₪ David Pescod's Late Edition November 12, 2007
STERLING RESOURCES LTD (V-SLG) $2.24 -$0.15
VERO ENERGY INC. (V-VRO) $5.75 -$0.15
GRAN TIERRA ENERGY INC. (US-GTRE) $1.67 -$0.08
Warren Verbonac of Octagon fame has got a hot hand picking stocks of late, particularly with this Pan Orient (POE) nominee, but for right now he suggests that the story of the day is Sterling Resources. There’s not a person’s name more associated with following Sterling’s stock over the last few years than Josef Schachter.
When we finally caught up with Josef last week, who’s been under the weather for much of the past week we ask if he’s worrying too much about natural gas prices and he assures us that’s not the case at all. He’s one of the few believers left it seems.
“Winter will come” he suggests, and “we’re currently not looking for gas” and he points to drilling numbers just out showing that only 33% of the drills could be looking for natural gas in Alberta at the peak season, are now actually looking for the stuff.
And given decline rates and all that, well you get the drift. He figures sometime this winter, winter hits and we will see a spike in gas and that will deliver a nice pop in the currently beaten up gas stocks. Well, there you go!
Onto the story of the day Sterling Resources, a stock he’s liked over the years for their large numbers of plays in the North Sea, but most of which has been disappointments. But like an Oilexco story, all you need is a couple of hits and then all of the sudden you’re in the limelight.
Josef tells us that the current terrible conditions in the North Sea are delaying work for just about everyone and particularly for Sterling. He wouldn’t be surprised to have to wait for news on their Breagh drilling until the next week or week and a half.
“What we do know” he says, “is that instead of an expected 60 feet of pay, they probably will come in closer to 76 feet.” They’ve also come in with porosity numbers of somewhere between 10% to 20% which leads him to believe, one should be expecting 6 to 10 million cubic feet out of the current well being tested. If that’s the case with potential for 3, 4 or 5 additional wells, one platform could be rather productive.
And gas prices in England are at a nice level, not like Canadian prices. Whatever the results are on this well though, they’ve only got the rig for this one shot, although they expect it back for follow up drilling sometime in the second quarter of next year. Should this well be successful he suggests then they develop that area and then go test the areas surrounding it.
This could develop into a rather significant play, he suggests. As far as his current top three (these days anyone following stocks have to realize that given different commodity prices, different currencies, phases on different programs, the only constant in your top three list is that it’s flexible and ever changing), see’s Sterling as number one pick with a $5 target. That’s a $5 target that could easily move up he suggests, to the $8 level should Breagh be successful in the different components.
Solana Resources had been one of his other favorite stories, but now he’s saying a junior currently listed on the pink sheets in the US called Gran Tierra Energy is trading for a mere $1.75, but has some of the same interest as Solana in plays in Columbia. He has a $3 target.
As we’ve mentioned we tried to talk him into saving himself and running to the hills about natural gas - he won’t be discouraged. He remains bullish and hopeful on natural gas and Vero Energy, very much a natural gas stock (although with lots of liquids associated) is his number three pick. He’s a fan of management and their ability to deliver production.
For those interested in following Sterling, they have a little dated website (it was put together for the annual meeting way back on May 23rd) and it gives you a scope of their vast interest in the North Sea. Simply go to www.sterlingresources. com.
Lately we’ve not had so much joy in the markets as we should have and there’s been days where gold is up $10 yet most gold stocks are down. And there’s been days where oil seems to be going through the roof and yet oil stocks look as if someone’s bought in an Alberta royalty on all oil and gas stocks everywhere. It’s been that kind of market and it’s been tough to make a buck.
On top of some of the actions of some commodities many Canadian explorers, minerals producers or oil and gas companies have been absolutely hammered because of the problems of the higher dollar. All of a sudden Canadian producers are 20% and 30% more expensive than from these south of the border or for that matter in other places of the world. It's created an atmosphere where Canadian stocks are suddenly at a huge disadvantage and investors who had to become international.
It’s been easy to make some wrong steps in the last month or 3. Having said that though, I don't think many have faced a performance in the mutual funds such as this.
Aren’t you glad you don't own some of this mutual fund. |
