OUR STOCK PICK OF THE UNIVERSE CONTINUES TO DELIVER EXCELLENT RESULTS AND WE CONTINUE TO POUND ON THE TABLE THAT THIS STOCK HAS TO BE BOUGHT--AWRCF.OB-- SEE OUR CURRENT BRIEF!
Obama: you blew it! healthcare, bailouts, wasted $860 billion,continued welfare hand outs, looming tax increases all yields uncertainty- that is why America refuses to hire! Wake UP!
Sept 07, 2010
Recent oil and gas domestics that we have recommended:
BEXP-- $3.25---current price $17.11-
One of the early pioneers in horizontal frac in the Bakken in ND- remains a core holding and Strong Buy on any weakness. Most likely a takeover candidate within the next 6-12 months as the Bakken consolidates. Capitalism at work and creating "real' jobs! Thank You BEXP!
AXAS--.96-- Current price $2.57-
Remains one of our favorite domestic oil and gas E & P. Just signed a jv for $100 million to develop the Eagleford Shale area in TX. Participation in the Bakken continues to grow & other drilling continues in the Rocky Mountains & Canada. We continue to rate AXAS with a Strong Buy rating at current levels. We also believe that within 6-12 months AXAS will also be a takeover candidate. Insider buying has been heavy with little to no selling. This also remains our largest holdings!
USEG-$2.75-- current price--$4.38-
Well off the 52 week high, but still a winner. USEG was a "pilot fish" of BEXP and blasted-off during Oct 2009 running to $7.00 and then again during April of 2010. Current not a favorite of the street- I believe that analysts would prefer greater diversification within management and the board and less corporate spending. The money raise during late 2009 or early 2010 capped the run and management still promises a new drilling program, but as of yet we just hear "white noise". We are kinda in the Hold mode!
KOG- $1.28--- current price $2.68
Another favorite and potentially a huge winner. KOG just completed another $75 million raise for further development of their 55k net acres in the Bakken. Capex for 010 anticipated at around $75 million, which will be for the drilling of some 20+ wells in the Bakken. Management estimates exist 2010 with production of 2500 Boepd up dramatically from 2009 levels of around 800 Boepd. Management assumes that they have some 213 drill sites available for development. This is one Bear that I would not short!! The recent raise may cause near term flat line, but we believe KOG remains a winner and potentially a tracker of BEXP. We rate KOG with a Strong Buy rating at current level.
SSN- $.59 current price $1.38
Recently recommended via June 1, 2010 email alert. Presently everyone is waiting for the close of their property sale that will result in some $70 million in cash, which will be used to develop their remaining Niobrara & Bakken properties. They also are trying to finish up some problematic Bakken wells. The closing date is today so all the anticipation we assume is already built into the stock. We believe that until a drilling program is formulated and success occurs we see limited upside potential near term. We rate SSN with a Strong Hold and Buy on any weakness @ the $1.00 level if there are no corporate negatives. A well run junior Australian based E & P with the vision to Buy acreage on the cheap a few years ago and now have created a real "game changer" for itself! An excellent management team that has huge growth potential if they 'hit" in the Niobrara within their remaining acreage!
CMT.TO--.72- current price .$44
Mostly a NG play in Canada that has issues. Recently sold some acreage and raised some $150 million, which was used to pay off debt & the balance to be used for working capital. Capex for 2010 anticipated to be in the range of $60-$70 million. The main problem is NG has no legs and until it gets some "footing" most if not all NG plays can be very hurtful to investors. The company is working on a recap of debt- $450 million in Senior Notes for cash and "new" notes. On or about July 7th of 2008 when oil was trading @ $150/barrel or so- our little friend traded @ $13.00! So at .44 there is very little risk left! New management has turned CMT.TO around and survival is not a question any longer. We like it and own a bundle. The real risk is not owning CMT.TO or CMZPF.PK at current levels and rate it with a Strong Buy for more Speculative accounts!
