₪ David Pescod's Late Edition October 1, 2008
BANKERS PETROLEUM (T-BNK) $2.81 -0.03
OILEXCO INC. (T-OIL) $10.31 -0.14
To many people Josef Schachter is one of the guru’s of the oil and gas sector and over the last few years, he’s gained quite an audience on BNN plus his various tours across the country to brokers and so forth accompanying and hosting different oil and gas companies.
But in this time of fear and panic, many of his favourite stocks have plummeted 50% and he admits that he never thought that the S&P/TSX Capped Energy Index would fall under 340. It hit a low of 292 which he is hoping will be putting in a bottom and he is suggesting that some time this winter, we will see oil right back at $120.00 to $130.00.
He’s assuming that the bailout will go ahead in congress and points to better than expected consumer confidence numbers out, showing that the American consumer isn’t that beaten up as many had expected. To put some comfort into the credit system, he also wouldn’t be surprised to see the FDIC up limits for protecting a person’s assets in the financial system up to $1 million for Corporations and maybe $200,00 or $250,000 for individuals giving them a little feeling of security. He points out what Ireland has done, guaranteeing everybody’s assets at the banks for restoring confidence in that country.
As far as the panic, he just points out that we’ve had panics and crashes for hundreds of years and suggests that the crash of 1987 was over in a few weeks and the one in 1981 was over in a few months. “They’re brutal, but they do end” and he gives the impression he thinks it’s going to end a lot sooner than most people think.
His Maison Monthly comes out in just a few days and he promises a new target for the oil and gas index that might appeal a lot more to the greed than the fear we are currently experiencing.
Meanwhile, he points to several of the stocks that he likes such as Bankers Petroleum and Oilexco and suggests it’s just insane what’s going on with their stock patterns as they are trading like “yo-yos”.
And at prices that he, and we, are not all that fond of.
SPROTT INC. (T-SII) $4.85 -0.35
There aren’t too many people that have escaped the credit crisis as stocks in oil and gas, mining, banking, you name it, have been absolutely swacked, so many being down 50% or more that most people realize we are in extraordinary times.
To be a mining analyst these days is to be a little beaten and bruised. We welcome Eric Zaunscherb to the team of mining analysts at Canaccord Adams and immediately go for some hand holding. When is this going to end? Or better yet, can you tell us where two key commodities might be a year from now?
Zaunscherb suggests a year from now, gold will probably be at the $1000 level or slightly above it and as far as oil, which he points out is not in his bailey-whack, he believes will be firmly above $100.00.
What will get things going? Well, he suggests that the BRIC (Brazil, Russia, India, China) is not dead and that down the road, once again, pressure will be applied on supply of many resources.
Mind you, going ahead he also suggests investors/speculators are going to be looking for quality assets and they are going to be risk-adverse. They are going to be steering away from risky countries and these days the world seems to have ever more of them.
While Zaunscherb does figure that it could be volatile over the short term, when we ask him if there is a stock pick out there he would be looking at, he comes up with an unusual one when he mentions Sprott Inc., and suggests it’s probably a proxy on the entire resource area and at the $5.00 to $6.00 range it’s selling at close to half price of its recent issue.
DELPHI ENERGY (T-DEE) $1.67 -0.03
VERO ENERGY (T-VRO) $7.42 +0.02
I realize we’ve been whining just a bit lately...about the markets in general, the capital that’s been lost undeservedly, about the mess in Washington, and how they created it and created a mess for the rest of the world that they didn’t seem to want to help solve. But most of all, with oil at around $100, we were whining that there was no appreciation for junior oil and gas stocks these days.
So it’s interesting to see Dundee Investment Research come out with a report on junior oil and gas equities entitled, “Time to Buy” suggesting there is a sale on for most junior and intermediate oil and gas producers.
They write, “With equities trading at discounts to the commodities we feel it is time to BUY the Junior/Intermediate Oil & Gas sector, although recent equity market volatility will require investors to be patient...We feel commodity prices are near their bottom but expect continued volatility given macro issues relating U.S. markets and specifically the financial sector.
Given increases in natural gas supply and crude oil demand destruction we are neutral to bearish on the commodities for 2009. Our commodity price assumptions for 2009E of US$100/bbl for oil and US$8.75/mcf for natural gas. We believe investors with a 12 month horizon will be rewarded as we expect when stability returns to the equity markets shares of Junior/Intermediate oil and gas producers will recover and reflect current commodity price levels.”
Some of their favorites stories are names you might have heard of frequently before such as Delphi Energy, which they have a target of $3.50; Vero Energy with an $11.00 target and Galleon Energy which is also the subject of take over rumors with a $17.50 target.
If right on any of these, there would be ample reward. It’s quite an impressive report, weighing in at no less than 182 pages with probably just about everything you’d want to know about the oil and gas stocks talked about, but mainly, thanks for the hand holding you guys! If you would like a copy of the report, e-mail Deb at debbie_lewis@canaccord.com. |
