The emerging from Oil patch Hell | S A Advisory Email Update December 12, 2014

S.A. Advisory E-Mail Update

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S. A. Advisory Update for December 12, 2014


The emerging from Oil patch Hell

The Oil shock works in 2 directions and we are currently visiting the downside shock!


December 12, 2014

The low priced oils are the avenue to return to riches during the next 12 months

A NEW & CHEAP OIL & GAS PROJECT THAT SHOULD BE PURCHASED! THE PARAMETERS ARE BASED UPON $50 CRUDE AND $4 GAS.

EGARDLESS OF THE GLOOM AND DOOM THIS PROJECT WILL RETURN EXTRAORDINARY RETURNS ONCE THE O & G SECTOR RECOVERS NEXT YEAR!

The reserve report for this re-complete is extremely favorable from top reserve reporter Netherland Sewell. It does not get any better for reliability. See Complete story within email alert or call 800 746 4427

Special Note: Within this rant we try to approach the "nuclear option" and the reality option concerning our Bullish view about oil prices for 2015!

********The view from Oil Hell and the ticket too Oil Heaven!****************

This Oil shock is the opposite of the usual suspect. Most assume that the promised Oil shock was on the upside ( Goldman Sachs- 2007 when oil was $137/barrel was calling for $200 oil!) We all would take a fraction of that price today ( $59.00 midday low on Dec 11th for WTI).

Is there a conspiracy that created this commodity crash that has happened with such speed and magnitude that if your head is still on your shoulders it may need altering with either Scotch , Vodka or maybe heroine!

Food for thought: We all know that the current administration hates fossil fuels. We all know that Iran is building a "bomb" and that Russia has invaded Ukraine & finally that by next year we will be the world's largest Oil producer in the world ( horizontal drilling ). This of course is a very troubling development for the largest Oil producer in the Middle East, namely, Saudi Arabia .

Leading up to the scheme: The Black Friday that the average "joe" knows about is the day after Thanksgiving which results in shopping until you drop. For the Oil and Gas investor this will go down as 2X the paper loss that 9-11 produced after that terrible day in US History!

A little over 2 week ago WTI was $77/barrel and now we are barely above $59/barrel and that does not take in account that Oil was $107 during June 2014.

In my opinion, true or false, maybe or maybe not -this is how it works!

The US government and the Saudi's - The Saudi's hate the Iranian's and with the current sanctions the Iranian Oil production is only 2/3 of their real production levels and with the current prices prior too the Oil BUST the price was about $80 (Brent) still way below the level that the Iranian's needs to balance their budget and keep the "natives" from getting restless. So the US agrees with the Saudi's - don't cut so the Iranian's have to slow down their Nuclear Bomb building because they are low on cash. In addition, we tell the Saudi's, keep flooding the market so the Russian's have too slow down their aggression in Ukraine. In exchange, because of the over production and slow growth in Europe and China and by not controlling the glut -- The huge excess will drive the competition out of business or at least dramatically slow it down. So because OPEC said no to production cuts ( most likely only Saudi Arabia ) the price of Oil has cratered & currently sits @ around $ 59/barrel WTI.

If there is not a price recovery what we get is a curbing of development all across the world. Oil projects stretching across the globe from Venezuela's tar sand to the North Sea to Canada's Oil sands to all the new drilling in the US and even Mexico! Oil projects worth more than $150 billion face the axe during 2015 because of plunging prices. Next year companies will finalize investment decisions on a total of 800 oil & gas projects worth $500 billion and a total of nearly 60 Billion barrels of BOE.

The oil shock in reverse will come back to bite the world in a few years with the reverse of the current shock!

The consumer gets the cheap gas, but the bite of the snake later in the story will surely be more painful and destructive to the world economies at some later date because there will be a much tighter supply. ( Recall, the OPEC nation's produce around 30 million barrels and world production is around 89 million barrels/day.) We all know that Obama hates fossil fuels! Because of the temporary price drop we get less drilling and that means less carbon footprint and he can continue to push his "green" agenda.

