₪ David Pescod's Late Edition 6/23-6/27/08
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David Pescod's Late Edition June 23, 2008
Oilexco (OIL-T +$18.16 )
Delphi Energy Corp. (DEE-T n/c $ 3.28 )
Sterling Resources Ltd. (SLG-V + $3.15)
Ithaca (IAE -T + $3.10)
Just back from spending some time on the beaches of Mexico, Josef “The Tiger” Schachter, is only two days away from hitting the links in Kelowna.
We joke about his golfing skills, as he has admits his main target while out with the clubs, is to beat “Bond Par”.
It sounds like an noble ambition, but in the meantime, we are after him on any ideas on Oilexco, and whether they may or may not become a consolidator in the North Sea, what with Ithaca as a takeover candidate and Antrim etc.
Oilexco has been one of Josef Schachter’s favorite stories over the last few years, and he has looked pretty good backing that story. But at this time he suggests he can’t see Art Millholland, the fearless leader at Oilexco going after some of the juniors with the small chunks of this play or that play.
Instead, he suggests Millholland will probably be buying some of bigger chunks of properties owned by some of the larger companies that have big interests. Schachter, figures Oilexco and Millholland want to be in control of their destiny, hence has huge interests in different plays.
Meanwhile, Schachter suggest Oilexco should shortly have results out on their Moth, which has been delayed in its drilling because it’s deep and with high pressure, but results should be out within a few days or a few weeks.
He only gives the Moth a one in four chance, but suggests that if it does hit it could be worth seven dollars a share for the company. He also points out that very shortly they should have a big increase production from Balmoral that adds five thousand barrels a day.
On to oil and gas prices; Schachter expects oil to correct fifteen to twenty dollars, and he is a little less aggressive on oil stories versus natural gas.
Just six months ago he was a raging bull on gas at a time that is was half the current levels. He now prefers gas and suggests he wouldn’t be surprised to see it spike to fifteen dollars an mcf, when the hurricane season hits in the United States.
As far as Josef Schachter’s favorite stories of the day, for natural gas he goes with three domestic stories, Tusk, Delphi and Accrete Energy.
For oil stories he goes with three internationals, Sterling, with a fist full of high risk, high reward plays in
the North Sea and Romania over the next year, Western Zagros, and Oilexco.
Meanwhile, he cautions on two of his best performing stock tips over the last while. Solana and Grand Tierra suggesting that they might just be getting a little bit ahead of themselves, suggesting that the production profile is going to be significant, but it is down the road.
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David Pescod's Late Edition June 24, 2008
Bankers Petroleum (BNK-T -$1.93)
. . . . . . . . . . . . . . . . . . . . . . AN UPDATE WITH ABBY BADWI
. . . . . . . . . . . . . . . . CEO & DIRECTOR OF BANKERS PETROLEUM
. . . . . . . . . . . . . . . . . . . . . . (As of June 17, 2008)
He’s one of the most successful oil men of the past decade and we are talking about Abby Badwi, who had so much success in the oil and gas patch with Rally Energy and he’s taking a couple of big steps repeating it with Bankers Petroleum.
David Pescod: Abby you decided to split the company at this time, so two different factions get what they want. What are your thoughts on this?
Abby Badwi: It’s really the new management team’s focus on Patos Marinza oil field in Albania. It’s heavy oil. It’s what we’ve been doing and what we know best. The capital and energy required are substantial enough to deal with only one asset. Having a whole new set of totally different assets being shale gas in the U.S. just did not fit with our business plan and focus.
D.P: So who is going to be running the American assets?
A.B: It will continue to be run by the same team that Bankers assimilated together over the last three or four years. Wolf Regener is the President and new CEO of
BNK Petroleum (which is going to be the name of the new company) and it will start trading on the TSX as soon as we receive approval of our shareholders and the Exchange.
So early in July, Wolf and his team out of California will be managing those assets.
D.P: Now back to the major prize in Albania. There still continues to be a little bit of debate as to A) how big it is and B) how much of it you can recover.
A.B: It’s really what we’ve been working on. As you know, most of the reserves recovered to date were recovered on primary recovery techniques which include drilling and reactivation of old wells. We are going to continue doing that. This will be the main part of our activities over the next three years.
Connacher (CLL-T -$4.43)
Vermilion Energy (VET.UN -$43.18)M
We will pursue a major reactivation program of the old wells and we are going to do about 250 of these wells, but we will also drill 110 new locations, both vertical and horizontal to extract additional oil from un-drilled spacing units.
Our second focus which takes a bit of time to show results is a water flood program. One of the zones – the deepest zone into the reservoir has a relatively lighter crude around 16 degree API. We believe a water flood could work very well in the zone and we are starting with the program in 2008 and extending it into 2009 and beyond.
