Repost: The sleeper play on Shoal Point with huge implications: Pinnacle Oil
Pinnacle Oil International (BB:PSFD), a Calgary company, has the exclusive license to the Stress Field Detector (SFD.) Encal (T:ENL) used the SFD over Anticosti Island and Shoal Point. The SFD not only found the structures like seismic can, but predicted dry holes on Anticosti Island and a big oil find at Shoal Point. Pinnacle earns an 8% gross override on anything a partner drills based on the SFD survey. Encal owns 25% of Shoal Point, Pinnacle gets 8% g.o.r. on that, which works out to 2.1% of the whole Shoal Point structure.
However, the play on Pinnacle is much bigger than Shoal Point. Shoal Point just happens to be the first structure to be drilled under one of its partner's contracts. All other structures drilled by one of the three partners to date (Encal, Renaissance Energy (T:RES), and CamWest) were drilled during the “testing phase” of this revolutionary technology. These partners have been testing the SFD for nearly two years each, or in CamWest's case, one year. There is good reason why the partners have tried to keep the SFD a major secret and been willing to sign contracts with Pinnacle paying Pinnacle either an 8% gross override or a 45% working interest (Pinnacle's option) in anything surveyed by the SFD and drilled by the partner.
What is the SFD? A passive sensor that detects something (trade secret) that reveals not only the exact location of a structure (like seismic can), but also the presence or absence of hydrocarbons and the porosity of the structure. Oh yes, and all this is done real time from an airplane. The company is able to survey roughly 150 miles an hour from a plane, with no access limitations compared to 5-25 miles a week for seismic, not including interpretation time. And of course seismic can only detect a structure, not hydrocarbons. The cost of seismic is anywhere from $5,000-$15,000 a mile, while the SFD runs $5-12 a mile.
I have talked with all three partners many, many times over the 2 plus years I have been following Pinnacle's development. I have met the top executives at all three partners in person several times. The results of all the testing was fantastic. None of the partners will deny at this point that the SFD is superior in every way to seismic. It reduces their exploration costs significantly. As far as the hydrocarbon detection claim, the holy grail, publicly they say they will wait to see how the first commercial holes come in (ie. Shoal Point, and several more being drilled shortly with results early summer.) Privately though, you can feel their enthusiasm. In tests over known fields by the partners over the past two years, it is at least 85% plus successful is what I have been able to get out of the partners.
The seismic industry and Canadian oil and gas companies are about to get a wake up call. Imagine what happens at all of the Canadian land auctions. The SFD can be flown over every parcel very quickly, if you buy it, you just bought some very expensive dirt. If Pinnacle or one of Pinnacle's partners buy it, it will be at a price no one else can earn a decent rate of return on because the partners have significantly lower finding costs with the SFD and have a very high degree of confidence in finding hydrocarbons. If you are a Canadian oil and gas company who does not use the SFD, you are in trouble. We could be about to witness a revolution in the oil and gas business.
Any one have any feedback, and more input on Shoal Point, etc? I would love to discuss it.
Disclaimer: Consider everything I write to be biased and potentially wrong. The information contained herein is based upon sources believed to be reliable but is neither all inclusive or guaranteed. This is not a report and does not purport to be a complete statement of all data relevant an investment decision in any security mentioned. Certain opinions reflect my judgement at this time and are subject to change without notice. This document is not deemed to be a solicitation to buy or sell any securities, instead consider it to be for entertainment purposes only. I may from time to time have either a long or short position in any security mentioned and will not bother to keep anyone up to date.
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