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To: ms.smartest.person who wrote (1254)	7/16/2006 10:03:41 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 3198

&#8362 David Pescod's Late Edition July 14, 2006 NATURAL GAS $6.34 +0.218 SHININGBANK ENERGY INC. TR. (T-SHN.UN) $21.16 -0.84 CYRIES ENERGY (T-CYS) $10.72 +0.20 Who would have thought six months ago, we’d be seeing what we see today in the natural gas sector...or what’s left of it. Six month ago, gas was $15 an mcf and the sky was the limit. Coal bed methane was the rage and you couldn’t find a drilling rig no matter what you offered. Today gas is almost a third that price and inventory levels are near record highs and while we may have written about this gas problem several times over the last two months, if you want to get a really bearish viewpoint, go to ROB-TV on July 13th (watch past videos, 10:15 am) to hear Bill Gwozd of Ziff Energy give you the bearish view on gas that could go on for the next three months. Have you ever thought the possibility of gas going to $2.00 an mcf? Oh yes, and that top chart, which shows you where gas prices have gone, it doesn’t show you where costs of production have gone, which are way up! Costs of everything from land, to drilling, to personnel to you-name-it, costs have soared while revenue has gone down. There are many producers that are not having any joy at these prices at all, so no wonder drilling in the natural gas sector is being cut back dramatically. And that’s why all of a sudden folks, if you want a drilling rig, you can find one. In the interim, all sorts of companies have been hurt and hurt big time. Whether it’s a gassy stock like Cyries Energy, Delphi Energy (DEE) or Accrete Energy (GZ), or one of the most gold-plated of income trusts such as Shiningbank Energy, which if you go to their website probably tells you that they are 77% natural gas. Which is great when gas is $15 an mcf. But at this level... So the question is, how low does gas go and how low does it take the gassy stocks with them before... hopefully...we hit a bottom and then hopefully, head to more reasonable price expectations. Meanwhile, the debate continues about the price disconnect between oil and gas and we note some people suggesting that just maybe it’s permanent. AVERY RESOURCES (V-ARY) $0.75 -0.02 SHELTON CANADA (V-STO) $0.71 n/c CANDAX ENERGY (T-CAX) $0.94 n/c If you are getting into the oil price versus gas price debate, and just when they might get back into usual sync, someone with an interesting viewpoint is Dave Little. The Calgarybased Chairman and CEO of Avery Resources has most of their company's assets in Australia, a jurisdiction he likes because of firm title and good net backs. He wonders if some of the old rules for oil and gas relationship might not be just old maid’s tales and uses the example of “didn’t an ounce of gold used to buy a man’s good suit?” What’s going on in Australia is an example. First of all, Australia today just announced a record trade deficit. Why? Well simply put, Australia is having to import ever more amounts of oil which is hurting their net trade position in a big way. What oil Australia does produce is the sweet stuff that receives absolute top dollar. Meanwhile, something Australia does have is a lot of gas in a small population. So natural gas prices trade at less than half the prices we see even at this reduced rate in North America. Little’s Avery Resources is about to spud a fairly significant hole for them in Australia in the next couple of days, however they are being held up by rain. Can you believe it? In the middle of the Australian desert, the fear of rain...but that’s the exploration game. The main reason we were trying to get a hold of Little (who was a board member) and his sidekick Richard Edgar (who is a board member at Shelton Canada), a little oil and gas company that is involved in the West Birjuchja well in the Sea of Azov offshore Ukraine. They are about to find out in the next couple of hours or days, whether they have hit something or not. While some in the industry joke about the fact that they are using 40 year old Russian equipment, former board member Little suggests these are not confusing targets they are drilling, not like the Foothills in Alberta, so they don’t need complex equipment. As far as the play as best he remembers it (he left the board a while ago) he suggests there are three targets, each a structural trap and each hopefully, with a one third TCF target, and he figures each has a one in three chance of hitting. So the odds (he hopes) might come up with something intriguing down the road and of course, the Ukraine is an area that needs gas. Unfortunately his sidekick Edgar has been out of communications because of the remote location or because whatever he has found, he can’t talk about. But it’s news one way or the other—could be significant in the next few days. Meanwhile, we ask Little the question we love to ask...if you could only buy one stock (which you can’t have any conflicts of interest), no oil and gas stock you are a board member of, what would it be? And it has to double...or else! He suggests Candax Energy and when we point to the endless delays that Candax has suffered over the last year, Little says that “is simply God getting back at John Clarke for all those years of using a pen.” (Being a critic instead of being an industry player) “I can see a $2.00 target on Candax within seven months, should their plays in North Africa work out” Little says. Disclosure: Candax Energy: Canaccord Capital covers this stock and has a Speculative Buy rating on it. (Speculative buy: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the stock may result in material loss.) Canaccord has recently led a financing for Candax Energy. If you would like to receive the Late Edition, just e-mail Debbie at debbie_lewis@canaccord.com