We will also begin a thermal pilot program. This type of reservoir, a sandstone with good porosity and permeability and not too deep (we are talking around 1000 metres) is the upper zone of the main producing section and has about 10 degrees API oil. Thermal recovery methods, particularly cyclic and steam flood can work very well in this field. We will start slowly with an eight well pilot program at the end of 2008. Observing the pilot’s performance over 2009 secure a cheap source of energy (and I’m talking about natural gas here) and then go into a commercial expansion in 2010.
D.P: What kind of production numbers are you hoping for by then?
A.B: We put our guidance out as part our business plan and we are talking about exiting 2010 at 20,000 barrels per day.
D.P: What kind of production numbers are you hoping for by then?
A.B: We put our guidance out as part our business plan and we are talking about exiting 2010 at 20,000 barrels per day.
D.P: Now there is one big question these days, and that is we’ve had a huge run in the price of oil. We are long overdue for a correction. What are your thoughts on this idea of oil prices over the next while after this huge run up?
A.B: The run up is beyond anyone’s expectations and definitely beyond my own. I don’t believe it is totally related to supply and demand. I think there is a lot of financial speculation and hedging going on by investors and traders. Of course, it is a depleting commodity but I couldn’t see a double in oil prices over the last 12 months just on supply. I do know that we have shortage of supply but also an unstable political situation around the world with two wars going on in Afghanistan and Iraq and we have discussions about invading Iran are all causing this volatility. You add all these things together and it creates a situation where traders are very active and looking at maximizing their hedging programs. I don’t see this rate of escalation continuing and I hope it retracts a little for no other reason than it will just create a more stable economy. It is just too volatile at this stage.
D.P: What would be your guesstimate of what would be a fair price at this time?
A.B: That’s a tough question! I am going to tell you one thing, at $100 oil, we have some tremendous netbacks for heavy oil. At stable prices of $100, with minimal inflation increases of 3%, to 5% per annum – it would make my life easier planning my future capital program and securing our activities.
D.P: Now one thing you have done well at over the last few years is also pick other stocks that have done rather well. So our favorite question is as usual, if you could only one stock other than own, what would it be?
A.B: As I mentioned to you last time, I am very bullish on Canadian Natural Resources (CNQ) and I think when we were talking about it last, it was at $70 or $80. It has performed very, very well. One of the Trusts that I think is one of the best ones out there is Vermilion Energy Trust (VET.UN) and again, I’m very well invested in it. It gives a nice distribution and equity appreciation value. As you know I am still a big believer in Connacher Oil and Gas (CLL) because of the large reserves they have in their Great Divide project. I think the market is going to reward them as they continue growing the company and proving its reserves and increase cash flow. I think Mr. Gusella has done that well over the last three or four years. So he will be rewarded.
D.P: Is there anything else you want to add?
A.B: Everything with the arrangement is complete. We hope to see some good support in the marketplace for both companies that are being split and that our shareholders will continue to support us as they have done over the last eight months now.
D.P: Thanks Abby!
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David Pescod's Late Edition June 25, 2008
. . . . . . . . . . Six Stocks that just might Change your Lifestyle...For the Speculator:
The problem with high risk/high reward plays is that usually these plays that could change your lifestyle, have huge risks.
When they say that there’s probably only a one in ten chance of success on a certain play, for those that are mathematically challenged, that means there’s a 90% chance it’s not going to work.
Over the last year or two, we’ve had more than a few examples of well thought of plays that were $50 million duds.
So here we are, from different sources, our picks for plays that should be watched in the coming 6-12 months, all of which are cheaper after the current correction in oil stocks the last few days.
BRIDGE RESOURCES (V-BUK$1.17 –.04)
For those looking for one of the big high impact/high risk/high reward plays in the immediate future that is undoubtedly Bridge Resources and their Piper play in the North Sea. The Piper is arguably one of the biggest targets left to be taken a look at and they are expected to spud in late July.
Bridge has about 160 million shares outstanding which is a bunch, but with their recent success at Durango, Bridge is probably worth at least what it’s trading at, if not more.
Piper is estimated (if it’s there) to be as big as 500 million barrels and Bridge will be putting up 25% of the cost to earn a 50% interest in the play.
Once again, spud date is late July.
CORRIDOR RESOURCES (T-CDH $9.04 –.44)
Corridor Resources has recently raised $55 million so they can hurry along the work on their Frederick Brook shale and shale these days is attracting an awful lot of attention.
One source we trust suggests that if 10% of Corridor’s 240,000 acres holds the Frederick Brook shale and so far four holes have intercepted it and they have flowed to surface (and using $10.00 gas) Corridor could be worth multiples of current value which is a pretty big number. But then the suggestion is, that the Frederick Brook shale is four to five times as thick as the Quebec shale projects and the organic content is much better than the Utica shale as well.
