Investment briefs: SSN, CMZ, AEZ & BP (flash news on awrcf.ob)
FOOD FOR THOUGHT! WILL OIL BECOME A CURRENCY? IT SURE HAS UNIVERSAL APPEAL!
WHY WE LIKE OIL !
1. THEY ARE NOT MAKING IT ANYMORE.
2. REGARDLESS OF THE "GREEN MOVEMENT", WE WILL BE TOTALLY DEPENDENT UPON FOSSIL FUELS FOR AT LEAST 50-100 YEARS.
3.DOMESTIC OILS ARE SAFER THAN FOREIGN BECAUSE OF OUR STABLE GOVERNMENT.
4. WITH RECENT DRILLING FAILURE IN THE GULF THERE WILL BE A DRAMATIC SHIFT AWAY FROM THIS KIND OF EXPLORATION ALSO INCLUDING ALASKA.
5.BECAUSE OF NEW DRILLING TECHNIQUES HUGE OPPORTUNITIES EXIST IN AREAS OF THE US THAT HAVE ALWAYS BEEN KNOWN TO CONTAIN VAST AMOUNTS OF OIL AND GAS, BUT THE TECHNIQUE AND COST HAS MADE THEM NOT ECONOMICAL UNTIL NOW--EXAMPLES OF AREAS OF CURRENT INTEREST- BAKKEN ( WILLISTON BASIN , ND), EAGLE FORD (TX), NIOBRARA (WY), MARCELLUS SHALE ( WV TO NY). THERE ARE OTHERS- THESE ARE JUST A FEW, BUT SOME OF THE MOST EXCITING.
6. WE BELIEVE THAT IT IS JUST A MATTER OF TIME BEFORE ISRAEL ATTACKS IRAN BECAUSE OF THAT COUNTRY'S NUCLEAR THREAT- ONCE THAT HAPPENS THE GULF OF HORMUZ MIGHT CLOSE BECAUSE OF MAJOR HOSTILITY, WHICH WILL CAUSE OIL TO DOUBLE OVERNIGHT!
7. CHINA AND INDIA SUCKING UP EVERY DROP THAT THEY CAN USE AND FIND, REGARDLESS OF THE LOW GROWTH IN THE REST OF THE WORLD.
8.IF WORLD ECONOMIES START TO GROW AGAIN OIL DEMAND WITH INCREASE.
9. IN OUR OPINION, OIL ALREADY IS A WORLD CURRENCY AND IT HAS NO BOUNDARIES.
10. ALMOST 90% OF THE TIME JUNIOR OIL AND GAS COMPANIES THAT WE HAVE RECOMMENDED DURING THE PAST 26 YEARS SUCH AS IN CANADA, RUSSIA, KAZAKHSTAN, US AND AFRICA HAVE EITHER BEEN BOUGHT OUT OR APPRECIATED DRAMATICALLY ( LUKOIL, ADDAX PETRO, SIBNEFT,ARAWAK, CHAPARALL OIL AND MANY OTHERS. RECENTLY OUR OIL PICKS HAVE ALL EXPLODED, NAMELY, BEXP ( RECOM. $3.95), AXAS (RECOM .96), USEG ( RECOM. $2.75), KOG (RECOM. $1.28) AND CLL.TO ( RECOM. .83 CND). WE BELIEVE THAT THE ABOVE MENTIONED WILL MOST LIKELY ALL GET BOUGHTOUT- IT IS THE NATURE OF THE BEAST!
11. EVEN THOUGH CURRENT STOCKPILES OF CRUDE IN THE US ARE NEARING 19 YEAR HIGHS ( 10 MILLION BARRELS SHY)- THIS IS JUST A TEMPORARY SITUATION AND LONG TERM PRICES WILL MOVE MUCH HIGHER. SOME MAJOR THINK TANKS BELIEVE BY LATE 2011 OIL COULD REACH $100.00-$110.00/BARREL.
12.DOMESTIC OIL AND GAS COMPANY'S IN OUR OPINION, OFFER ALMOST A COMPLETE INVESTMENT STRATEGY; ECONOMICALLY SENSITIVE, BUYOUT POTENTIAL, HUGE "FIND" POTENTIAL, INFLATION HEDGE AND ASSET PROTECTION , LITTLE CHANCE OF OBSOLESCENCE, GEOPOLITICAL SENSITIVITY AND ACTUALLY ACTS LIKE A VERY LIQUID CURRENCY.
