₪ David Pescod's Late Edition October 10, 2007
ITHACA ENERGY (V-IAE) $3.60 +0.05
OILEXCO INC. (T-OIL) $17.04 +0.58
SOLANA RES. (V-SOR) $2.29 +0.09
STERLING RES. (V-SLG) $1.91 -0.05
That was a nice little tidbit of news out of Ithaca Energy and its success at the Athena field. For those hoping to have the next Oilexco on their hands, Ithaca announced that their latest Athena well in the outer Moray Firth of the UK North Sea was drilled to a depth of 11,000 feet and a total of 355 feet of pay was encountered of which 92 feet is considered to be productive with 14.3% average porosity.
The well was tested at 1,300 barrels a day and analyst Fred Kozak who’s been so successful following Oilexco writes, “While the well parameters have not been made public, we would expect that the new well should have a similar test rate.” Kozak, writes “the impact is positive” and he adds that “the drilling location was in an untested part of Athena field”, but more importantly the well was drilled in an area where Ithaca has no reserves assigned to the Athena structure.
For a background on Ithaca, email Jenn at Jennifer_Lagdamen@Canaccord.com. And Kozak has a $4.50 target on Ithaca Energy which he adds “could be conservative.”
We also note that Warren Verbonac of Octagon who first got us interested in the potential for Ithaca has raised his target to $6.00 from $4.00.
But if you’re in the North Sea, the major play is still Oilexco, which gets us to Josef Schachter who’s currently got two stories in vogue of late, Oilexco and Solana Resources.
As far as Solana, Schachter tells us that their “Tres Curvas well is expected to have results next week” and he suggests that “it’s a well that could come in at 200 to 300 barrels a day that could see multiple targets added in the area.
He also suggests that the well looks like it’s coming up with multiple zone targets. Needless to say, the market is paying attention to this success at Tres Curvas and Schachter points out, one of the big problems with operating in Colombia over the last while has been rig availability and if that problem has been surmounted, Solana should have several other projects on the go that will m a i n t a i n t h e m a r k e t s a t t e n t i o n .
But onto Oilexco, which Schachter’s name has been associated with for the last few years and he bluntly states that Arthur Millholland could become the “Jack Gallagher” of this cycle. He bluntly states that “just between Shelley and Ptarmigan you could see fourth quarter of ‘08 production of 70,000 barrels a day or a $6.00 cash flow. Just based on that, add in a 4.00 times multiple and you come up with a $24.00 target. Add on Morro and Coronado, and he suggests you’ve got a target easily at mid- $20.00 to $30.00. And he is suggesting to institutional clients that this is a story that if Millholland doesn’t sell soon and maintains a moderate level of drilling success, could easily see $50.00 before the end of this decade.
As far as the big concern going around Alberta these days with the Royalty Review he does suggests that the oil sands is a bit of a poker game right now as costs have gone up significantly and if they do put in the taxes, suggest that you wouldn’t be surprised to see the cancellation of many projects. What Schachter hopes to see instituted is a form of price-sensitive deal where the first $60 or $70 for the price of oil sees money at the current royalties maintained, but if oil prices do increase then the province gets a bigger chunk of it.
Schachter wouldn’t be displeased to see some of the same arrangements with natural gas which is still the bulk of the province’s revenue. As far as the Royalty Review though, he was more than a little disappointed to see much of the analysis done by some Americans when there’s so much Canadian talent that could have done it. He also notes that they did not take into consideration some of the big costs for land, which could make up to $2.5 billion in difference or so a year. He is hoping that consensus and common sense prevails and oh, boy if it doesn’t…
As far as natural gas is concerned which is a much beaten up sector he suggests, “we are weather dependant.”
Cold weather is what one needs to make a difference and a normal winter would take down inventory just enough to attract markets attention and get us back to the $8.00 or $9.00 level, hopefully by Christmas.
Deliverability he says, continues to go down both north and south of the border, but when we get down to the major point of what would be his 3 top picks, Oilexco remains #1, Sterling is #2 and Solana is #3. |