AEZ-$6.44--- current price---$7.53
Bought out by HESS- At this point I would sell it! Short term hold for a short gain!
SDCJF.PK- .17US --current price .29US--
Our most recent recommendation: See email alert for July 1, 2010. Sundance Energy ( another Australian based corp that has all of its business in the USA. In Australia it trades with the symbol SEA. If you would like to review all financial and other dd go to the site www.asx.com.au and review the PDF's for SEA). We continue to rate SDCJF.PK with a Strong Buy rating even though it has almost doubled from our initial recommendation some 65 days ago. The current reserves exploded from last year, the drilling success continues ( some wells have fractional interest while others yield some 25% interest), has cash and no debt. Much of their property-95% is not included in recent reserve report. All investors need to visit www.asx.com.au and use the symbol SEA and review the August 23rd 2010 presentation. The company has 65k acres within the Bakken and the Niobrara plus other properties. Management estimates that sdcjf.pk will exist 2010 with 800-1000 Boepd in production. We like management, the properties, the potential and the current share price and still rate SDCJF.PK with a Strong Buy rating @ current levels. As mentioned within the July 1, 2010 email alert recommendation- the company intends to participate in 40 wells during 2010 and I believe that they have not hit a dry hole yet!! A great speculation and micro-mini cap with unlimited upside potential within some of the hottest drilling areas in the USA!
Asia Pacific Wire & Cable Corp
AWRCF.OB~~current price $4.875
WE HAVE BEEN POUNDING ON THE TABLE SINCE THE OCT 26, 2008 E-MAIL ALERT THAT AWRCF.OB IS THE CHEAPEST STOCK IN OUR STOCK UNIVERSE! -WE RECOMMENDED AWRCF.OB @ $1.15 ON THAT DATE AND HAVE NEVER CHANGED OUR MINDS! A FEW DAYS AGO AWRCF.OB RELEASED THEIR 2ND Q RESULTS (09/02/2010 RELEASE) AND THE COMPANY HAS PROVED AGAIN THAT MANAGEMENT CAN DELIVER "LARGE"!
For the Q ending June 30th- rev equaled around $106 million and again net income/fully diluted shares came in at .27. For the six months ending June 30th rev equaled $210 million and net income/sh equaled .54.
The company is a leading manufacturer and distributor of Telecom ( copper wire & fiber-optic) and power cable and enameled-wire products in the Asia-Pacific region, primarily in China, Thailand, Singapore and Australia.
RECENT CONFERENCE CALL ( 09/03/2010)- "BUSINESS REMAINS VERY STRONG, FILING FOR AMEX LISTING WITHIN 30 DAYS, DIVIDEND HAS BEEN DISCUSSED, NEW PLANT BEING BUILT IN CHINA AND DURING NOV 2010 ~ ANOTHER "DOG & PONY" SHOW IN NYC.
The current book value is around $10.00/sh - this does not include an additional $60 million in minority interest, which based upon 13.8 million shares fully diluted equals another $4.34~ for a total BK of $14.34!
Cash-on-hand equals $43 million + an additional $20 million that is restricted, which equals a total of $63 million or $4.56 in cash/sh!
Many investors have fled Asian stock because of auditor problems! AWRCF.OB does not have that problem either because they contract with Ernst and Young ( Top 5 auditor in the World)!
All of Asia continues to grow, while we are stuck in a hole because Comrade Obama has never been a Capitalist and therefore has no clue about how and why business runs! He wants to control a welfare state and make you dependent upon the government!
Based upon management's discussion at the annual meeting and conference call to discuss the 2nd Q of 2010- it seem quite evident to us that the second half will equal or surpass the 1st half concerning rev and earnings.
