₪ David Pescod's Late Edition October 26, 2007
CGX ENERGY (V-OYL.U) $3.09 +$0.10
CANDAX ENERGY (T-CAX) $0.93 +$0.04
ARGENTA OIL & GAS (V-AZA) $0.58 +$0.01
PETROLIFERA PETRO. (T-PDP) $13.96 -$0.49
Well, sometimes the wait is worth it and Kerry Sully has definitely had to have patience. It’s now more than seven years since the border dispute between Suriname and Guyana meant they couldn’t find out what their big targets offshore Guyana might or might not have, but with the border settled and a financing just about complete (because of the financing, we can’t say much about it at this time until the financing closes) but Sully is an experienced oil and gas guy who used to run Ranchmen’s Resources and has connections all over the world and after recent trips to South America, Europe and all over, he decided it was time to step out on a limb and pick some stocks for us.
One has to remember that when Connacher (CLL) was trading at 0.60, he was the guy we quoted widely and loaded up on Connacher. So anytime you can make five or eight times your money on a guy’s recommendation, one figures you have to listen.
As far as stocks he’s talking about right now, the first one he mentions is Candax Energy. “This story has taken longer to develop than most investors would have hoped” but he suggests “they are now finally bringing on production El Bibane. By the end of December, they should be cash-flowing $0.30 per share on an annualized basis. If you stick in a multiple of only four you get an upside $1.20 or 40% and a free ride on a lot of exploration potential that’s going to be tested in 2008.”
A second pick of his (and this has to do with his close associations and relationships in South America) is Argenta Oil and Gas. This junior doesn’t have cash flow to talk about yet and already has almost 100 million shares outstanding, but he suggests they’ve probably got one of the best management teams one has ever seen assembled.
They are ex-Repsol and YPF folks and he suggests they have access to most governments in South America and are developing an amazing portfolio of projects. Argenta’s goal is to producing 40,000 BOE per day with in five years. This company is newly public over the last few months.
A third pick of his is Petrolifera Petroleum. He suggests that success in Argentina has provided firm backing for the current share price, and again, this is an opportunity to participate in very significant exploration upside for free. Like Connacher at Great Divide, Petrolifera was the first to acquire a very large land position of five million acres in Peru and are now surrounded by 30 new licenses.
Independent resource potential is estimated to be 176 million BOE, but that was using old seismic and valuing only a third of the prospects. The bad news is that drilling might be delayed until mid-year 2008, but as is often typical in the international scene, you need to be patient if you want to be rewarded.
Within 12 hours of our June 2, 2000 “Beer and Pizza” with CGX, the potential of Eagle and Wishbone were shelved by Surinamese gunboats. However, the border decision has preserved those targets for CGX, and in the mean-time, the company has quadrupled its land position and created a portfolio of more than a dozen targets in five different play types – perhaps the agenda for a reconvened Beer and Pizza session?
TUSK ENERGY (T-TSK) $1.65 -$0.05
HIGHPINE OIL & GAS (T-HPX) $9.05 -$1.80
PEERLESS ENERGY (T-PRY.A) $4.83 +$0.34
The Alberta Review is in….and it smells!
The Alberta Review is in and this whole debate has proven embarrassing to ourselves as we found out there are more than a few Albertan’s that really do believe in Santa Claus. The changes are really going to impact small companies and in particular, the natural gas companies that currently are the back-bone of both the oil and gas industry and also revenue for the Provincial coffers and it simply looks ugly!
While everyone seems to know the price of oil these days (at $90 a barrel) they seem to conveniently forget that the Canadian dollar is up almost 30% in the last two years—meaning a number you should be thinking of is closer to $67, which is still a good number...but costs have gone through the roof.
You also have to remember that Alberta is now pretty much a mature basin and the targets you’re looking at (while costs are high) are quite small and deplete rather rapidly.
The big concern is for the natural gas players. Natural gas prices have been in the tank for a while and most natural gas stocks are down anywhere between 50% and 80%. With targets for exploration getting ever smaller, costs and services ever higher, prices lower and pipeline costs not getting any cheaper, the natural gas sector simply looks ugly.
If the Royalty Review stands as it now is, it’s time to ask your wife, hubby or whatever for an Atlas for Christmas because I suspect you are going to be wanting to look in other places of the world to make a buck, be it Peru, Argentina, the North Sea, Thailand, you-name-it, it doesn’t matter.
“Ed the Red” has come up with a plan that might represent the agricultural interests well, but for the oil and gas patch which has enriched this Province greatly, it is ugly. While the changes are most dramatically going to hit the juniors, if I was running a big oil company looking at projects in the North where costs have doubled, tripled and quadrupled, it’s probably time to hesitate.
Meanwhile, some of our favorite commentators have some interesting points to make. Don Coxe, one of the analysts who simply has to be followed and has been so right on the commodity bull market, and has almost monthly for the past 5 years suggested to international investors that “you had to be in the Alberta oil sands.”
Last month he wrote that the Alberta royalty report was such an embarrassing report it couldn’t possibly be take seriously. He suggested it would simply be buried and forgotten about. Now he suggests that he is embarrassed “and I suspect many thoughtful Albertans are embarrassed as well.” To listen in, go to:
events.startcast.com/events/199/B0001/.
He suggests that you simply have to take Alberta off the politically secure map of the world. It’s no longer one of the more attractive areas of the world to be involved in. One analyst who doesn’t wish to be named tells us that the royalty review simply “puts a couple of bullets into what is already a corpse anyway,” referring to the natural gas juniors.
We figure real estate in Alberta dropped 10% when the Royalty Review was first mentioned. We figure today, it dropped another 10%. Unless this changes, we wouldn’t be surprised to see another 10% drop. So if you need a new home in Edmonton, just wait.
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