₪ David Pescod's Late Edition January 14, 2008
High Risk/High Reward Plays for the Coming Year
The trouble with high risk/high reward plays, particularly at a time like this when the market just doesn’t seem to care about anything and there is a lot more fear then greed, there’s a reminder that high risk/high reward plays simply don’t work out in a lot of cases. Take a look at tiny GUL and IFR in the North Sea. They’ve had three high risk/high reward plays in a row ... and all have missed. The reason you pay attention to these plays is that if you are involved in the one that works out, usually you are amply rewarded for taking the risk. Herein lies our high risk/high reward selections for the coming year and again, this is not for widows, orphans or anyone not liking risk.
CORRIDOR RESOURCES (T-CDH) $7.13 -0.43
Corridor Resources had had a nice run for the last two years based on surprised discoveries of natural gas in the McCully Basin of New Brunswick, of all places. Who would have thunk? But analyst Andy Gustajtis was right and the crew at Corridor has come up with some pleasant surprises. At least until lately when the overall market sentiment has been clobbered if it had anything to do with natural resources. Today they also announce a little drilling problem in their shale zone.
While the company is behind production estimates as many had thought they would be at 40 million cubic feet a day by now, and instead they are at 32 million, the reason you are following Corridor at this point is for some of their deep drilling as they target the Dawson Settlement. This is a deep play and sometime near the end of February they will have a handle on whether it’s there...or it’s not.
Some of the more optimistic analysts assume that what they currently have on their shallower zone could be as big as 1 TCF, although it’s going to take a lot more drilling to prove that or dis-prove it. What they are hoping to find at a deeper level is multiples of that number. If it’s there and being close to the high priced Boston/New York market on a much shorter pipeline, this would be incredibly significant. Many of the juniors listed in this piece, have very few plays or backup plays, so if their major play misses, they are left with very little. Corridor, we believe and their McCully play could be on its way to one trillion cubic feet and if that’s the case, this stock at this level, even without the Dawson Settlement, could be/should be a bargain.
MARCH RESOURCES (V-MCF) $0.62 +0.04
A recent article in Bloomberg featuring the energy crisis that the booming economy of Chile is facing brought home just how important it is for Chile to find alternative and internal sources of energy. The Bloomberg article points to electricity charges going up as much as 42% in the last year and that the country has to import 75% of its energy needs. The economy is booming and power is needed.
March Resources will be spudding in the next two weeks their Pica #1 well way up in the high Andes. There is not a lot of pipelines anywhere nearby, but has to be considered a high risk/high reward play. But this is one area of the world that needs energy (of any kind) badly, and prices down there aren’t bad.
They have three significant targets on the way down and potentially a shale zone bale-out as well, but until the drill turns to prove or disprove all those pleasant theories … results should be in by early March.
The company has negligible other assets, so needless to say, if this play doesn’t work...Take a quick look at who the major backers are on this play, and you’ll know there is some significant people involved in this play. Spudding in 10 days!
ENERGULF RESOURCES (V-ENG) $3.06 +0.43
Energulf Resources has done one thing better than most junior oil and gas exploration companies ... keeping the number of issued shares down to a modest number, being just over 40 million shares. Which means that if they hit anything, there is big potential upside.
The two year chart shows you how high Energulf ran just on receipt of some of the exploration plays. The stock petered-out as some people are just not patient, but finally they should be spudding in the next two weeks, their Kunene play offshore Namibia.
It offsets in a bit of a way, some of the enormous success big companies have had offshore Angola. The suggestion is that their target of somewhere between 500 and 1 billion barrels, which are truly elephant-type numbers. Their 10% interest is significant.
Meanwhile, of even more interest to us is just when are they going to drill the Hartmann Prospect. If you think the current target is big, the Hartmann has been suggested in some circles as having potentially as much as 5 Billion barrels. Of course seismic targets and what is really there, can sometimes be numbers on two different planets.
Spudding Kunene in next month. To see their presentation go to www.energulf.com.
LATIN AMERICAN MINERALS (V-LAT) $0.85 n/c
The chart shows you that Latin American Minerals was going the wrong way because their zinc project in Argentina that was supposed to drilled in October, still isn’t drilled and now it looks like they may not have the equipment they need until February.
In the meantime, a big surprise as work on their Paso Yobai gold project in Paraguay has come up with visual gold which has excited the market. There are those who aggressively suggest that their target could be as long as 5 km and given certain widths and depth, can come up with some rather significant tonnage numbers.
Once again, the question is, just how rich is the ore? Because visible gold can be very exciting...and very misleading.
Results should be out sometime in the next two weeks on their first two holes and then they expect an additional two holes a week for the next few weeks.
Management hopes to have some numbers out for the Cambridge mining show this weekend.
PETROLIFERA PETROLEUM (T-PDP) $8.57 +0.24
Analyst Warren Verbonac is the guy who gave us Pan Orient (POE) which was one of the best stock picks over the last year. It was almost a four-bagger and he suggests looking into this year, you are simply looking for the best and biggest target you can find anywhere.
As far as he’s concerned, Petrolifera Petroleum with its Maanon Block 106 and Ucayali Block 107 in Peru Is that one.
Petrolifera has been hurting as all resource stocks have been swacked and the Argentinean Government has, like Alberta, changed royalty rates hurting their numbers in Argentina.
Production is hoped to increase in Argentina which would help the stock, but it’s their play in Peru That Verbonac has high hopes for. Gary Wine, the President of Petrolifera had for many years worked in the government agencies for Bolivia, so when the country did sell some of their rights to private oil and gas companies, Petrolifera was first in line for some of the best targets. Spud date however, not until second half of the year.
CONDOR RESOURCES (V-CN) $1.63 +0.13
In the mining business, Pat Burns of Condor Resources is one well thought of personality. In Condor, with very few shares outstanding (at last count only 35 million) has two significant plays currently being looked at in Latin America.
The Ocros porphyry copper project in Peru had two holes 500 metres apart go into copper mineralization between 25 and 35 metres and then intersected copper mineralization that stil existed at 400 and 460 metres of depth.
The question is, what grade if any, did they have? Results can be out anytime, but with such a width between holes, tonnage implications could be massive. But is there any grade? Management hoping to have some assays out by Cambridge mining show this weekend. Canaccord analyst Wendell Zerb says if you are looking for a high risk/high reward spec….this is it.
INTL. FRONTIER RES. (V-IFR) $0.74 +0.01
Little guy International Frontier Resources has not one, but three significant plays, all starting in February so it will definitely be a cheapie to be watching if not playing. They will be spudding sometime in February along with PetroCanada, their Maria play in the North Sea. Thirty days is what people in the industry say it takes, but lately things in the North Sea seem to be getting done a lot quicker. Spud date sometime in November depending on rig availability.
Meanwhile, in the NWT, their Dahadinni B20 play is being called by some potentially the biggest exploration well in Canada for the next while. One shouldn’t get too carried away with these claims, but an independent source tells us that partner Husky is already working on a model that includes a $30 to $50 million seismic operation, should this well work out. Obviously the model is suggesting something enormous. Spud date, assuming the MacKenzie River is frozen is February 1st. About mid-February, IFR also spuds their shallower Keele River L52 prospect, also in the NWT, but also a potentially significant well.
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