AWRCF.OB now has posted 6 quarters of continued growth and we assume the next 2 will be quite rewarding to shareholders. As mentioned in prior email alerts- AWRCF.OB earned .73 during 2009 and now for the first 6 of 2010 the company has earned another .54. It is in our opinion, the rev for 2010 should easily reach $425 million and net income/sh should equal $1.10/sh before any one time charges. The estimated PE for 2010 equals a tiny 4.4X 2010 EST.. numbers. We believe that AWRCF.OB should easily sport a PE of 10 to 12X~ yielding a share price of $12.10~ a far cry from the current $4.875 share price. Trading @ 3x cash would result in a share price of $13.29 and 1.5X book would result in a share price of $15.00 ( not including the extra $4.00 in book from minority interest) and finally concerning PSR an est. .15 value results from 2010 year end EST.. A value of 1 would get us a share price of over $30.00!
Bottom-line AWRCF.OB remains the cheapest stock in our Universe. Things are going to change sooner than later~ AMEX listing will allow Mutual funds, Institutions and Index funds to purchase shares. Once listed AWRCF.OB will become marginable~ more brokerage firms will hop-on-board! In a recent Wall Street Transcript a "noted" broker place a "BUY" rating on the shares! NOW THAT WAS A DIFFICULT CALL!
Asia is going to continue to grow especially China- and that country is going to "wire-up" whether for phone or Internet and AWRCF.OB is going to be there- that is why they are planning the construction of a new plant in that country during 2011. Even Thailand is "rocking" ~their 51% control Charoong Thai Wire (7.80 baht-ctw) is trading up 100% for 2010 to date with record rev and earnings.
When the herd gets their "horns" around AWRCF.OB within the next 3-6 months our little $5 number is most likely going to have a 1 before the 5 so don't say I didn't warn you!!
We reiterate a Strong Buy rating on AWRCF.OB @ current levels for extra-ordinary upside potential near term and longer term!
NEW BUY RECOMMENDATION
Warren Resources (WRES-$3.33)
The company primarily explores, develops and produces on-shore oil and NG reserves. The company's acreage and production lie in the Wilmington field in California and NG in the Washakie Basin in WY.
For the 2nd Q of 2010, rev increased by 38% to $21 million, net income/diluted share resulted in .12 net. For the Q WRES produced 241,000 net barrels and 1.2 bcf of NG an 11% increase over the 2nd Q of 2009. The average price/barrel was $69.71 and $3.62 for Mcf. For the 6 months rev reached $42 million and net equaled .22/fully diluted shares (this includes gains on derivative financial instruments)
At present there are 70 million shares outstanding. According to management, the average net production for Q2 2010~ 4800 Boe/d. and proved Reserves as of 12/31/2009~ 10.8 MMBO & 71 BCF (the 10.8 MMBO net proved oil reserves account for only 2% of est. 556 MMBO of remaining oil-in-place in Wilmington Units. The Wilmington Field is the third largest oil field in the USA, having produced over 3 billion barrels of oil from 9 billion barrels OOIP. Approximately 300 MMBO of est. oil reserves have yet to be recovered in the Wilmington Field. Around 3600 boepd are produced under WRES ownership. The balance comes from NG derived from Washakie Basin in WY. At present Net Producing Wells equals around 234 and total drill locations equal 735 and Net Undeveloped Acreage equal 62K. The total Capex for 2010 has been increased to $37.5 million and the Senior credit facility has a borrowing base of $120 million, with $37.5 million of borrowing capacity available at June 30th 2010. During the balance of 2010 6 new wells will be drilled in the Wilmington Field~ this results in a total of 14 new wells for 2010 in the WF acreage. The Atlantic Rim project located in the Eastern Washakie Basin, WY produces the balance of daily production.
Warren also owns deep rights below its Atlantic Rim project which includes 80k net acres position that is potentially prospective for the Niobrara Shale. Warren estimates that the Niobrara Shale formation is at depths of 4000 to 10,000 ft. The plans to drill one exploratory oil well in 2011. Successful Niobrara Shale oil wells that have been developed in southern WY and N. Colorado are typically drilled horizontally with multiply-stage fracing.
