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To: ms.smartest.person who wrote (1387)	9/7/2006 11:13:06 PM
From: ms.smartest.person	Read Replies (2) \| Respond to of 3198

&#8362 David Pescod's Late Edition September 7, 2006 DELPHI ENERGY (T-DEE) $4.00 -0.10 We’ve written many times over the last few months regarding natural gas, natural gas prices and weather. Because of the warm past winter, natural gas prices got clobbered and because of big inventory, natural gas prices have stayed weak. It has affected a lot of gassy stocks too as many are down between 20% and as much as 60%. One of the ones that we’ve watched is Delphi Energy, because of good management led by Dave Reid and his team and lots of significant joint ventures. That doesn’t mean there has been any joy with the stock over the last few months though, and some actions taken here in the last few days shows us that with what’s going on in the natural gas business certainly isn’t getting better anytime soon. Haywood analyst Fred Kozak who follows Delphi notes that in the recent company update the company has earned in their Area-1 lands at Bigfoot in northeastern B.C. by drilling 20 wells, constructing 30 kilometers of gathering system and constructing 54 kilometers of all other road. However, Delphi will not proceed with the next farm-in, which involved $54 million of additional capital expenditure to earn a 50% interest in 95 sections of land. Asked why? Kozak mentions in his report that management sited the current weakness of natural gas markets as well as the high costs of services for field activities. Price of gas is down, costs are up—that’s what’s going on in the natural gas business these days. What could change all this, is something scary...betting on the weather. KIRKLAND LAKE GOLD (T-KGI) $7.62 +0.07 Now these are the kind of drilling results a geologist prays for. Kirkland Lake on their ongoing exploration program yesterday announced that their drill Hole 50-740 intersected 5.57 ounces of gold over a core length of 50 feet. Included, was 180 ounces of gold over a 1 foot width. These are simply spectacular results. The Kirkland Lake chart shows that it has faired like many other golds over the last while, having a big correction over the summer, But now, what next? Kirkland Lake is the amalgamation of the old former producers, Kirkland Lake Gold, Teck, Hughes, Lake Shore and Write Hargreaves and have a very interesting management team that is being led by English billionaire Harry Dobson. We are a little surprised that on these drilling results, the stock only moved $0.40 yesterday, although it was on a day that gold was down $5.50. Once again, that’s the kind of stuff that people explore for and it has got to be an understatement that they think it’s one of the richest holes ever drilled in the Kirkland Lake Camp—an area that has produced over 22 million ounces in its history. KODIAK OIL & GAS (V-KOG) $4.90 n/c There’s two ways one could look at Kodiak Oil & Gas these days. One is from the viewpoint of the cynic or that of the eternal optimist and both are seeing the same company in very different ways. To the cynic, they look at a company that’s hardly done any drilling and hence has very little of a financial nature to talk about other than options and compensation schemes for management and a ludicrously high market cap for the company with almost 80 million shares out. You rightfully ask whether this company with this itty-bit of cash flow is worth $400 million? The optimist on the other hand, can’t ignore the low natural prices, hope that this changes with the cold winter and looks forward to the drilling on the Vermilion Basin, which is finally going to start shortly as the company announces they have entered into a drilling contract with True Drilling to drill two test wells to evaluate the natural gas potential of the Baxter Shale and Frontier and Dakota sands to a proposed total depth of 14,800 feet. The suggestion is that the rig becomes available in early October. They do have a big interest in the first well—North Trail-State No.4-36 of 90%, so if it does come in they will have a big chunk and something good. And why is the optimist so carried away? As the company’s latest press release points out, Kodiak currently controls 49,000 gross acres, or 29,000 net that gives the potential for nearly 750 locations based on a 48- acre spacing. So if they do find something, they could have something big. On the other hand...if the cynic is right... To see their presentation, visit their website at www.kodiakog.com NATURAL GAS STORAGE: The chart to the right tells you the one thing you need to know about natural gas which after big inventory numbers today hits new lows for the past two years. To think the bulls have to hope for a cold winter...Meanwhile, there is an interesting dichotomy happening as many natural gas producing companies are seeing their stocks clobbered 20% to 60%, but a couple of gassy stocks that are exploration stories such as Delta Petroleum, Exxel Energy and Kodiak, flirt with new highs. Interesting! Meanwhile, oil has hit new lows for the last four months and we go to Jim Rogers who with George Soros had that enormously successful Quantum Fund three decades ago and has written the best selling book “Investment Biker” and “Adventure Capitalist” (both must-reads on a sunny vacation) and also the author of the recent book, “Hot Commodities”. He also developed his own index for commodities over the last five or six years. When we asked him about his new take on oil after the recent major discovery in the Gulf of Mexico of between 3 billion and 15 billion barrels, his comments on oil prices is simply: “Even IF they do have all of the 15 Billion barrels, that adds only 8 months supply to the world's reserves at a time when other reserves are declining. And even IF they are there, it is a long time before it gets to market. That does not mean oil cannot go to $40 in times of surprise or stress, but this field does not end the bull market.” In the meantime, he points out that new fields in India and Sakolin Island in Russia have run into big problems.