OIL, IN OUR OPINION, IS ALMOST A COMPLETE INVESTMENT PACKAGE AND THESE JUNIORS ARE OUR TICKET TO RICHES!
ADDITIONAL FOOD FOR THOUGHT: WORLD OIL CONSUMPTION IS OVER 1000 BARRELS/SEC!
UNITED STATES POSSESSES 2.6% OF THE WORLDS OIL RESERVES, WHILE IT CONSUMES 24% OF THE WORLD'S PRODUCTION.WE PRODUCE 9.2% OF TOTAL WORLD CURRENT PRODUCTION OF AROUND 80 MILLION BARRELS/DAY!!!!!!!!!!!
OIL AND GAS INVESTMENT BRIEFS
1. Samson Oil and Gas ( SSN $.59) A small Domestic Oil and Gas company that has various projects located within WY, ND, NM and Texas. ( formed 1980- headquartered in Perth, Australia). Please visit their website and review all financial documents- especially the last Q report- very informative- www.samsonoilandgas.com .
As you know, we have huge interest in the Bakken located within the Williston Basin in the State of North Dakota ( bexp, useg,axas and kog). SSN is not a large player there with only the ability to drill 6 to maybe 9 wells on their acreage. The first well was a success and produced around 3000 boepd initial 24/hr and ssn has a 30% working interest in the Gene 1-22H. The first of the series of 3 wells to be drilled in Williams County ( a super HOT SPOT) was spud on or about May 24th 2010 with working interest of around 37%. During August the Rodney 1-14H ( working interest of 26.3) and then during early September the Earl 1-13 (working interest of 31%) will be spud and actually we assume they will be successful ( in this county it is very hard to miss a 2500 to 3000 boepd 24 initial.
As you know there is a rapid drop off in boepd, but production becomes stable. Let us assume that all 4 wells become "A" typical producers for the area and we "haircut" the production so that all 4 average 300/boepd X 365 days X $70.00/barrel ( this value is their % of the production)--results in $30 million gross revenue/1st year. This yields a very interesting picture for cash flow generated that can be earmarked towards SSN's real prize---the 41,000 net acres in the Niobrara located in SE WY.
The "Niobrara" geological area of WY is considered by Oil and Gas expert to be a similar formation that has made the "bakken" one of the HOTTEST OIL & GAS areas in the US today- it is not as deep so the cost is less and the production will be less, all the major players are jumping all over it!
Recently, a land auction in WY was conducted and 46 parcels (16k ) located in Goshen sold for $33 million. The most expensive sale of $3000/acre was located in the deepest portion of the basin, south and on the trend with Samson's leaseholding ( purchased in 2006 @ $5/acre).
According to filed docs, EOG ( larger O & G company) owns 400k acres in the Niobrara play located just to the south and west of SSN's 40k net acres. EOG is completing 3 well, 2 wells are waiting completion and 9 are staked. A good portion of EOG's leaseholding are located in Goshen County just to SW of SSN. Currently 2 wells are proposed in London Flats, the 1- 29H is a re-complete and 2-29H is new drill. SSN estimates that as many as 100 wells can be drilled on their property.
The company has been actively raising money during the past 6 months and has paid down debt ( only $13 million end of March q 2010) and filled its coffers with cash and drilling participation. During early May 2010 the company did another raise of $4.2 million in A$ and is also offering a rights offering ( don't think the offering will be exercised because out of the money) to shareholders @ .65 (US) on or about.
A compelling development concerning SSN is the intent to sell 25% of their Niobrara property so they can ramp up the development of the balance of this potentially "new" bakken play in WY. The company intends to sell by "best" bid and hopes to get around $20 million for their selected acreage ( only time will tell if this amount equals or falls short- based upon the recent land sale- company hopes to complete by end of June 2010). The company has other projects that interested parties should review via presentation 6K and 20F filings.
On Friday May 28th 2010 Royal Dutch Shell bought East Resources. Inc. for $5 Billion- part of the opps. acquired in the Rocky Mountains is sizable acreage in Goshen County WY! ( Niobrara). Their press release mentioned 100k net acres in this area of development .
Recently, Citi upgraded MDU Resources Group to a BUY because of Bakken and Niobrara exposure.