Before you jump in ~go and read the presentation dated August 22, 2010 and the 2nd Q earnings report~ You will see a cheap and undervalued domestic oil and gas company that has huge upside potential longer term and very little downside risk near term. When Oil was around $150/barrel WRES traded @ $15.00/sh and @ the bottom of the market March 2nd 2009 WRES traded at .52. When NG prices firm up drilling will increase dramatically in their Atlantic Rim property~ for the time being the company is happy drilling new wells in their WF acreage. The proven and estimated reserves indicate plenty of upside fuel for the patient investor . It is our opinion, the risk has basically been rung out of the company and the real risk is not owning WRES at current levels for short and long term appreciation. As mentioned, WRES could easily be a takeover candidate when one considers the acreage, well locations and reserves. Even if they do not drill today or tomorrow the stuff is not going anywhere and eventually demand will demand extraction. WRES will be attending another "dog and pony" show Sept 12th-15th @ the Rodman & Renshaw Conference~ the key is fresh eyeballs and it is our belief that "smart" investors will start to warm up to WRES @ current levels.
We rate WRES with a Strong Buy rating at current levels!
ENTEK ENERGY LIMITED ( ETKEF.PK .15 OR ETE -AU SYMBOL)
Entek Energy Limited -a small emerging domestic oil and gas company with an offshore pipeline of Gulf of Mexico projects and an onshore resource play in the Green River Basin of some 66k acres net( Colorado & Wyoming). This property has the potential for many 100's of wells. In order to earn 55% in these properties they must spend $12.5 million during a 3 year period which started August 2009. Management anticipates that their 55% interest will be achieved during 2010.
At present there are 225 million shares fully diluted and outstanding (does not include out of the money options of 14 million shares ).
As of August 31, 2010 the company has 5 wells in the Niobrara Oil Play, all of which have encountered hydrocarbons. All 5 vertical wells are being reviewed to optimize completions to maximize production potential.
A recent USGS assessment of the recoverable oil from the Niobrara Continuous Oil Play, where Entek has focus , is about 2.5X that of the Niobrara Continuous Oil Play in the DJ Basin where there is the current industry focus.
The average production rates for Niobrara wells throughout the Sand Wash Basin where Entek's acreage is located is 101 BOPD & 165 MCFD. Estimated Ultimate Recovery for those averages are 260k BO & 1.1 BCF per well. Initial production rates have been as high as 550 BOPD
Based upon the July 30th 2010 pdf etkef.pk or ete ( au- exchange) had almost $ 6 million in the bank and no debt , additional revenue stream for the Gulf of Mexico, with new production from PN 975 (flow stabilized at a rate of in excess of 4 million cubic ft/d gross). This is in addition to the production from High Island 24L Block offshore in the GOM and onshore in SW Queensland from Block ATP-269P.
At present ETKEF.PK or ETE has interest in some 13 Blocks in the GOM. According to the May 2010 presentation 10 of the Blocks are located in shallow water( recent Obama foolishness has banned deep water drilling in the GOM). The interest in these Blocks range from 5% to 100% . The recently successful PN 975 yields the company a 25% WI in the well. The remaining (8) Blocks Entek is looking for a JV partner. We believe that Entek will be raising a small amount of money during the next few months in order to speed up development of on and offshore properties. At present HI 32L, HI 25L and HI 24L GOM properties have a 5% working interest while the (8) mentioned above all have a 100% working interest at present.
From recent May 2010 presentation management is targeting 2 offshore GOM wells, 6 onshore Niobrara formations in Green River Basin and 4 CBM wells in GRB.
Finally, according to the presentation, Net Reserves equal 97.5 BCF and 2.2 MMBO!
