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Strategies & Market Trends : Bosco & Crossy's stock picks,talk area

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From: HotnSpicy	6/7/2008 8:21:18 PM
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Pacific Energy (PFE.V) PV10 2P reserves = ~$2.5B (with $96 oil). Current mc is around $500MM with around $300MM debt. PV10 P1 reserves are around $1.3B. ($6.50 share). Trading $1.60 due to (unjustified imo) concerns over debt from their large asset purchases last year. Got caught in the subprime debt mess and have some high cost debt which they expect to restructure later this year. Just sold non core onshore Calif fields for $135MM, most of which went to pay down debt. PFE is 100% US based play (offshore Calif and Cook Inlet Alaska). Will exit '08 with 11-12K boed, up from around 7,000 exit '07. Most of the new production comes from the restart of the previously shut in Beta fields offshore Calif (had corrosion in the pipeline, but now have a fix). Expect 1-2K bpd by end of June, 4-5K by end of year, all unhedged. PFE is the most undervalued play based on discount to reserves that I know of. Debt concerns have pushed the stock down, but recent asset sale has revived interest. But it's still extremely cheap. With $139 oil, their cash flow is very strong (although about 4500 bpd is hedged around $65 to secure their loans). Wellington West gives a very conservative $3 target price (huge discount to P1 reserve values, let alone typical P2 valuation). As PFE brings on new production and works off the hedges, I think they have significant upside and it should trade closer to PV10 P2 value over $10 share. I see PFE as one of the lowest risk plays around. Proven reserves fully backstop valuation. They also have a very tasty exploration play called Corsair in Alaska that drills mid '09. '08 is a transition year and I expect '09 to be rewarding for shareholders. Since they are a US asset company trading on the TSX Venture, Fund interest seems weak. They are planning on listing on the Amex later this year and I expect the market will reward them, especially if they restructure the debt in the meantime. pacenergy.com

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