Of course the "green" scene will not work because with oil this cheap it competes with windmills, ethanol, solar and bio-fuel. The low value of oil will cause the coal industry to finally go out of business. ( The EPA's new regulation all but put the nail in the Coal Industry's coffin, but now with cheap oil the coal producer will not be able to make it!)

Let us not forget the pipelines that could and will be affected by lower prices. We believe that the XL Keystone pipeline is all but dead regardless if the new Congress passes legislation and Obama signs it into law. It could take 8 years and costs have doubled from the initial $5 billion to the current $10 billion price tag.

At present there are at least 10 pipeline projects that are snarled by regulators and political push back. As a result of all this "bull" 6 O & G projects in North America costing a proposed $15 billion or more and are stretching more than 3400 miles have been delayed.

This Oil shock is "like" a swinging pendulum and sadly the "dumb" American sees cheap gas at the pump and does not understand that the joy will eventually turn into severe financial pain.

The steps- 90% of the jobs created during the past 5 years have been related to the Oil and Gas Industry. The Saudi's our friends have only one interest and that is too make us dependent upon their energy source. So we give them our money, puts us further into debt and of course we help fund the terrorists that want to kill us!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Not to get side tracked: the E & P's stop drilling, they layoff workers, the drilling rig is returned to drilling company, they have no business so they layoff their workers, the frack crews have no work because oil @ $59/barrel is not economically viable so they are out of work, the companies that supply the chemicals, sand and other materials are not selling to any projects so they layoff workers, the production of oil needs lots of steel pipes and because the pipes are not needed because there is no drilling happening it affects the Steel companies and they layoff workers. The investors in the O & G vast array of industry players are all destroyed because the share prices of these investments have been destroyed in turn have reduced the spending habits of these investors. So they buy fewer cars, houses, clothing, taking trips and the list goes on and on. Now we get to the pipeline operators that give healthy dividends to their shareholders because either Oil & Gas runs through their lines- less product or slimmer margin calls for small dividends which in turn drop the price of the underlying stocks of this specific investment group.

So now the industry is destroyed and the Saudi's have us exactly where they want us- DEPENDENT!

Now it really gets juicy!! The banks that loaned Zillions of dollars to the O & G companies are having issues with late payments and default. The junk bond market is also tubing because of default by overextended companies that cannot pay principle or interest because their business is dead or dying.

Let us not forget the other losers in this scenario that has been created. The Coal industry as mentioned cannot compete for the time being because of super cheap Oil and mines begin to shut more rapidly with the addition of EPA mandates. Have you seen TSLA's share price lately, it has cratered ever since "black" Friday and continues to dive. Who needs electric cars when gas is $2/gallon? Have you seen the solar stocks and LNG stocks lately -- they are all cratering!

Let us not forget the railroads that transport the crude and related materials. The tanker cars that are built and used for the transport. The less you use the less jobs are kept. The trickle down theory of job loss will be broad and especially run deep in energy related states.

The consumer gets the cheap fuel at the pump, but the real damage is coming very soon---layoffs of the regular Joe Blow that has benefited from the trickle down revenue stream from this amazing industry that creates job, reduces dependency on Middle East Oil and helps reduce funding of the terrorists..

Believe it or not higher Oil prices are a much better environment for the world and the consumer that the potential out coming of this developing scenario.

Saudi Ararbia is not only harming the world economies by flooding the world with their cheap oil ( they currently produce 10 million barrels per day - total production of Oil in the world/day is around 89 million) they are also harming ALL of the members of OPEC!

****OPEC members pricing needs**********

We all know that with oil prices at current levels that E & P will all but cease unless drilling is in progress and or under contract. Driller will most likely drill only to secure leases.

Prices of Oil prices need to balance budget of each OPEC member

Libya **************$184

Iran*****************$131

Algeria*************$131

Nigeria*************$123

Venezuela*********$118

Saudi Arabia******$104

Iraq**************** $101

UAE****************$81

Kuwait**************$78

Qatar************** $77

The other scenario that many prove correct as we enter 2015 & may cause an explosive rally in crude because maybe this time the herd is wrong for a change!

