Buy more CLL?
It would appear I should.
Cannacords Pescod after the close just now.
C
+++++++++++++++++++++++++++++++++++++++++++++++++++++
CONNACHER OIL & GAS (T-CLL) $5.28 +0.12
PETROLIFERA PETROLEUM (T-PDP) $11.40 +0.81
CORRIDOR RESOURCES (V-CDH) $4.93 +0.28
It was way back in the $0.60 to $0.70 range, that Kerry Sully, the former
President of Ranchmen’s Resources (who had some experience in heavy
oil) came out of a COPIC conference and told us we “had to have a whole
bunch of Connacher Oil and Gas. We are thankful that he was very aggressive
on it and emphasized that a person should have a whole bunch and
because of this for a lot of people, their portfolios have changed significantly.
Eventually Kerry was bold enough on this play to even give us some
price targets, but we joke about how he’s had to change them. Originally
last year, he was ticketing a $2.50 to $4.00 target by Christmas 2006. Eventually
he moved that to $5.00 by December. And even later, he moved it to
a $5.00 target by March! Missed again Kerry, as it slices through the $5.00
level in mid-January—but then, who knew!
Who knew that oil would move from the $45.00 level way back then to
the current $65.00 to $70.00 level. Who knew that heavy oil would start
attracting the attention it has these days and who knew that little subsidiary
Petrolifera Petroleum (PCP) (which hit the market at time of an ugly
correction in oil prices and would have to drop its entry level price from
$3.00 to $1.75) would not come up with this workmanlike 200 barrel a day
wells that they were expecting in Argentina, but wells that were screamers,
coming in five and ten times that size. Who knew also that Dick Gusella
would be so forward-looking as to buy a natural gas producer such as
Luke Oil to come up with the natural gas Connacher would need as its
feed-stock and even be looking at refining facilities for the gook it will produce
this early in the game?
When we caught up with Kerry Sully yesterday, he offers no analysis he
says simply, “just enjoy the ride.”
From our “Doubles Issue” back on January 6th, the other analyst who
has been long and strong on the Connacher story—Andy Gustajtis does
offer a little more analysis. Gustajtis, formerly with Jennings Capital and
currently making a new home at Dominick and Dominick has been one of
the few analysts to write up the Connacher story to date and he still is long
and strong the story.
“The stock has made a nice move” he says, “but the game is not over at
all”. On the oil sands in general, he says, “the world is just learning how
important they might be and it’s the same for Connacher—far from over”.
We see the activity and the impact it may have, but it’s just begun and of
course, those of us who have seen the “60 Minutes” show—in the United
States with its huge audience just introducing some people to this potential
of heavy oils, we suspect the word is getting out. The only negative
Gustajtis can see would be a crash in oil prices, but it’s hard to see that, he
says.
In fact, he would argue for higher prices and suggests that if Israel
and the United States ever decide to take out Iran’s nuclear capacity,
$100 oil could be a possibility. After all, “why not” he says, “the world
economy has adjusted as oil tripled from $22.00 to $66.00. Why would it
hurt that much more if it ran from $66.00 to $100?”
Currently he suggests that Connacher has a P-3 (proven, probable
and possible) of about 118 million barrels. He suggests that there is a
possibility of doubling that number when more drilling results come out.
He would not be surprised that current drilling (which is being a bit delayed
because of the warm weather) could see a dramatic increase in the
reserve for Pod-1 and he expects at least one of the several other Pods
being drilled, should deliver some good news as well.
He also suggests that over the next while, he wouldn’t be surprised to
see the go-ahead given by government authorities for the development
of Pod-1. He suspects within the next 30-60 days. He also suggests a
phase two on one of the other Pods before year end.
As far as valuing Connacher, he suggests “who would have known
that Petrolifera would have been this successful” and that currently
gives it an asset value to Connacher of almost $150 million.
Down the road he says, “$7.00 to $8.00 could be quite conservative as
the company offers a “bite-size target” available to somebody big (like a
Devon) who wants an entry and a quick one, into the oil sands.
When we ask Gustajtis for his three picks, his number three right now
is Kodiak Oil & Gas (KOG) the TSE Listed, American company working in
the same area as super-successful Ultra Petroleum. Connacher Oil &
Gas remains his number two pick.
Meanwhile, Corridor Resources still continues to be his favorite story.
He notes it is an important day as their annual meeting is today and suggests
people take in their webcast. He suggests that over time, people
are going to be more comfortable with this story of natural gas in New
Brunswick and while they probably will need a financing and they do
have a pipeline to get built, he suggests that the excitement comes when
they drill the Dawson Settlement Sands, underneath the McCully target
that is currently near and dear to them. He suggests if the Dawson Settlement
hits (and he admits that’s probably only a one in four chance and
it may not be drilled until November/December this year) a $20.00 price
might be cheap.
Page 2 David Pescod 780-408-1750 Debbie Lewis 780-408-1748 Sandra Wicks 780-408-1749
OOPS!!! LEADER ENERGY (T-LEE) $5.80 +0.25
There has been a little problem with miscommunication as here we are in Palm Springs, enjoying a bit of a break, while
the working folks are back in Edmonton. Yesterday, we had suggested that one of Jim Letourneau’s favorite stories was
Leeward Capital. Totally wrong, but close. His favorite story is oil and gas service company Leader Energy (LEE), which
continues to grow and just recently added an American division. We own a bunch and hope to own more.
DEB’S DITTY:
You’re falling short of my expectations.
That’s really sad because I have no expectations.
If you would like to receive the Late Edition, just e-mail Debbie at debbie_lewis@canaccord.com
CRUDE OIL
Corridor Resources
www.corridor.ns.ca
(Continued on next page)
This newsletter is solely the work of the author for the private information of clients. Although the author is a registered investment advisor at Canaccord Capital Corporation (“Canaccord Capital”),
this is not an official publication of Canaccord Capital and the author is not a Canaccord Capital analyst. The views (including any recommendations) expressed in this newsletter are those of the
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e-mail: debbie_lewis@canaccord.com January 25, 2006 e-mail: david_pescod@canaccord.com
Connacher Oil & Gas
www.connacheroil.com
Petrolifera Petroleum
www.petrolifera.ca |