Drilling is expected this summer and fall and they’ll know by this winter whether the first several wells have been successful...or not.
STERLING RESOURCES (V-SLG $2.86 –0.20)
If you follow Josef Schachter’s work...and you should, one thing he is featuring now in his monthly newsletter for Maison Placements, is a high impact drilling watch list and the one story that stands out there to us is Sterling Resources. He talks about their different plays coming up over the next 12 months and if any one of them hits, it could make a big difference to the stock and if several hit…
Their East Breagh exploration is expected to spud in July and if it hits, Schachter gives it potential additional value to the Company of $4.00 per share. Their West Breagh appraisal well could add $3.00 a share and it spuds in September. The Breagh area exploration could add another $3.00 a share and it will be drilled near year-end.
If you are looking for excitement their 210-29/30 well also in the North Sea is expected to spud in September and Schachter suggests, could add a potential $10.00 a share to the Company if it works out.
Meanwhile, Sterling is also working in Romania where their Doina and Doina Sister wells will be drilled later this year and next year and could add $3.00 a share to the value of the Company. As far as their Midia well also in the Romanian Black Sea, Schachter suggests that the targets could be as big as 500 million barrels and he says that the leverage potential is simply multiples of this current stock price.
JUNEX INC. (V-JNX $3.99 +.04)
While Josef Schachter goes with Questerre Energy (QEC) and gives the possibility of success in Quebec of at 25%, we’ll go with Junex Inc. But the success Forest Oil has had in Quebec so far is getting more than a few people excited for the potential for the Quebec play later this summer.
The suggestion has been made by Forest and others that there could be as much as 93 BCF of gas per section and if just 10% of Junex’s 1.1 million acres has the good stuff, Junex will be trading at many, many multiples of current levels.
The Quebec play also has lots of built-in and nearby infrastructure to work with as far a pipelines and Forest Oil should be working the first Junex joint venture over the summertime with results September or October. This project however, will stretch over time, and require big bucks!
There are now several reports available on the Quebec plays—they are a must read!
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David Pescod's Late Edition June 26, 2008
CIBC (CM ) -$2.57 at $58.54
CITIGROUP (C) -$1.14 at $17.71
MERRILL LYNCH ( MER ) -$2.31 at $33.15
GENERAL MOTORS (GM) -$1.31 at $11.50
GOLD +$37.00 to $919.30
With oil at $135, and gold up $36.00, silver just spiking nicely today and natural gas at levels we would have thought impossible just six months ago, we should be having a lot more fun in the natural resource sector.
We aren’t and the charts around this piece show you why .. The Asset backed mess in the USA seems to continue to drag things down ever lower, and just a few weeks after some analysts thought we had seen the bottom, and it was time to buy the banks and brokers, they are now changing their minds thinking it could get worse.
Meanwhile with the high oil prices car sales have gone off a cliff, and Goldman Sachs raised the possibility that General Motors may have to raise money to deal with its depleting cash pile. Chrysler had to deny rumors on Thursday that it was facing a cash crunch.
G.M. is now trading at levels lower than back in 1974. The chart shows you how badly big broker Merrill Lynch is faring as the market wonders what next for them and Goldman Sachs put Citigroup on their sell list (it would have been a lot more helpful if they had done that a long time ago don’t you think?)
It’s called fear as some of the biggest car makers in the U.S. and brokers, and bankers suddenly look scary, and lots of folks want to have a little cash.
CIBC 1 Year
CITIGROUP
MERRILL LYNCH
GENERAL MOTORS
A Must Read
On the Top Ten Seller List!!
FIRST THEY KILLED MY FATHER
BY Loung Ung, a survivor
We are just recently back from a trip to South-east Asia, touring Thailand, Vietnam and Cambodia, and it was great to see first- hand this area of the world, and while some areas are having a little trouble, the area is booming compared to a few years ago.
In Bangkok airport you quickly realize that much of Europe and many young Canadians have discovered this country and it’s gorgeous beaches, and cheap, but getting more expensive quickly lifestyle. Those cheap suits you have heard about from Bangkok are great, but not as cheap as you heard.
Vietnam was interesting to tour, and see first hand the places you heard of daily during the war years. We saw the Ho Chi Minh mausoleum (always a big line-up), in a busy city of Hanaoi, with millions of motorbikes.
Outside Hanoi, we saw shift change at an enormous textile factory, with thousands of women off to work, at a plant owned by Chinese interests, taking advantage of low labour rates in Vietnam...and pay of $150 a month, ,,,,we saw the town you heard of all the time in those days Da Nang, and the gorgeous nearby China Beach, seeing is first development projects for tourists, and then there was Saigon, which was booming.
