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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: Scott Mc who wrote (6711)	8/12/1999 11:47:00 PM
From: kingfisher	Read Replies (1) \| Respond to of 24920

Scott, Despite this dilution Scorpion continues to offer great value.If you look at 1998 year end their net asset value discounted at 10% was valued at $16,140,000.This amount includes total proved gas reserves of 11.8 bcf. and probable reserves of 6.6 bcf.Scorpion's reserves are 85% gas.At year end 1998 gas prices were around $2.25 mcf.They are now around $3.25 mcf.Net asset value has increased dramatically.If you add the $5.7 million of cash proposed to be injected into company n.a.v will rise to $21.84 million without adjustments for a 50% increase in gas prices and 85% increase in oil prices.Add future and current drilling success and year end n.a.v. could exceed $2 per share fully diluted. Based on last quarters results they are flowing cash on an annualized basis of $5,200,000 with an average gas price of only $2.55 for the quarter. But there are some risks.They have yet to settle a dispute with Circle Energy .Apparently Circle chose to release flow rates prior to additional Shunda zone rights being obtained at Brazeau.A hostile relationship unfolded and this dispute remains unresolved.A decision against Scorpion would reduce proved reserves by 1.2 bcf.But Circle with a win would owe Scorpion $1.3 million in drilling and tie in expenses. Also Petro Canada controls the gas plant at Brazeau and I am not sure if plant capacity restrictions will remain an issue.This problem might have been resolved due to fact that Black Tusk Energy drilling at Brazeau in a press release stated that their was adequate gas processing capacity available. Notice in press release that Scorpion will be drilling another well at Brazeau.Initial flow rates from this area have averaged 10 million mcf per day. At Gadsby/Hackett 3 wells will be drilled soon.All shallow wells with high quality liquids rich production anticipated averaging initial flow rates of 2 to 4 mmcf/day.All in an area with significant plant and pipeline infrastructure. As to flow through shares still available you would have to call the company for more details. In regards on how to play it, the safe way would be too wait for this refinancing to be approved etc..and the dispute settled. I have it in my portfolio.Sincerely feel the risk reward factor worth while.Confident that gas prices will remain strong for at least a couple of years with $4 possible and then not likely to drop below $2.50. BWDIK, Richard