kozak. They also have interests in Russia and Oman and the chart tells you that they are certainly having a lot of success.
When we point out his target of $85.00 after the recent run, it doesn’t necessarily attract a person’s ultimate greed, but Kozak says, “Read the Report” and he suggests that if you look at the value on all their different plays, you could be looking at potential upside of as much as $250 per share and yes, that suddenly does attract someone’s interest.
Fred cautions that this still remains an exploration company, so the sense of greed should be tempered by a higher risk factor for success (for investors).
So to receive a copy of the Heritage Oil and Gas report, just e-mail Jennifer at Jennifer_lagdamen@canaccord.com. As of today, he has appealed to our sense of greed and we are a shareholder.
GOLDCREST RESOURCES (V-GCL) $0.97 +0.21
We have spent much of the last week in Morocco at Marrakesh on a beautiful trip arranged by Canaccord for the Chairman’s Club members. There were a couple of moments involved on this trip that we will be referring to over the next few weeks, but some golden moments involved watching Canaccord’s Chairman, Peter Brown ride a camel. Wish we had a video of it!
But needless to say, when you get some of the top stock pickers of the firm together, the top thing on their mind is other people’s favorites and we have to suggest that Goldcrest Resources is one name that got mentioned a lot and with more assay results expected out at any given time, this is one that should be on your screen.
PACIFIC RIM MINING (T-PMU) $0.96 +0.05
ATNA RESOURCES (T-ATN) $1.46 n/c
When we contact Canaccord’s mining analyst Graeme Currie for an update today after leaving him alone for quite a while, he says that the one thing standing out to him is what has happened to the Gold Index. While gold is down only about $50.00 or 7%, he suggests the Index is down almost 25% and more interestingly hitting an area where there should be some support.
He also suggests you take a look at the charts of stocks like Pacific Rim (one of his favorites), Rainy River or Atna Resources and you notice that they seem to be building bases.
What happens next for gold of course is up to anyone’s debate, but take a look at some of those charts folks. For those that still have faith in gold, a commodity which has been losing its luster over the last six months compared to molybdenum, tungsten, nickel or you-name-it, but while some of the others maybe topping out, maybe gold has been establishing a very significant base.
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