₪ David Pescod's Late Edition October 25, 2007
DELPHI ENERGY (T-DEE) $1.74 +0.06
STERLING RESOURCES (V-SLG) $2.55 +0.20
He is probably one of Canada’s most high profile oil and gas guys and he’s definitely got the affable personality.
We’re talking about Josef Schachter of Schachter Asset Management frequently seen on BNN (Business News Network) with his bow tie and the likes, but whose work is yours courtesy of Maison Placements of Canada.
His monthly report (and look at the energy index) is pretty good and so far you have to admit his pick of Oilexco over the last while has faired rather well. Some of his hopes for natural gas is of a disappointment. His latest monthly outlook dated October 17th features these comments “use any upcoming seasonal weaknesses this fall to add to favorite energy investments.” Inside the report they write “if winter is delayed or starts moderately and energy stocks correct, use this weakness to add to favorite investments.”
One of the key points in his monthly report though is Premier Ed (Chavez) Stelmach’s Royalty folly. The much talked about Royalty Review in Alberta we find very embarrassing and could be a disaster for both the oil and gas business and also Albertan’s in general. Schachter writes “Without a doubt the most talked about topic in Alberta and of energy investors across the country over the past month has been the proposed Provincial oil and gas royalty changes. It is our belief that the implementation of the proposed royalty recommendation will drive down billion of dollars in capital investment as made public by the likes of Encana, Talisman, ConocoPhillips, etc. It is also our belief that the new royalty rates will result in substantial job losses, which will drive drilling activity down even more than justified by current weak natural gas prices. In addition the fiscal regime change will add major uncertainty which will result in a loss of confidence in Alberta by the worldwide investment community. Capital of the scale needed to develop the unconventional oil and gas resources in Alberta is fickle and energy companies will move their funds to areas with higher returns and greater political certainty. This is the second hit to the oil patch, the first being the taxation of royalty trusts. The alarmist are calling this NEP1 and NEP2.”
For a copy of the report, email Jenn at Jennifer_Lagdamen@Canaccord.com and his comments on natural gas are of interest because natural gas prices remain weak, and inventory high.
If one could only predict natural gas prices over the next while with natural gas stocks down 50% to 90% from year ago levels, one might be able to do quite well.
As far as his top picks for the month he goes with Sterling Resources, a story that’s been a favorite of his for some time. As his top international pick he writes “SLG is exposed to approximately more than $10 a share in un-risk upside via exploration and appraisal drilling in the next 12 months. Currently drilling is the high impact Breagh appraisal well.SLG
has a 50% fully carried interest.”
As far as his top domestic, it’s Delphi Energy, a natural gas that has a lot of leverage or should we say “debt.”
We should mention that management at Delphi ran Renata at one point which was another natural gas story that had too much debt, and well...
Schachter writes “Delphi has successfully negotiated its way through weak natural gas prices by high grading and reducing capital expenditures as well as instituting a prudent hedging program. Current debt is at a manageable level of $98 million.”
As far as his past favorite pick Oilexco he writes, “since the recommendation Oilexco has been a champ, rising to new all time highs…we have now moved the stock to Under Review as we await details of the Shelley development work and the initial development drilling at Huntington. We expect to be raising our previous target of $20.00 materially, once we have the data to include in our models. An exploration success at West Huntington will be the next material event to lift the stock even higher.”
ANDINA MINERALS (V-ADM) $4.96 +0.59
As you can tell by our constant following of this story, Andina Minerals is one of our favorite stories and one we frankly have high hopes for.
Yesterday we were wondering just where Carl Hansen might be...probably bravely scaling the Andean Mountains up to the volcano site for a look/see or maybe perusing the jungles of Latin America for yet more potential gold discoveries.
Wrong on both. Carl Hansen was involved in a hockey game and apparently took a cheap-shot (or at least that's what his supporters say) and broke his leg. He is undergoing surgery today.
One thing about Hansen and whenever news on Andina comes out though, is that his timing is not necessarily the best. Some of the best news the company ever had to announce roughly a year ago, came out the day that Aurelian Resources announced some of the most spectacular diamond drilling results anyone has ever seen on the face of the earth. Ah, yes...bad timing.
Meanwhile, the last bunch of results just a few days ago showing very significant increases in reserves for Andina was announced the same day that everyone worried about the 20th anniversary of the crash and there is a lot more worry out there than greed.
Recover quickly Carl, we want you back on the job quickly!
For those who want the recent report on Andina, please e-mail Jenn at Jennifer_lagdamen@canaccord.com.
If you would like to receive the Late Edition, email Debbie at debbie_lewis@canaccord.com |
