IN THE NEWS / Juniors Surge As Well Burns Brightly
Kookaburra Soars 460%
Garry Marr
Financial Post
Shares of Kookaburra Resources Ltd. soared again yesterday as news of a natural gas blowout in a jointly held well in Bakersfield, Calif., continued to have the biggest effect on the property's smallest stakeholders.
Since initial reports of the blowout surfaced, Kookaburra stock (KOB/TSE) has declined in just one of the past 10 sessions. It jumped 39¢ to close at $2.32 yesterday and has now risen more than 460% since closing at 41¢ on Nov. 23.
Kookaburra has at 5.2% after-payout interest in the well, which represents the majority of the company's potentials revenue. "This could be a home run but I understand it is largely the only thing they have going for them," said Peter Linder, an analyst at CIBC Wood Gundy Securities Inc.
Yesterday, the partners in the Bellevue number one well said they had decided to drill a relief well, which is expected to spud on Saturday. Samples taken Sunday from the hydrocarbon stream indicate the presence of light oil, condensate, natural gas and water.
"It's a huge blowout," said Mr. Linder. "It's not like it was three days and fizzled. The pressure is as strong ask ever."
"You wouldn't be drilling a relief well if you didn't think it was a major discovery. Otherwise you would put the fire out and move on," he said.
Mr. Linder does not believe figures will be available for some months but says he is "95% sure" it is a major gas discovery, possibly as much as three trillion cubic feet.
He said there are many partners in the well, including Berkley Petroleum Corp. and Westminster Resources Ltd., and their stakes are relatively small. "But if Berkley's interest after payout is 15% of three trillion cubic feet, and Westminster's is 7.5%, that's 450 billion cubic feet and 225 billion cubic feet, [respectively]. That would double Westminster's reserves," he said.
Westminster shares (WML/TSE) rose as high as $8.90 yesterday before closing up 15¢ at $7.60. They have gained 52% since closing at $5 on Nov. 23. Berkley stock (BKP/TSE) jumped $1 to $11.75, up from $11.25 on Nov. 23.
"The impact on smaller companies is much larger than on Berkley," said Mr. Linder.
Other companies involved in the project include:
Richland Petroleum Corp. (RLP/TSE), up 10¢ to $3.30. With a 3.75% after-payout interest in the well, Richland stock has climbed 83%s since closing at $1.80 Nov. 23.
Elkn Point Resources Ltd. (ELK/TSE), which is operating the well, climbed 50¢ to $5.85 and has risen 129% since closing at $2.55 on Nov. 23.
"There are a lot of questions as to the size of the reservoir that won't be answered until there is a controlled well," said Paul Beique, an analyst at Dundees Securities Corp. However, he said predictions of 45 days to drill a relief well and use it as replacement wells might be optimistic.
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