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To: ms.smartest.person who wrote (1216)	6/28/2006 5:08:59 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 3198

&#8362 David Pescod's Late Edition June 28, 2006 COMPTON PETROLEUM (T-CMT) $12.39 +0.22 Like they say, a chart (like a picture) is sometimes worth 1000 words. This three year chart of Compton Petroleum tells you a bit about its history. A couple of years of things going the right way aided by higher commodity prices, and then well, the ugliness has hit. A big chunk of the ugliness these days is the incredibly low natural gas prices. It used to be that oil and gas used to have a relationship of about six to one. If that were the case, oil today would be priced at roughly $36.00 a barrel and not $70.00. It just shows you how out of kilter the two are. As one oil and gas analyst who we will leave unnamed, tells us today, “there’s lots of oil and gas companies these days rejigging their budgets, moving towards drilling oil prospects and leaving their natural gas projects to next winter.” So what does a company the size of Compton do? Today, the company announced that they are cutting their 2006 capital spending to $465 million from $575 million and now plan to drill 360 to 380 wells this year down from 480. They are also going to sell about $100 million worth of noncore properties they suggest during the second half of the year and these are the oil properties where they can take advantage of the good crude oil prices. As to why the problems? Compton announces in their press release today: Number 1: The decline in natural gas prices and uncertainty as to future prices. Number 2: The current inflationary operating environment in the Western Canada’s Sedimentary Basin (where everything is suddenly super-expensive we might add). Number 3: The industry wide shortage of qualified personnel. Number4: There are also problems with regulatory issues. Number 5: There are uncertainties relating to the direction of global economic conditions. While this is a chart of Compton, I suspect there is an awful lot of other oil and gas companies that have a strong natural gas component are going through the same problems. For sure they have the cost pressures and the big question of everyone’s mind is, what next for natural gas? Gas inventory levels are way ahead of the five year average and if we don’t get a hot summer, a tad bit of hurricanes and a normal winter (because gas is so weather dependent) natural gas weighted oil and gas companies could continue to suffer. MAJOR DRILLING GROUP (T-MDI) $21.25 -0.05 Everyone’s got a theory about just how long this commodity market can go on for (if it can go on at all that is - if it recovers from the current correction of course). Some people such as Jim Rogers and the like figure that there could be another four or even eight years left in it, but the good folks from Major Drilling are doing presentations on a PR tour for the company and part of telling the world what Major Drilling (a big explorer for junior miners) is up to is telling about their business plan and exactly how long this cycle can go. They suggest that all this heated activity in China, that is geared up to the Olympics in 2008, just might be leading up to what just might be a climax or for that matter an anti-climax. Meanwhile, they talk about the one big problem Major has in this boom – is finding people and the skilled trades that can operate the drilling equipment that is suddenly in huge demand. They say it takes three to five years to train a driller and that guy is pretty valuable to the company, so they have to pay some pretty high wages these days. On the chart of Major Drilling you will notice that after a nice run showing that they are making money drilling for all those companies these days, they too haven’t been ignored by a market that has spanked everyone in the resource sector. WESTERN KELTIC MINES (V-WKM) $0.47 n/c If there is a family you consider royalty in junior mining exploration these days, it’s the McLeod family. Veteran miner Don is the family head and daughter Catherine of Arequipa fame, plus Peru Copper and Bear Creek Mining is way up there and son Bruce currently sitting on about a dozen boards of junior explorers. When we caught up with Bruce today, he too is suffering through an ugly market and he points to news out on Tenajon (TJS) yesterday, showing a huge increase in reserves of moly and yet no reaction in the market. “There is no liquidity in this market at all” he says and “all good news ever does is give a tad of liquidity.” His best guess is the market bottoms over the coming summer and just maybe we might have some joy starting again in the fall. When we ask him to pick three stocks that aren’t his own that a person should be starting to watch for a chance to make an honest buck again, he points to Western Keltic, which is currently doing a financing. Brilliant Mining (BMC) with its nickel project and cash flow plus lots of blue sky for exploration. And Grayd Resources (GYD) as three he’d be watching. What’s common with all three is that they are trading at roughly 50% of where they were 2 1/2 months ago, showing just how ugly it has been.