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Gold/Mining/Energy : KERM'S KORNER -- Ignore unavailable to you. Want to Upgrade?

To: Kerm Yerman who wrote (11307)	6/18/1998 5:10:00 PM
From: Kerm Yerman	Read Replies (2) \| Respond to of 15196

CORP. / A & B Geoscience Azerbaijan Deal NOTICE: This information was prepared by an investors relation group of which A & B Geoscience is a client. June 11, 1998 Market Misses Significance Of A & B Geoscience Azerbaijan Deal On June 2nd we notified you of the long awaited signing of the Exploration Development and Production Sharing Agreement (PSA) by A & B Geoscience (ABG-VSE) with the Republic of Azerbaijan and SOCAR (the state oil company). Clearly, the broad market has completely missed the importance of this agreement based on a slip in the stock to the $1.50 range from $2.00 just prior to the announcement. Consider these points: 1) Grahame Notman, analyst for Dominick & Dominick Securities, has just come out with a financial assessment of the net asset value of ABG based on current reserves on the 600 square kilometer on shore concession. Using pricing of $15 per barrel oil and $2 per thousand cubic feet of gas, his Net Present Value discounted at 20% is $7.00 per share. His 12 month target price for the stock is $5.00. Mr. Notman has not even included any value to ABG's marine seismic division which had revenues of $4.8 million in the first quarter of F1998. 6 month results will be released shortly with revenues expected to be in the $10 million range. In addition, ABG has acquired a second vessel which will begin generating revenues in the next several months. 2) Mr. Notman's value is based on a recovery factor of only 20% of the total reserves of 500 million barrels of oil equivalent. However, there are an additional 6 major structures which are yet to be drilled. 3) ABG owns 40%, Union Texas Petroleum (UTP) listed on the NYSE owns 40% and the state the other 20%. UTP has tied up another adjacent concession. ARCO is completing a takeover bid for UTP. It makes sense to consider the possibility that ARCO could have eyes on ABG's interest! 4) UTP appears to have created confusion in the market with its news release last week which stated the Azerbaijan parliament still had to approve the PSA. In the history of the Republic, NO contract which has received the approval of the President and SOCAR has failed to be ratified by parliament and this does not stop work from starting on the concession. Also keep in mind that the largest oil and gas companies in the world, including state run companies, have been falling over themselves since 1990 to secure a position in Azerbaijan due to its massive on shore and offshore reserves. It says a great deal about ABG's management and the credibility it has established to secure this important concession where others have failed. So why is the stock down? Crashing oil prices have seriously damaged confidence in the sector and general market conditions are a compounding factor. However, seriously consider the above points and the picture becomes clear on the attractiveness of ABG.