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Gold/Mining/Energy : Panaco Corp (PANA) -- Ignore unavailable to you. Want to Upgrade?

To: stevedhu who wrote (104)	11/5/2000 10:43:45 AM
From: Ed Ajootian	Respond to of 115

Steve, Great to hear of the low entry points you've had in PNO. Wondering whether you ended up buying any more in this latest pullback. I have been buying quite a bit, to add to my already burgeoning stake. I believe it has bottomed and will quickly recover to a new 52-week high by the end of the month. Regarding short interest in PNO, a web page for this is at amex.com As shown there, short interest was about nil at 10/13, the last date announced. Apparently they still just announce short interest once a month, as of the 15th of the month, on the 23rd. They were probably doing it the same way back in 1960. Wonder why this aspect of the investing world has not caught up with the rest of the Information Age. This next PNO report will have some interesting tidbits of info in it. I believe the costs of drilling the East Breaks A-11 well will have to be separately shown on the balance sheet as Prepaid Drilling Costs, since they did not get the well flowing until after the end of the quarter. This will allow us to see, once and for all, just how much that debacle cost. The only other well they had going was the Delvalle well but that one should have been completed (or abandoned, in which case its cost would be expensed) by 9/30. As announced by Basin Exploration on 10/30, BSNX plans to drill another well in PNO's West Delta Block 58 acreage by the end of the year. If this one is like the last few then it should be good for another $4 M a year in cash flow, from PNO's 15% ORRI in the block. I am calling for PNO's discretionary cash flow per share (i.e., cash flow before working capital changes) to start with a "5" for 3Q. That is, it should be between $.50 and $.59. Can't get more specific than that because I don't know how much production declines they incurred from existing production. Remember, they did some recompletions earlier in the year and with recompletions, everything can be going like gangbusters for months, and then you can lose a lot of pressure in a hurry and that's the end of the line. When looking at the 3Q numbers we need to mentally make an adjustment of about $.30/share in annual cash flow, as a result of the East Breaks A-11 well that is currently producing but did not start until October. So I guess what I'm saying is that the company is currently generating cash at an annual rate of about $2.40/share. Considering that they have 2 more wells to drill this year in East Breaks, each of which are low risk now that they finally learned what things really look like down there from the East Breaks A-11 logs, it looks like a slam/dunk that they will exit this year producing cash flow at a $3/share rate. In total dollars this works out to roughly $75 M. They are not far away from being in an "embarrassment of riches" situation, where they don't know what to do with all their cash. One might think they should be able to just keep drilling holes in the ground with it. But the problem there is that every rig in existence in the USA is being used by others right now. It will be interesting to see what (if anything) they decide to do with all this excess cash. Carefully checked my stock records and my heart sank when I found out that my earliest buy of PNO was 1/11/00. I missed the deadline to be eligible to subit a shareholder proposal by 11 goddam days! This is real shame, as I would have relished the opportunity to publicly bust Carl's chops, even if it would not have succeeded in doing anything more than that. (If anyone reading this would like to "lend" me their name to do this shareholder proposal, send me an email at edajootian@aol.com. I will do all the work -- all you will have to do is sign it and send it in. In order to be eligible you must have owned some Panaco on or before 12/31/99.) This is why Carl does this stuff. He's basically nothing more or less than the neighborhood "bully". He knows he can step in and get his way with these small O&G companies that are run by Texas hicks and use Texas hicks as lawyers, and he can just bring in his expensive NY lawyers and blow out all these other suckers, and most importantly, he knows that the non-management shareholders won't give a goddam about any of it and will never bother to try to stop it by issuing their own shareholder proposals.