₪ David Pescod's Late Edition September 5, 2007
CORRIDOR RESOURCES (T-CDH) $11.49 +0.80
While many commodities have been enjoying good
times, natural gas is one commodity that’s been in the toilet...
big time, particularly here in Canada.
Costs for much of western Canada remain high, natural
gas prices (at least based on the last few years remain in
the dumps) and even the Canadian dollar is working
against the producers. Many gassy stocks are trading at
20 or 30 cents on the dollar and most are down at least
50%.
Standing out in this group is Corridor Resources which is
delivering a success story in of all places, Sussex, New
Brunswick. They have a few advantages over their western
compatriots because the pipeline is relatively short,
from New Brunswick to the rich markets of Boston and
New York where they receive top dollars for gas and the
toll charges for the shorter distance is relatively low.
Today they announce some drilling results on their
McCully H-76 well and some preliminary McCully F-58 frac
results. We have followed this stock for one reason only
and that’s because Andy Gustajtis currently with Dominick
and Dominick, has suggested it as a play one had to follow,
and it’s done surprisingly well moving from $1.50 to
$12.00 over the last three years.
The key to Corridor now is the Frederick Brook play
which Gustajtis says, “underlies the Hiram Brook formation
which has now had 25 successful gas wells drilled
(with no dusters) and is currently being developed by Corridor.”
He suggests, “The Hiram Brook formation will reach
production of 50 mmcffpd in the coming year.” He continues,
“The chapter on the Frederick Brook has just started
and how it will unfold is far from certain. We know from
seismic mapping that it covers an area at least three times
the size of the Hiram Brook and we also know that it is at
least twice as thick.”
He continues, “I do not think there is any doubt that the
Frederick Brook could contain natural gas in place of 5 tcf
or more. The question is, will this shale rock release commercial
volumes of natural gas. Today’s press release
said YES!” He cautions, “This is very important, it is early
and much more work needs to be done, but I think the Corridor
story is far from over and worth following closely.”
DOW JONES IND. AVERAGE: 13,305.31 -143.55
This chart on the Dow Jones Industrial Average shows
that there’s recently been a bump, but it doesn’t really
look like a crash. It might feel like a crash and it is certainly
getting a lot of press and it’s much better if you
didn’t own shares in brokerage houses, banks and the
like, but it hasn’t been all that disastrous.
We suspect it’s going to be a few months before we
get over this financial hiccup because most markets
still key on what’s next for the United States. But as far
as the big story in today’s American market going into
the day it was interesting because one of Bloomberg’s
major articles was headlined “Cheapest Stock in almost
12 years Greets Investors,” as the Bloomberg’s article
keys on the fact that the industrial companies are trading
at 18.4 times earnings lower than their 23.4 average
for the decade.
The real ugly stuff today was once again, because of
real estate mistakes, as it suggested the number of
Americans signing contracts to buy previously owned
homes in July dropped by the most since records began
in 2001, commercial sales weren’t all that healthy
either. Interesting but you’ll have to excuse us for
thinking the most important article of the day on
Bloomberg was something else.
The biggest story we thought is India’s Tata Motors
is trying to roll out a car that they hope to build and sell
for $2,474 an issue. It’s expected that the Indian car
market will triple in the next seven years (and all those
cars need oil) while Chinese production now hits +7
million units a year in a country that 30 years ago had
only a handful of privately owned cars.
Right now, China devours more mineral resources in
several categories than the United States and even if
there is a touch of recession in the U.S, what’s happening
in Asia can more than make up for it as more and
more Asians reach the middle class and want their
fridges, stoves, motorcycles, cars and things made of
metal and needing oil that we take for granted in North
America.
As long as Asia stays healthy, the demand for commodities
and commodity prices should remain strong.
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