Bottom-line: We are on the pad ready for lift-off! Samson has the right stuff to make us very happy investors if the plan pans out. The have very attractive O & G properties within the US and have a stake in the one of Hottest drilling Counties in the Williston Basin, ND -they have a huge acreage position in what is called the "baby bakken", namely the Niobrara located in WY. They have been growing production, increasing their drilling, have raised and are currently raising additional funds and most likely will sell a small portion of their "cherry" Niobrara property so as to speed up the development of their acreage either going it alone or do a jv.
Hard not to like this junior O & G at current levels. It recently traded as high as $1.10, but can now be had for .59-- We like it, own it and rate SSN with a strong speculative Buy rating. With only 80 million fully diluted shares outstanding the upside potential exists for multiply times your investment if SSN starts to fire on all cylinders.
Compton Petroleum Corp CMZ .72
CMZ engages in the exploration and development of natural gas, gas liquids and crude oil in the Deep Basin fairway of Western Canada.
264 million shares outstanding & fully diluted
$3.78/sh book value
T rev for 1st Q ending 3/31/10 $71.2 million
Current production -19,400 boe/d
Operating loss= (.02)/sh, Net income/sh .06
bank debt- $539 million -5% decrease
reduced operating cost/boe to $10.53 vs $11.29 for 2009 full year.
cash flow- $20.3 million
Capital expenditure $14.9 million
participated in 13 wells during Q1 10
Compton reduced well drilling costs by 15-20% while increasing the length of the horizontal section.
Management plans on reducing operating costs by $80- $85 million for 2010
For the year 2010 average boed anticipated 18,500
admin expense- $25 million
operating cost-$80 million
cash flow - $45 million
capital expenditures - $65 million
During 2010- 23 gross wells to be drilled ( combo of new and recompletions)
Natural gas + - .25/mcf----$6.3 million
Potential of 432 drill locations on total properties
Price/NAV average 1.1X--CMZ - .5X****
EV/2P BOE average 15.32 for "group"--CMZ - 5.21****
Jan 9th 2006 CMZ- $16.26/sh -- low Feb 17,2009 $.46
Read Rodman & Renshaw Presentation May 10, 2010
The company plans focus on unconventional gas resource plays. Management plans on renewing balance sheet and financial opportunities. Management will consider growth opportunities, commodity price upside, merger and acquisitions and potential impact from horizontal multi-stage "frac" wells.
Most importantly, management will position for next up- cycle in Natural Gas and sees CMZ as having huge upside value by most industry metrics.
IF YOU WILL REVIEW ALL THE DATA CONTAINED ON THEIR WEBSITE AND FROM THEIR RECENT PRESENTATION IT IS OUR OPINION, THAT YOU WILL WANT TO OWN SHARES IN CMZ AT AN EXTREMELY DE-RISKED PRICE.
CMZ TRADES @ 81% BELOW STATED BK VALUE- THE MANAGEMENT HAS AND WILL CONTINUE TO DEMONSTRATE THE ABILITY TO GUIDE CMZ AND STRENGTHEN THE COMPANY WHILE COMMODITY PRICES REMAIN AT HISTORICALLY LOW LEVELS.
AS WE HAVE SAID IN THE PAST, NATURAL GAS IS NOT BEING MADE ANYMORE AND IT STILL REMAINS THE CLEANEST AND MOST EFFICIENT FOSSIL FUEL THAT HELPS POWER THE WORLD'S ECONOMY.
AT CURRENT NG PRICES IT IS EVIDENT THAT PROFITS WILL BE SLIM, BUT JUST IMAGINE A ROBUST HURRICANE SEASON THAT DISRUPTS PRODUCTION AND DELIVERY FROM THE GULF OF MEXICO-- PRICES COULD DOUBLE OR TRIPLE AND CMZ'S SHARE PRICE WOULD GO BALLISTIC! AT CURRENT LEVELS CMZ COULD BE A JUICY TAKEOVER CANDIDATE AND OF COURSE WITH THE "NEW" DRILLING TECHNIQUES YIELD GREATER EFFICIENCIES AND ENHANCED PRODUCTION VOLUMES.
YOU MAY SAY THAT THEY HAVE HUGE DEBT- WE AGREE, BUT ANTICIPATED CASH FLOW MEETS THEIR NEAR TERM NEEDS, CMZ CAN ALWAYS SELL OFF ASSETS & PRICE OF THE COMMODITY COULD HEAD HIGHER YIELDING GREATER CASH FLOW! THE COMPANY COULD BE SOLD- MORE AND MORE MAJOR OIL AND GAS EXPLORATION COMPANIES ARE HUNGRY FOR PROVEN RESERVES THAT COMPANIES LIKE CMZ HAVE DEVELOPED!
