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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: Taff who wrote (5440)	9/28/1998 5:16:00 PM
From: Kerm Yerman	Read Replies (2) \| Respond to of 24921

John / Lateral Vector & Black Sea Energy Permit me first to thank you for your comment. Also, if you haven't visited Kerm's Korner, do so. I think you will find it of value to you. If so, pass the word on the two sites to those who may be interested in the subjects. Subject 10229 I know of these small junior oil's but must admit I'm not up to date regarding their activities. One thing I can relate to immediately, these type companies are out of favor with the financial community and I believe they will be over the intermediate term. Both are international junior oil operators (Strike One). They are primarily involved with crude. (Strike Two) Black Sea was basically a Russian situation and that is definitely a no-no. In the same breath, China is in a region of unstable economics and that presents a problem also. On both counts, consider this as (Strike Three). I thought Lateral Vector was a great speculation a couple years ago. The reputation behind the company was that the principals were good engineers. At the time they operated solely in Canada. The next thing I know is that they sold off their Canadian properties and are pursuing interests in China. I dropped coverage of the company at that time. Black Sea was a company I began to follow soon after they went public. Gordon Capital monitored their activity. I know a couple of highly rated investors who invested into the company and in turn shared information with me regarding meetings and seminars the company participated in. In time, the company fell out of favor due to events occurring which effected their planning and activities. I will attempt to get an updated professional comment on the company for you. In both cases, I will offer this. Unless they change the rules from three strikes and you're out, I think investment into a domestic operator (natural gas) would serve you better in the form of risk management. If you are currently holding shares, you will have to decide whether to sell or hold after learning a few details directly from the company. These details would include extent of working capital available, current cash flow status and extent of current long term debt. This will give you an idea of how well they are working within their means and if further financing is required - which would present a serious problem. Ask what their price assumptions are for both oil and natural gas. Also ask what their internal estimate is for their Net Asset Value. On the operations end, identify what average production is forecasted for this and next year, as well has the exit forecast for both this and next year. Based upon what you learn, you will be in position to make an informed decision. I will comment on what you learn if you desire such. If a company can't present you with this information, consider it a red flag. One additional point I want to offer is this. Over the next few months, I believe oil & gas companies will remain out of favor with investors. My viewpoint is to begin accumulating shares in these companies of your choice now, for the longer term is favorable for the industry. The objective of investing is to buy low and sell high and and the time to buy low is when a sector is out of favor. For other people viewing this message, if you are familiar with the two subject companies, please offer your comments. John, keep in mind that I am not on top of these companies and have just offered a general opinion and direction. Further, it's just one person's opinion, this time it was mine. I'm sorry I couldn't offer you more.

To: Taff who wrote (5440)	9/29/1998 1:29:00 PM
From: SofaSpud	Read Replies (2) \| Respond to of 24921

John / Black Sea I have been following this story: the IPO (June '97) caught me on a day that I was particularly stupid, so I bought some. Started out with JV opportunities at Tura on the Kalchinskoye block, and Kuban. They later locked up the rights to an enormous piece of land adjacent to Tura called Radonezh. The crux of the story was that they would apply western technology to badly abused and under-maintained Russian oil fields. Things went along pretty well at Tura the first year or so. Black Sea spent something like 80% of the money their agreement required them to spend. Production came up nicely, to around 9,000 bbl/d, half net to BSX. Kuban and Radonezh didn't work out so well; the latter at the time appeared to be the real company-maker, so it was a disappointment. Then things got progressively more ugly. Of course there was the decline in the price of oil. Much of the Tura production was destined for sale in the Russian market, where prices are quite a bit less than WTI. There were able to export some, though, and it would have brought their netbacks up to decent levels if world prices hadn't crashed. But they did crash -- strike one. At the time of the IPO, it looked like Russia might turn the corner. It did, but unfortunately it turned the wrong way. Strike two. Then the Russian JV partner decided to sue for operatorship of the Tura field, the litigation over which still seems to be tied up in the Russian courts. If the court decision goes against Black Sea, it will be strike three (at least) for the Russian operations. There was some criticism of management's actions, as well. Of course they emerged cash-rich from the IPO. Some questioned whether they used that cash as effectively as they could have. For example, they spent $20 million on equipment -- trucks, rigs, etc. Of course that stuff isn't available in Russia like it is here, but there were suggestions that they could have found a western service & supply co. to do that stuff for them, that Black Sea wasn't a service company. And of course there has been management turnover. Last I heard (three or four months ago) the company had 66 cents per share in cash and assets (taking the equipment at 50% of the purchase price). They were well ahead of their required spending at Tura, so they could do nothing for a year and not jeopardize their rights. Presumably they won't spend any more money in Russia until the court case is settled. The downside is that production is likely to decline while the field isn't being maintained. The announcement this month that they would JV with Pangaea to drill in Peru, is consistent with the company's intent to not just sit still and wait for Russia to get better. I know nothing about the oil business in Peru, so I'm not in the least bit qualified to say whether this is a good move or not. Black Sea has brought in new talent from Big Oxy; hopefully they know what they're doing. If you're thinking about buying in, you probably want to find out something about Peru, and to check on the track record of management to see if recent moves address those concerns. IMHO, this started out as a very high-risk venture and has turned into a speculation.