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

To: Cal Gary who wrote (8682)	2/25/2002 3:08:48 PM
From: Cal Gary	Read Replies (1) \| Respond to of 24921

While everyone has their eyes fixed on RAX's cursed reserved writedown, there was quite a surprise piece of news within their 2001 guidance and 2002 outlook CC. Ecuador 5000 b/d from 2 wells. 3 more wells to drill or drilling! Their website has an updated presentation that lists current net production at 5,500 b/d from these lands. From squinting at their published reports, I think only 1000 b/d is included. Their YE/4Q may reflect another 4500(?) b/d to their net production on the oil side. Anyone else with opinions/guesses/confirmation? At current prices, that's about 5 months payback on the new Ecuador properties not couting any more successes with the 3 remaining wells, of course beware, I'm using my simple math. Not bad for about (3%) of their capital invested last year? Here's some clippings from two of their recent quarterlies that talk about Ecuador. It can speak for themselves: Q3 20011108 NR: "Following the company's largest ever winter drilling season, Rio Alto conducted normal, seasonally reduced operations during the second and third quarters. Third quarter operations focused on northwest Alberta and Ecuador drilling projects and optimization of newly drilled wells." "At the company's Tiguino play in Ecuador's Oriente basin, acquired late in the first half of 2001, Rio Alto is conducting a two-well, horizontal drilling program and a concurrent seismic effort scheduled for completion by year-end. " Q2 200108 "Late in the second quarter Rio Alto purchased a 70-per- cent interest in the Tiguino block and a 90-per-cent interest in the Charapa block in the Oriente basin of eastern Ecuador, an underexplored region of increasing industry interest. For the purchase price of approximately $13-million, financed through working capital, Rio Alto acquired net production of 1,000 barrels per day of medium-gravity crude oil and 90,000 acres of undeveloped land. The company plans to conduct a seismic program in the coming months and drill and complete two exploratory wells before year-end. " "The acquisition of properties in Ecuador late in the second quarter, together with development commitments on the properties through year-end 2001, prompted an upward adjustment of $25-million to Rio Alto's capital expenditure plan. " For the technically inclined, the gap between 17 and $18 look like a tempting short term target. Given bleak picture being painted, I'm hoping to see RAX in the $15 level soon. At least before the gap is filled.

To: Cal Gary who wrote (8682)	2/27/2002 10:26:41 AM
From: stan_hughes	Read Replies (2) \| Respond to of 24921

Cal Gary - Sorry for the late reply, I've been muchos preoccupied elsewhere. About the RAX - I guess I get the benefit of a few day's hindsight on your question - the recent price action doesn't look like any deal is in the works to me. Problems abound, and no one should be surprised to read reports of directors attempting to appear like they're doing something about it. From most of what I've read about RAX for the past 6-12 months, it is generally disliked within the group by institutions for its poorer performance and metrics in comparison to its peers. That would tend to suggest that so-called big money logic thinks RAX is no bargain, making it an unlikely takeover target on a valuation basis. Having said that however, someone inside the patch might get the idea that they could grab RAX cheap here, and then get the value out by kicking some butt and getting the operation to straighten up and fly right. So I guess you can make a case in either direction as to whether RAX being in the institutional doghouse is good news or not. Fundamentals aside, I don't know whether I ever posted my TA opinion on RAX here, but I'm on record on some other forums for a $12-13 target on it going back to last summer when it was in the low $20s. I haven't changed my mind. I continue to await NG's moment of truth as winter ends. If we see the price weakness that I anticipate will prevail through spring shoulder season, one would have to expect an already weak stock like RAX would suffer even more than it already has. Consequently, I'm still in cash playing cat and mouse with the producers. Still, it wouldn't be a bad idea to pick your spots now and establish a scaling-in plan ahead of the predicted slide, as I also expect those prices to be the lows for the year, and possibly even multi-year lows going forward. All JMHO - I'm very mindful that waiting for a slide that never comes could leave me out of the sector, and not everyone is going to think that's the way to play this. Good luck to ya.