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Junior Oil Companies. ASX


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QUOTE (KOKO @ Saturday 18/08/07 11:15am)

Hi Koko,


If you find an asx listed oil producer cheaper than IPM please let me know!


The also have around 20-25 years reserves at current production (I think - too lazy to go and check now..)


Some sovereign risk in Turkey with a second turkish gas project due to start production at the end of this year.


They are also paying a dividend at around 7%


Exceptional buying at this smacked down price IMHO

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In reply to: wasabibarako on Saturday 18/08/07 10:27am

Wasa nothing certain with any oilers, like AED and NWE but they still have to get the oil out and prove up the suggested numbers. Like CUE and HZN but again depend on future results. With all these stocks a very high chance they will get there. But as we have been told from everyone in the last few weeks cash is king. So if one is looking for something as certain as one can be with a spec oiler PPP has to be the undervalued situation IMO. Market cap about A$132million, flow rates of 50000BOPD now seem certain considering they were getting 90000BOPD from only three wells. During the current crisis in the market, PPP has gone from a minnow with zero cash flow to a cash cow. This is very unusual as very few shares could change so quickly , really it has happened overnight while the market was sleeping or in a panic.The numbers are very simple to work out about 42 weeks revenue (10% interest) is equal to their current market cap, thats absurd. I cannot see how this can continue either the price of the shares goes up to a reasonable level or they just have to get taken out. But DYOR.

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In reply to: KOKO on Saturday 18/08/07 12:15pm

Koko, In my mind the most important issue right now for entry is confirmation of a equity market bottom.


The timing of this is not important just for a cheap entry point. It is critical in terms of the drop in consumer spending. The longer the equity fall goes, the more damaging the effects, and the more consumers will batten down the hatches.


This will translate in the US and possibly wider to less travel and therefore less oil consumption. The mid week weakness in oil prices was borne from an expectation oil consumption would fall.


If the market corrects quickly a reduction in oil consumption will be small in western economies, if the correction is longer then there will be more significant implications for the short to medium term oil price.


Countering the possible reduced consumption are 3 main factors. Firstly the Gulf of Mexico is now in the main 3 months when hurricanes impact drilling rigs, production platforms, pipelines and shore facilities. Mention the H word in a weather forecast,eg, Hurricane Dean, and the market starts to put a premium on oil/gas as it did last night. the 2007 season is predicted to be an above average season for hurricane impacts so it appears we are going to have peroiods of premium pricing in the next 3 months and longer if permanent facilities are significantly damaged as in 2005.


Secondly is China. Chinas growing and some would say insatiable appetite for oil is huge. Many would speculate Chinas growing consumption will more than compensate any short term fall off in western oil consumption. OPEC believe this to be the case as earlier this week they revised their world consumption forecast figures upward.


Thirdly is the spectre of global geo-political issues which guarantees oil gains a premium any time something nasty happens.


Long term oil is going to disappear so while it will be volatile in its price swings its very hard to see oil going anywhere other than up until such time as a viable commercial alternative is readily available. And that is years away.


So back to your question I' d suggest you concentrate at the smaller end of the market for the leverage to new production that it offers.


With peak oil upon us it is going to be extremely hard for the oil giants to replace reserves faster than they are producing them without resorting to takeover and merger activity.


The other reason to sit aside from the big boys is that their new production is just not that significant when related to all their other assets so the leverage is slight.


Contrast this with a stock like say Norwest Energy whose current oil production is around 28bopd. By way of what appears to some in the market, a piddly 1.25% royalty, Norwest will soon lift their daily production to something like 400bopd with upside to 700bopd as the rest of the Puffin field develops. Given the current weak state of the market a doubling of the current sp is probable once Puffin production is confirmed and global equity markets have stabilized.


You look at more established companies like ARQ/BPT/AWE and it was'nt that long ago that they had zero production, so companies like Norwest have alot of potential in front of them.


Not many companies are able to provide a forward look at potential production but one you might consider is Petsec. Currently producing gas at around 19MMcfe/d, this will double by 1st quarter 2008 and is forecast to go up 6 times by January 2011 as other oil and gas fields are developed. (see latest presentation, page 31).


Coupled with a rising oil/gas price through this same period its anyones guess what their sp will become.


Salinas is another to have recently provided forward predictions of production from their new fields.


Many companies hold interesting and sizeable acreage that could point to big production increases once fields are proven so there will be a reasonably constant supply of production opportunities to consider over time.


And don't overlook the cheaper stocks in the coal seam gas game. These companies appreciate in value by not only by production but in the nearer term, by converting 3P gas reserves to 2P. Just try and find the next QGC or Arrow.



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In reply to: KOKO on Saturday 18/08/07 10:15am

Koko good thread to start.


ELK has a current market cap of $13mil, Revenue $1mil+ per quarter. 1mil barrels 2p reserves. Looking to add upwards of 12mil barrels of 2p reserves when it contracts co2. When those reserves are moved to 2p Elk may have reserves that are significantly larger than most (if not all) sub $300 mil companys. Looking to rework more abandoned oil fields. Is in the process of acquiring a couple of large tracts of exploration acreage ( details yet to be released).

The company is following a low risk high reward strategy that I beleive will be significantly more rewarding than the other companys you are reading about here.



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In reply to: annaliese on Saturday 18/08/07 12:17pm

Hi annaliese -- & all

If you have or anybody else has the name of some good books/DVD's that cover the processes & fundamentals of oil/gas co's, could you please post them here.

I have been trading this sector (my fav) for yrs now & the returns possible are a bit mind boggling. Been using probably 80% TA & 20% FA to choose stocks, now wishing to even the balance a bit more with a better understanding of what I am reading in their reports.

I like all those you mentioned plus many many more. PSA is one I have been watching for the bottom & turn back up -- it seems for an eternity now. With the cyclone season coming to the gulph shortly (as you mentioned) maybe it'll stay down till that uncertainty period is over. We'll see. A few others I like that weren't mentioned -- AZA COE GGP MAE HZN IPM KAR BAS CIG ESG EWC FAR MEL NDO NXS NZO OEX ORG OSH PPP ROC SHG TAP YGL.

All for different reasons & not all at this particular time & some just because they are good st trading stocks with more predictable moves & patterns.

I also agree about timing entries with the general market turnaround. After the DOW rally Fri night, I would expect ours to follow on Monday. The candle pattern on the DOW has now technically confirmed a bottom reversal patt, a hammer with a green follow up on vh volume. Has bullish divergence on many indicators also.

Doesn't mean it will stay up forever, but for now it looks ok to me. Monday will be a very interesting day imo.

Sorry KOKO, they're not exactly the cheapest producers & I have broadened the thread a bit, didn't think anyone would mind http://www.sharescene.com/html/emoticons/smile.gif





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  • 8 months later...

In reply to: frankmal on Thursday 08/05/08 11:47am

I've got three fav's


CVN - ongoing drilling, good flows, strong management. Plenty of news to keep momentum flowing


STX - ongoing drilling, good flows, strong managment. Three wells still to test which will push it higher. currently 30c Strachen and others are saying worth up to $1.20


SAE - good management, high % of their plays, safe (US drilling) good reserves with big drilling coming up soon.


I'm not the sort who invest in 1 - 10 shots would rather back solid companys with good prospects, staff and cashflow.


All of these three should give you 100% in the next year

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