If you didn’t know better you would have thought the south won, and if this is a communist country, they could teach the west about capitalism. Our guide tells us the big worry for every -one here was high real estate prices, and how to afford doctors services.
But the shock was Cambodia, it’s history and the Khmer Rouge and the devastation they left behind. Their beliefs included a dislike for cities, government, and intellectuals. People were shot just because they wore glasses ( a sign they might be an intellectual) and it has been estimated that only 5 doctors were left alive in the country by the end of their reign of terror.
Everyone should be out working on the rice paddies....they killed two million people out of a population of seven million.
For a remarkable first - hand look at this time and place through the eyes of a child, we suggest First They Killed My Father....by Loung Ung
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David Pescod's Late Edition June 27, 2008
OILEXCO (T-OIL $ 18.81 +$1.69)
CANADIAN SUPERIOR (V-SNG $4.65 -0.100)
TUSK (T-TSK $2.95 +0.08)
In the unending battle for news, gossip and other good stuff, we found ourselves yesterday bothering once agin, the amiable Alex Squires , managing director of Brant Securities , but someone you probably know as the guy who first introduced you to Oilexco on his frequent appearances on BNN.
Why he hasn’t been on BNN in a while I don’t know, their mistake, but Squires is in the interesting position of being close to Oilexco, and a director of Canadian Superior, and the charts show you that both are currently interesting.
Squires did say that he had just recently been to England and went to Ascot, the races with Art Millholland and the crew, and even won 100 pounds or so on the ponies, which was the good news.Apparently the bad news was that Champagne costs about 50 or 70 pounds a bottle so those winnings didn’t go all that far.
But as far as stock picking he stuck with two of his favorite stories, Oilexco and Tusk, the Alberta based natural gas player, that was having such tough times when gas prices were weak just six months
ago, but is now booming. Couldn’t get anything specific on Oilexco, but their news on Moth later last night was the stuff that keeps an investor interested.
As far as Canadian Superior , which is currently testing their Bounty well offshore Trinidad, he suggests news is coming when appropriate, but the market is obviously expecting good things. The news on Oilexco later was intriguing, but information was not yet all in.
Jamie Somerville of Genuity writes “Moth looks like a good discovery: but not a beautiful butterfly yet”
He notes that “yesterday, Oilexco announced that it has made a dual zone oil and gas /condensate discovery...and encountered 605 feet of hydro carbon bearing reservoir sands in the middle Jurassic Pentland and a further 219 feet in the Upper Jurassic Fulmar” While oil and gas did flow to surface Oilexco was unable to measure flow ,and they are now making preparations to drill stem test the Upper Jurassic interval immediately, with results expected by late July. As far as impact Somerville Writes “ with both of the discovery zones still to be tested, it is still to early to be certain that Moth will yield a significant discovery (that can be fast-tracked to development).”
He adds”.. we now assume a 65% chance of success for a development of approximately 80mmboe” but points to high costs and development uncertainties Somerville maintains his buy rating and raises his price target to $29 from $28.00….
for a copy of Canaccord’s Fred Kozak on the latest developments on Oilexco, e-mail Deb at debbie_lewis@canaccord.com.
Oilexco remains one of our key holdings, and they should shortly be announcing a bump in production of about 5000 barrels a day.
CANDAX (T-CAX $ 1.03 -0.03)
For those that are frequent flyers, and particularly those in the oil patch with companies that have assets spread all over the world, you know that you are supposed to get up every two hours or so and stretch your legs and get the circulation going. Particularly those on the long flights as medical concerns could become very real.
The stewards and stewardesses may not always like it , but our thoughts go out to John Clark, recovering in a Toronto hospital from just those problems associated with long and frequent flights, (Tunisia), and some other souvenirs of those flights.
Clarke used to be for several years running one of this country’s top ranked oil and gas analysts, until he visited the dark side and became Vice president of Candax energy, and discovered there fist hand all the things that can go wrong with oil and gas exploration.
One of those big problems was just getting a rig that was good for offshore Tunisia, and in shallow waters. That alone took much of a year to happen , and then there was weather, and equipment...you name it.
Now however, Candax finally has some production occurring, and a recent road trip for investor relations purposes hosted by Paradigm has created attention for their story, and the timing is important as they are now within a short-time of having results known for their Ezzouia well, which could be/should be quite important for the company.
Ironically after almost a three year wait for some excitement, Clarke is having to watch nurses instead of a quote machine…
To receive the Late Edition and be on our daily circulation simply e-mail Debbie at Debbie_lewis@canaccord.com and give your address, phone number and e-mail and we’ll have you on the list tonight. |
