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Gold/Mining/Energy : International Rochester Energy Corp. (T. ROH)
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To: stockman who wrote (233)12/14/1997 11:32:00 PM
From: Ed Ajootian  Read Replies (2) of 934
 
"International Rochester Energy can be thought of as "Harken Junior." The
company has a joint venture deal on a relatively small portion of
Harken's ground. It's a big deal for Rochester as the firm's market cap
is less than 2% that of Harken. On this basis the stock is undervalued.
It might at first glance look like just another Vancouver speculation.
Actually, this is a high potential stock with assets that provide
substantial downside protection.

The company didn't have much going when it managed to get the deal with
Harken. (Harken today is a much stronger company and probably wouldn't
do a joint venture with the likes of Rochester.) To raise its share of
the drilling money, Rochester wound up having to sell a big chunk of
stock at a low price in a private placement. Profit taking by those
buyers has pressured the stock ever since (except for a brief runup when
the discovery was made in Colombia).

But now the company is on a different footing. Harken made a splendid
discovery on the Alcaravan block of which Rochester owns 25%. The well
flowed at more than 4,000 barrels a day, way beyond the most optimistic
expectations. Based on that well alone, independent analysts have
estimated likely reserves of at least 50 million barrels, which would
justify the current stock price. But there likely are other fields in
the block that will push reserves considerably higher. A step-out well
to the first one is on the schedule, and then an exploratory well to the
north. At the same time, the companies will be doing more seismic work,
perhaps recompleting the first well to produce at even higher rates
(from additional formations) and engineering a pipeline to deliver the
oil. Production is expected in the second half of next year.

The company is now well financed, having sold $6.6 million of
convertible notes in July through Dominick & Dominick. Rochester has
already paid its share of the upcoming drilling program and has cash for
other projects. Management indicates it is actively evaluating
additional opportunities and we expect some interesting deals to emerge. "

*************************************************************

Excerpt from Higher Returns newsletter. See

rochester-energy.com
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