Bottom-line: Even though revenue for the six months ending June 30th 2010 only equaled $2 million the real play has yet to be played! In our opinion, Entek is a junior micro-cap that is emerging rapidly and the upside potential is truly super sized! The thirst for Oil and Gas will continue for many years to come and new drilling techniques will suddenly create marginal drilling areas 5 years ago into prime real estate. These little fish such as SEA, SSN and ETE will become the fish food for the larger O & G companies needing to grow reserves anyway that they can ! Entek's Niobrara property has unbelievable possibilities and steady cash flow from the GOM Blocks can add in cash flow needs for development on and offshore. This Australian based Oil and Gas company has the story, has the management, will get the money and will have the production, which will enhance shareholder equity. This is a ground floor opportunity with excellent upside potential long term~ Geared toward speculative accounts that understand risk/reward. We rate Entek Energy with a strong Buy rating at current levels.
DEJOUR Enterprises (DEJ or DEJ.TO- current share price .30)
DEJ is an independent oil & gas company operating E & P in Piceance/Uinta Basin ( 109,000 net acres) and Peace River Arch ( 20,000 net acres)
At the end of the 2nd Q DEJ increased net production to 599 BOEPD (58% oil) and successfully brought 2 wells into production generating positive cash flow of $559,000.00. The company plans on additional drilling during the 3rd and 4th Q and exist 2010 with production/day of 800-1000 BOEPD and generate operating profits by 4th Q of 2010.
DEJ is currently dual listed on the AMEX and the Toronto Exchange located in Canada. At present there is a total of 122 million fully diluted shares outstanding and management currently owns 25% of the company. During the Q4 of 09 thru Q2 of 010 the insiders bought an additional 3.1 million shares. The current market cap is $37.5 million. According to a recent corporate presentation released during August 2010 management calculates land @ cost of $20 million + PV-10 Proven reserves from owned properties to be worth $169 million - $4 million in debt equaling $185 million net asset value & based upon 122 million fully diluted shares resulting in a value of $ 1.51/sh.
It is our understanding that the current focus because of weak NG prices that DEJ will concentrate drilling within their Woodrush properties located in BC~ according to the presentation management plans on drilling 2 additional well in this Peace River Arch district of NE BC. At present there are 8 wells currently producing and DEJ has a WI of 75%. The cost/well to drill & complete is estimated to be $1 million dollars
It is our understanding that the "Gibson Gulch" property located in W. Colorado timeline may be altered because of weak NG prices~ permitting,financing and other preps will go forward regardless~ it is assumed that there are over 220 drill sites with a minimum of 72% WI.
Two additional areas of interest in the Piceance Basin are the Roan Creek ( GAS) and the South Rangely (oil)~ drilling in these areas are anticipated during 2011. Both developments are in need of a jv partner and additional financing. The Uinta/Paradox prospects and other property have estimated reserves of an additional 275 BCF & 12 MMBO~ these additional projects may be placed on hold until firming gas prices or additional financing is available. It is in our opinion, management may decide to sell or farm-out select acreage for a quick cash infusion in order to rapidly expand more cost effective properties in order to achieve faster cash flow and operating profits. Management assumes that the company will exit 2010 with revenue of $10 million CDN! At the end of the june 30th Q cash on hand was $3 million.
This little .31 E & P Oil and Gas micro-cap has huge possibility and of course limited risk! Management's reserve est. seem to guard against any real downside risk from current levels and with expanding BOEPD ramping cash flow could easily meet near term needs. We actually believe that sooner than later DEJ will find a jv in order to maximize acreage usage and production potentials.
We "like" this deal for the huge upside potential over the next 6-24 months~ if you don't have staying power then this deal is not for you, but if you are patient DEJ may reward you with 5 to 10X your investment. Of course like most junior Oil and Gas micro's~ the takeover scenario always looms!
We rate DEJ with a Strong Buy Recommendation for Speculators that have vision and can be patient while a dedicated management team does their magic!
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