MANAGEMENT STATED IN RECENT RELEASE, "WE MAINTAIN A PHILOSOPHY OF LIVING WITHIN CASH FLOW, TAKING A PRUDENT APPROACH IN ITS CAPITAL INVESTMENT DECISIONS AND FOCUSING ITS DEVELOPMENT STRATEGY TO OPTIMIZE ASSET VALUE".
AT .72/SH CMZ REPRESENTS A CALL OPTION ON NATURAL GAS EXPLORATION AND NATURAL GAS PRICES OVER THE SHORT AND LONG TERM WITH NO EXPIRATION DATE. WE SEE VERY LITTLE DOWNSIDE RISK AT CURRENT LEVELS AND UPSIDE SURPRISES SUCH AS MERGER , ECONOMIC GROWTH AND WEATHER RELATED TURN OF EVENTS ALL ADD TO THE APPEAL OF CMZ SHARES AT CURRENT LEVELS .
WE RATE CMZ WITH A STRONG BUY RATING AT CURRENT LEVELS AND BELIEVE THAT A 5X TO 10X YOUR INVESTMENT IS NOT A PIPE DREAM DURING THE NEXT COUPLE OF YEARS!
WOULD YOU RATHER OWN NATURAL GAS AND CMZ AT IT'S HIGH OR DOWN HERE IN THE CUTTER OF WALL STREET?
American Oil and Gas, Inc. (AEZ--$6.44)
An independent energy company engaged in the acquisition, exploration and development of crude oil and natural in the western United States.
Our main and only interest in AEZ is their rather rapid and actually quite successful push into the development of their "cherry" acreage located within Williams County, in the Williston Basin in the State of North Dakota. At present they own 68k net acres in that county called the Goliath Project.
Take some time and review the latest press and the 2nd quarter update presentation dated and delivered during the April 12-14 2010 conference in NYC.
Recently, the company sold it's WY property that yielded them an additional horde of cash resulting in $74 million in cold hard cash and ZERO debt! The drilling results to date has been very impressive and their ownership in recent wells and future wells are on average 75% WI. The company has under application 28 drilling spacing units with the state of ND. Currently they intend to drill 5-7 gross additional wells during 010, but in our opinion that number is going to increase as additional results points to "sweet spot" acreage that AEZ holds leases on. Recently, AEZ announced success with the Summerfield 15-15H (2800 beopd initial 24-33% wi) and the Ron Viall (2850 boepd initial 24 - 95% wi).
Two additional wells, the Bergstrom 15-23H (95% wi) & Johnson 15-35H(82% wi) are in various stages of drilling and completion.
According to management, there are 50+ possible 1280 net acre drilling spacing units (DSU)- There is the potential for 3-4 wells in each DSU. This could result in 150-200 net unrisked Bakken and 150-200 unrisked three forks drilled wells. Note: According to management: It is their intention to drill at least 1 three forks well during 010.
At present there are 62 million fully diluted shares outstanding with over $70 million in cash, no debt and a bk value of around $2.09. Management has over 30 years of experience in the oil and gas industry. Recently, 2 regional brokerage firms rated AEZ a BUY! ( Rodman & Renshaw & Wunderlich).
Food for thought: Take the Ron Viall well- initial 24 hr flow - 2850 and they have a 95% wi-- let us assume that during the first year the well averages 1000 boepd and we use a $70/barrel valuation and their 95% interest- the gross rev of that one well is around $24,000,000.00!!! THINK ABOUT THE POSSIBILITIES! WE ARE A LITTLE LATE TO THE PARTY, BUT ACTUALLY THE PARTY JUST GOT STARTED. WE BELIEVE THAT BECAUSE OF THIS TERRIBLE DRILLING ACCIDENT IN THE GULF THAT GREATER DEVELOPMENT OF ONSHORE DRILLING WILL TAKE PLACE AND "THE BAKKEN" HAS GREAT "SEX" APPEAL AND PLENTY OF OIL! IT IS THOUGHT THAT THE "BAKKEN" COULD HOLD OVER 3.6 BILLION BARRELS OF OIL!
