usual sunday ramp

Thanks guys for all the contributions.

Last week I was thinking of lightening up considerably on PSA to preserve my capital (house, car etc) but after reviewing the presentation files, watching the price of gas head skyward and thinking more about Vermilion,China and this year's profits, I am not so sure.

First Terry Fern is in the United States for the drilling and is talking to Australian brokers there and from there.

Second, Vermilion is not your average exploration well where you have one primary target and a couple of secondary targets. This is a well hitting seven sands in all, in a gas prone region (GOM), on gas prone leases (Between V245 andV 269) and targeting gas proven sands (eg the bottom "G" sand discovered by Forest), with the all the target sands indentified by 3 D seismic which has a great record of success in the area.

The worst that could happen is that all PSA gets is the 7 bcf in the "G" sands, that we know is there form earlier drilling. But thinking positively the well could very possibly turn up more than the 17.5 net targeted.

If the well really disappoints and the second well is not drilled PSA saves itself some $US10 million to use elsewhere (cost on one well and cost of building a production platform). And according to Fern there are plenty of other leases available for a company of PSA's size.

But I don't for one minute think that Vermilion A #1 will be a duster. if you take your money off the table now it is mainly to preserve profits. It becomes a risk reward ratio play. How far will PSA fall if the well is no good versus how far will it go if it is a success and how quickly could you get back in? I still might take some off the table but it will not be because I lack confidence in Vermilion.

Thirdly, Petsec is on track to make a record profit this year, it first full year back in production. That is just a great turn around story. So it is not the end of the world for Petsec by any means if Vermilion doesn't prove up. It has at least $70 million in revenues over the next two to three years from current wells at WC and SS to use on other prospects. And that is without China.

Fourth , the shares are still traded by small investors and traders. The average trade in the past few weeks has been less than 6,000. The daily average has dropped since the price began to rise.

And more to the point the volume is miniscule. This week 1.7 million, last week 1.4 million and I think the week before less than a million. We haven't seen any action in PSA yet.

Just wait for some serious money to come calling and watch what happens to the share price. It is a bit scary to think how far it could go in a very short time.

Fourth or whatever, the stock was chased in the US last Friday with 106,000 ADRs changing hands at another record high.Thats 530,000 local shares, more than went through our market. That is an unusual day indeed for Petsec inthe OTC market.

Keep a watch on these numbers as they can indicate more than just Americans taking a punt on a producer ina hot sector it could reflect knowledge seeping out about the result of drilling the shallow sands. They should have passed through a couple of these sands by now.

Lastly watch the gas prices in the United States. I have said before that for Petsec, for the price of gas to go from $US3.95 to $US 6.74 is the same as the price of gold going up from $395 to $674 is for a hard rock miner. These price rises mean huge windfall gains for Petsec. The outlook in the US is for continuing below average cold and continuing high gas prices. Some analysts seee double figures a real possibility as happened last year.

Lastly all the increase in PSA's price has come from market action without any prompting from media articles. That just can't last and we all know what a bit of positive media coverage can do for a stock. Look at MEO (MEE?) after the recent shares magazine article.

Well tha's enough from me. It is going to be a fascinating couple of weeks inthe GOM and then on to China.

I don't think Petsec is going to issue bonus shares or dilute. I think Fern is totally unworried about liquidity, I am sure he would liketo see PSA prices up as high as possible as soon as possible. He has a lot of very faithful top 20 shareholders to look after. If he needs a bit of cash for the new car or house extension he can always pay a small dividend.