Are the Oil markets that are hitting multi-year lows (Dec 11, 2014 WTI- $59.00) really reacting to reality or theories about oil glut and fears of cooling demand.

Yesterday when the WTI dropped $3.00 to around $61 this may have been the result of comments by one of the OPEC member's spokes person stating that demand will fall during 2015. News out of China continues to be cloudy and more news about Greece. Is this reality or history- only time will tell and most likely the real news is not the news. Meanwhile , the geopolitical risks around the world has not disappeared and most likely has increased, but at present the Oil market has decided that the terrorists are planting flowers instead of slicing heads off.

The continued downward slaughtered of Oil prices is very headline-driven and sentiment-driven.

The reality may very well be completely opposite of the created reality because of emotional decision that have not been proven to be correct.

The real culprit may be caused by hedge funds that are still trying to unwind their long positions on Oil and they just keep selling and selling & the buyers are just standing back. Firms that "short" could also be "piling-on " as well.

One thing is for sure this "crash" will come to an end sooner than later!

THIS OIL DOWNDRAFT IS INVESTOR DRIVEN AND NOT OVER SUPPLY DRIVEN. I TRULY BELIEVE BY THE END OF THE YEAR WE COULD GET A HUGE BUMP IN OIL PRICES BECAUSE OF THIS INVESTOR SENTIMENT THAT DEVELOPED ATFER THE OPEC MEETING 2 WEEKS AGO.

Final closing note: Dec 13th - There is little chance that the Fed is going to change their tune with verbiage when they meet next week. This will take some edge off the dollar's strength, which in turn will add some support for Oil! There is NO inflation! When you consider that the market cratered today & the Oil stocks overall moved higher- there is a bright light in that pipe!!!

This Oil and Gas project offers huge returns even at current levels & very attractive tax relief for 2014 (66%)- Empire #1 - see below!
************The Empire #1*************

Regardless of the potential gloom and doom of the above "nuclear option" we believe that OPEC will blink during early 2015 and that economic recovery will accelerate during mid 2015 because of the huge benefit to consumers world wide especially in Europe and also even in China. The huge windfall to US consumer could spur GDP growth which in turn will bump up oil demand. We may not see $100 oil for quite some time, but $75-$80 by mid 2015 is in the cards, in our opinion. Of course some major disruption in the Middle East is always in the cards. Oil prices are always very unpredictable !

THE MOST IMPORTANT ASPECT OF THIS PROJECT IS THE FACT THAT THE BEST INDEPENDENT RESERVE REPORTER WAS USED FOR THE AUDIT OF THE RESERVE OF THIS PROPERTY.. NETHERLAND SEWELL IS A WORLD CLASS REPORTER OF OIL AND GAS RESERVES!

The field that this well re-complete is located within was discovered in 1959 and has produced over 14 million barrels of Oil and 35 BCFG ( billion cubic feet of gas). The k-6 was the major producer and has been depleted within this well and the re-complete will target the k-5 and k-2a & k-2b. The reserves are Considerable with behind the pipe pay in these three zones.

Recoverable reserves based upon 2 reservoir studies by world recognized third party engineering firms are included in the full report that can be obtained from Energy Equities ( 1-800-746-4427). Total P1+P2 range from 1,003 MBO & 6.854 BCFG to 1,288 MBO to .72 BCFG. When gas is adjusted to BOE the 2 reports give the same results.

*************Economic Recovery of 25%******

P1+P2 recovery using only 25% recovery and a WTI of $50 and $4/gas unit yields a recovery of 800,000 BO and 493 MCF of gas. At $50/barrel ( some 18% below current prices) yields a return of 3.2/1 return with a 66% TAX CREDIT FOR 2014.. AT $80.00 THE RETURN SPIKES TO 5/1.

Estimated economics based upon a 50% recovery of only P1+P2 ( there are huge potentials with P3 which we are not entertaining) at $50/barrel and $80/barrel. The estimated gas recovery in MCF equals 974,700 and 1,559,100 BO. Based upon this at $50/barrel and $4/gas unit we get a 6.3/1 return and for $80/barrel we get 10/1 return.

