₪ David Pescod's Late Edition February 27, 2008
OILEXCO INC. (T-OIL) $15.71 -0.76
PETROLIFERA PETE. (T-PDP) $11.38 -0.01
You’ve heard us wail over the last couple of months that it
made no sense that with world demand for commodities doing
well, no matter what happened in the United States, things
in the commodity sector should still be okay. Instead, we saw
the prices of many junior oils halved and worse and mining
companies experienced the same grief. Now with oil above
$100, for those who stepped up to the plate in the last few
weeks, you have been amply rewarded.
Some of our favorites like Oilexco, which hit under $10.00,
has now been close to $17.00 and Petrolifera Petroleum, another
exciting story in Argentina and Peru, has also bounced back
providing a double for those who scooped up just a few
weeks ago. Way to go! But what next?
We are going into the spring when oil and gas demand
goes down and while we note Raymond James has just put
out a technical report suggesting oil could be $110—$112
shortly, we also note Boone Pickens, one of the guys that
predicted this whole commodity boom has in fact gone short
oil and gas for a couple of months, expecting it correct and
then come back later this summer. For those who didn’t step
up to the plate when there was easy money to be made,
maybe there is another opportunity coming later this spring.
We should remember that things don’t go straight down forever
(although it felt like it) or straight up.
Meanwhile, Oilexco has news out on its Bugle project and
for those who would like an update from Fred Kozak who reiterates
his $24 buy target, simply e-mail Debbie at Debbie_
lewis@canaccord.com.
INTL. FRONTIER RES. (V-IFR) $0.71 -0.01
We find a quite interesting comment from Pat Boswell, regarding
the recent drilling of Maria that took longer than expected,
was tougher than expected and even when they had
some results, they were controversial. Here from Pat Boswell,
President of International Frontier Resources are his words
regarding the drilling of that well with partners Petro-Canada
and Gulf Shores Resources: “In my humble opinion your
comments on the Maria 15/18a-12 well do not tell the whole
story. The facts are, from the get go the well was never engineered
to be a producing well-bore. Our farmin agreement
clearly stated that the well was an evaluation well and
that it would be plugged and abandoned irrespective of
results.
I would point out that this is common practice in the
North Sea; in fact I would guess that 90% of the exploration/
appraisal wells drilled in the North Sea are plugged
and abandoned. It is very difficult to get the UK regulatory
bodies to approve suspending wells unless there
are immediate plans to place the field on stream. The
objective of the Maria well was to A) establish an oil/
water contact – this was achieved showing a consistent
oil/water contact in the pool as we know it today B) establish
fluid composition – achieved as oil (probably 37
degree API) and gas was recovered on MDT testing and
C) sand thickness – 45 feet of oil and 15 feet of gas in
an area near wellbore – who knows what’s 1-2 or 3 kms
away. As I mentioned we have to complete our G&G
review.
It is worth noting that when we drilled the Summit Creek
B-44 discovery well, the then operator recommended
abandoning the well with no further drill stem testing.
After numerous debates/arguments the well was DST’d,
further production testing resulted in flow rates of 20
MMCF/D and 6300 BOPD of light oil or condensate --- a
good lesson learned. If you look in the rear view mirror
Oilexco’s Brenda field was initially thought to be small,
Oilexco has certainly proved industry wrong and the
field may in fact be 5-10 times larger than everyone initially
thought. Oilexco had the foresight to drill lateral
wells to define the pool boundaries, which as history
has taught us, was the right way to go as seismic resolution/
modeling can not always see thinner channel
sands.
Now to the point is Maria a little sister of Brenda, we do
not know at this point in time. What we do know is that
Maria is located within the same regional channel system
as the McCullough and Brenda oilfields. We also
know that we have excellent reservoir sands (30-35%
est. Porosity) and have discovered oil and gas in the
Maria well, how big it is remains to be seen and in my
opinion we will not find that out until an appraisal well
and possibly lateral wells are drilled.”
STINGRAY COPPER (T-SRY) $0.85 +0.15
BREAKWATER RES. (T-BWR) $1.58 +0.18
Just like many of the oil stocks that have set in bottoms
and some of which have moved dramatically, with
copper prices fairing so well, we are finally starting to
see some of the mining stocks react positively.
The chart on Breakwater Resources shows that the interest
is back and so is volume and Globestar Mining
(GMI) has also been nicely heading up. But when you
look around for decent copper plays, Canaccord’s Orest
Wowkodaw has put out an interesting report on Stingray
Copper, a stock he expects to double over the next
while.
He writes today, “Stingray Copper is a developmentstage
company with a 100% interest in the El Pilar copper
oxide project in Sonora, Northern Mexico. As of December
2006, the deposit had inferred resources of
179.8 million tonnes grading 0.365% copper, containing
656,300 tonnes of in situ copper.
An updated resource statement which will incorporate
the 2007-2008 drilling program is anticipated to be
released in mid- to late 2008. While the grade of the deposit
is below average, the economics of developing
the El Pilar project are very compelling given the relatively
low required capital cost of US$150.0-165.0 million
as the company plans to produce copper cathode
through a conventional SX-EW heap leach process.
A feasibility study is anticipated to be completed in
calendar year Q1/09. The project is currently being advanced
for planned, open-pit production starting in midcalendar-
year 2010. At full production, we anticipate El
Pilar to produce on average 35,000 tonnes of copper
cathode per annum for at least 12 years.”
For those who would like a copy of the full report,
just e-mail Debbie at debbie_lewis@canaccord.com.
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