WE RATE AEZ WITH A STRONG BUY RATING, BUT WOULD SCALE INTO IT AND ADD ON MARKET DOWN DAYS AND DOWNWARD PRESSURE ON CRUDE PRICES!
WE ARE INVESTING HEAVY IN DOMESTIC OIL AND GAS OPPS. (BEXP, KOG, AXAS, USEG, SSN & AEZ-- CANADA--CLL.TO & CMZ)
THE CURRENT PRICE $43.00 (BP)
THERE IS KNOW WAY TO DESCRIBE THE MESS IN THE GULF OF MEXICO-- THE ENVIRONMENTAL DESTRUCTION DOES NOT HAVE A DOLLAR AMOUNT ATTACHED TO IT, BUT LIFE GOES ON AND BP WILL CAP THE WELL HOPEFULLY SOONER THAN LATER AND PAY A HEAVY PRICE FOR THE ACCIDENT! THAT BEING SAID ! IS BP AN INVESTMENT OPP. AT CURRENT LEVELS?
The Company operates in more than 80 countries- It is a Powerhouse in the Oil and Gas industry worldwide. The 010 rev est. for BP is around $303 billion and net income/sh is est. @ $6.40/sh with 3 billion shares outstanding. This Oil company is a Mammoth plain and simple- the biggest of the big and actually has been a friend of the environment---not now! It is hated by every environmentalist wacko that eats tofu and crawls around the world wishing that fire flies would supply the needed energy to the world and also advertises the Obama motto, " Yes we can"!
The cost has already exceeded $1 billion- and total costs are flying real "high" upwards of $60 billion. Lawsuits, penalties, civil fines, federal and state fine and of course a tarnish name forever!
How much will it cost? Let us say, $30 billion - this amount will spread over years and years of litigation and BP will set aside the reserves needed to pay. Is this situation heading BP in BK ? NOT!
Don't get me wrong I feel really bad for the people that rely on the Gulf for their livelihood and the death of all the fish, shrimp, birds and mollusks- We will learn from the mistakes and correct the problems and put greater safeguards in place to protect us from something like this ever happening again!
Bottom-line:BP is trading @ 6.7X 010 numbers & 5.6X 011 numbers- of course this will change, but the cost is somewhat of finite number that will be reserved. The book value at present is around $33.25 and the div, which most likely is extremely safe is a juicy 7.80%- much greater than the 5 year average div yield of 4.70%! The cost of this spill could cost 010 earnings of $6.40- which equals around $19 billion. For 011 earnings est. is $7.61 or $22.8 billion! Get the picture! BP is a money machine and can weather this terrible environmental disaster.
The name may be tarnished so it is possible that the company might be bought out especially when one considers the more oil that bubbles up the lower BP heads down.
Personally, we at www.saadvisory believe that BP will fall again on Tuesday and if crude is down and the market is down as well BP could crater to $40-- We intend to skim some BP in small 100 share blocks and build a position because one day the sun will shine again- would not sell the wife or the dog, but still worth a play! We rate BP with a cautious BUY @ the $40.00 ish level! Don't see much chance below $38.00, but you never know!
STILL REMAINS OUR CHEAPEST STOCK IN OUR PORTFOLIO OF INVESTMENTS. AS YOU KNOW, AWRCF.OB REPORTED REVENUES OF $360 MILLION AND NET INCOME/SH OF .73 FOR THE YEAR JUST ENDED ( SEE RECENT 20F FILING).
Their Thailand sub Charoong Thai Wire and Cable just reported first q results and earned $121 million Baht- awrcf.ob owns 51%, which when converted yields awrcf.ob around .10/sh toward their 1q that will be reported during June of 2010.
If you would like to visit Charoong ( www.ctw.co.th )
Regardless of the current events in Thailand, AWRCF.OB is rapidly expanding into China & growth in the whole Asian area is dramatically out pacing the West. We believe that AWRCF.OB could earn $1.00/sh for the year ending 2010. As mentioned awrcf.ob intends to list on major exchange on or before Feb 011. Once listed many funds will buy this issue- You have been warned!
AWRCF.OB remains the cheapest stock in our portfolio and can be purchased at $2.60/sh
WE WISH TO THANK ALL OF THE SOLDIERS THAT HAVE FOUGHT FOR THIS COUNTRY AND DIED SO THAT YOU AND I CAN REMAIN FREE!
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