Of course if we include P1+P2+P3 the numbers even @ $50/barrel and $4/gas unit rocket into huge returns for investors. At 25% $50/barrel yields 5/1 vs 8/1 @ $80 oil.

At 50% recovery @ $50/barre; yield 10.1/1 and @ $80 oil the return go to 16.5/1. !!

This does not include the tax advantage and of course any sudden spike in crude prices.

We see almost zero risk with this re-complete well project and 100's of % upside. We currently own a % of this program for tax advantage and of course a steady income stream that offers huge upside potential long term. Please call Energy Equities @ 1-800-746-4427 ask for Chauncey

If you would like to see past results from projects that we introduced please ask for project results.

6 OIL and GAS investments that can re-build you wealth during 2015

Oil will recover during 2015 either because OPEC blinks, Europe and China growth picks up or an event in the Middle East causes a major disruption in supply.

We also believe that most if not all oil related issues have been oversold that most if not all will get a nice bounce during early 2015 because tax selling season is over and the buyers will return and coop up the 100's of distress bargain within the oil and gas patch.

The pain is severe and losses are even worst, but we must be strong and follow our belief that Oil will recover in 2015 and many of these depressed could easily 100% their current share price.

6 stocks that we currently favor

sdcjf, mauxf, cazff, mqlxf, bxe, axas

1. SDCJF .34- $1.32 current price around .35

www.sundanceenergy.com.au

see current presentation and recent news

exit rate for 2014 yields 8000 to 9000 boepd

read Oct 31st 2014 operational update. Primary oil production comes from the Eagleford located in West Texas. The company has a small footprint within the Greater Anadarko Basin. At present there 548 million shares outstanding

According to management the company remains income positive even @ the $60 level by some 15-20%. The company has $50 million in cash and only $80 million in debt that is not due until 2018. Canaccord recently revised price target to $1.15. SDCJF has 20k acres in the Eagleford and during the 4th Q 10-13 gross wells will be completed.

We first recommended SDCJF 3 years ago @ .13 and this company was only producing 800 boepd. This management wins Best in Class and they get a A++. We believe that a position should be scaled because oil prices are very volatile & the oil stocks are following the WTI price and of course we have tax selling season.

SDCJF could easily get into the low .30's during the next 2 weeks. It is HELL out there in the Oil Patch!!

2. MAUXF .42-$1.64 current price .42

www.martresources.com

356 million shares outstanding

Mart is an International O & G company the develops and produces crude in Nigeria.

The company holds interest in the Umusadege Oil field located on-shore in Nigeria.

Current dividend per year is .04 ( not sure because of current environment that it is secure).

Visit website and review current press and presentations. End of Q3 production/day equaled around 8000bopd. The new pipeline has been completed and is currently in the start up mode. During the next 30-45 day this new pipeline has the ability to carry up to 45000 bopd. The company also has numerous test wells that have production behind the pipe and because of the new pipeline volumes should increase dramatically. The old pipeline is also still available ( not sure they will use it because of the Oil thieves .

The most recent well drilled had 11 zones with 200 feet of gross pay. It should be noted that this new pipeline has granted 75% usage of the pipes limit of 45k/day.

Depressed Oil price have hammered another great speculation that would be $3/sh with the news of this new pipeline that has taken almost 1 year to start and finish, but instead we sit @ .42

If you like it scale into it !

3. CAZFF range .07-.44 current price .11

An E & P within the Permian Basin ( West Texas and SE New Mexico).

www.cazapetro.com

Caza also trades on the London and Toronto (caza.l and caz.to)

Netherland Sewell and Associates reserve report show impressive numbers when you consider that cazff has a market cap of only $23.6 million.

Total P1+P2 $191,389,000.00

P1+P2+P3 $234,547,000.00

Of course with the lower Oil prices the number would be lower. Let us cut it in half and then 1/2 again and we still get one of the cheapest Oil & Gas juniors out there!

Current production is around 1200 boepd and this number should grow rapidly during the month of Dec because of 3 completions that will be taking place.

We believe that part of their production is well hedged because of bank lending agreements.

