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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Brinks who wrote (24752)	8/30/2006 12:28:47 AM
From: Spekulatius	Respond to of 78550

My opinion regarding SCU (Storm Cat) this is still a show me story. The stock was overhyped about a year ago and now the stock is trending down since the Momo players have left. What prevented me from buying when i heard the story from you was that it appeared to me that the stock is managed for news flow rather than numbers. Why did I think so: 1) The ridiculous project with Coal bed methane in Mongolia. Way to much to chew on for a dinky company like Storm Cat imo. 2) With all those acreage in frontier Coal bed methane, Storm Cat decided that they do want to be operator when they bought producing properties in the Powder River basin, where everybody knows that the gas is there and leases and are expensive. The Powder River basin at this point is simply a matter of economies of scale and low cost operation, not of exploration. Storm Cat does not have a business there. My take on this is that the claims of a huge reserve base on their large acreage must be taken with a grain of salt, otherwise they would just go out and drill. I think the Powder basin acquisition was also done for news flow. From the numbers i can see (Depreciation cost is around 2.7$/mmcfe) they are unlikely to make much money there as long as gas stays around 6.5$. In order for me to get interested, Storm Cat would have to show some success with their own acreage in Canada. However even in the latest presentation on their website i don't see much evidence that they are going to explore (10M$ in Capex won't go very far at current dayrates). So my short answer is that SCU does not make the grade right now for me to invest in, but it's interesting enough that i keep it on my watch list.