Recently announce farm-out agreement with (CWEI). At .11/sh the upside potential is 5X-8X the current price within a 1 year period . Strong buy at current levels.

4. MQLXF .35-$1.23 range current price .43

www.marquee-energy.com

review most current presentation on website

5600-5800 boepd exit rate for 2014 - Oil well hedged @ $100 CND (35%) and Gas $4.08 ( 60%) for 4th Q of 2014.

Management says cash flow positive even @ $70 (.33 for the year).

At present there are 120 million shares outstanding and the market cap is $54 million. The company has a huge footprint in the Michichi located in South Central Alberta. They have over 175 drill locations and other assets yield another 50 locations. The company has net debt of $55 million and a credit facility of $95 million.

Debt to cash flow of only 1.4X # is based upon 2014. The current share price is much lower now and the number is even more attractive, but 2015 with lower CF & low share price the number will remain very attractive. This management team is very lean and mean- they lowered G & A costs by 50% per BOE since 2013

Management states that they will protect the balance sheet during 2015 because of lower Oil and Gas prices.

Company has attractive Tax Pool of $220 million

Very attractively price O & G & should be purchased at current levels by scaling into it during the next 2 weeks.

5. BXE $3.00--$10.70 current price $3.05

www.bellatrixexploration.com

403 266 8670

production of Oil and Gas in Canada

191 million shares outstanding and of that amount Orange Capital is snapping up huge amount of paper and currently controls 14.28% of the free trading shares. Actually, Dec 11 2014 released a press release informing management that OC wants changes.

Visit website and review all current press especially 3rd Q results and guidance. Average production for 2014 was around 38,000 boepd and exit rate Dec 2014 is anticipated to be in the range of 45,000-47000 boepd.

Board of Directors have approved a capex budget for 2015 in the amount of $450 million and recently the credit line was increased from $625 million to $725 million.

Full guidance for 2015 production will range between 48000- 49000 boepd.

Important to realize that 70% of BXE's production comes from NG and the balance from other NGL's and crude.

The Nov 2014 presentation is a picture perfect display of how every company should grow and prosper. The charts and graph will win you over especially at current price levels..

The current book value is around $5+ - this of course does not take into account all the P2+P3. Most brokerage firms even in this horrible pricing environment have a target price for BXE around $10+. The coverage is very broad and overly "Bullish" even in the "throw the baby out with the bath water".

BXE is a great company and a super cheap of deal @ this "call" pricing!

We rate BXE with a very strong buy rating and should be purchased during the next 2 weeks by scaling into it.

6.AXAS $2.33-$6.45 range current price $2.58

Primarily- E & P in ND and Eagleford TX

www.abraxaspetroleum.com

201 490 4788

105 million shares outstanding

You must go and review the most recent presentation for Dec 2014-- This tells the whole story as to why AXAS is a strong Buy

Proved Reserves- 31 mmboe

Under 1.0X debt/FTM EBITDA

Capex for 2015 $200 million -can be rapidly decreased if crude prices do not reverse course.

2014E 6000-6100 boepd target exit rate 8500 boepd

2015E 8900-9200 boepd target exit rate 10,000 boepd

Year over year production still expected to grow even low price environment.

Again, you must go and review the just release Dec 2014 Presentation

Management says it all!

Low risk Bakken and Eagleford Development

Substantial Unbooked Potential Upside

Significant Operational and financial Flexibility

Strong rate of return driven by production growth

Prudent financial management

Great Hedge program - review page 39 of presentation.

Great story just a horrible environment.

We rate AXAS with a Strong Buy rating @ current levels for long term capital appreciation.

Other slaughtered Oils- OAS,NOG,SN, WLL, CPE,TPLM, JONE,CRL and the list goes on and on and on!

We have not been paid by any of listed investments within this email alert!

We may buy,sell and or hold at our own discretion.

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Have us call you with the recommendations prior to the release via email alert-- we call you -$1500.00/yr

Please send checks: S A Advisory, 4700 S Holladay Blvd, SLC, Utah 84117 phone 801 272 4761 or 949 922 9986

Happy Ski Season! We all need it after this blood bath!

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