grizzly to awake from slumber

Haven't posted much on MPO much of late.... it has been pretty clear to me that this Bear is in winter hibernation, and is in a pretty deep slumber.

But that said, there have been reports that we will get an early onset of spring this year, so I thought I might look at what could be around the corner to wake this Grizzly MPO up.

First I will look at technical side. Looking at the Weekly Chart below, its pretty clear we are sitting pretty close to 50% of the range for the last three years or so. Price has sort of swung up and down around about $1.10 to $1.20.

Since March 2009, we have effectively moved sideways in a prolonged consolidation period around this level. It is pretty clear that this stock is driven by buying demand. When volume increases, the share price rises as buyers chase stock. When buyers decrease, and volume drops, the price slips away. This is a bullish thing, as it means buyers are in control of the price moves.

MPO has very strong support around 90c, and support/resistance levels are approximately every 16c or so, give or take a couple cents.

MPO is also currently in a down trend. From the back testing I have done on MPO, if it gives a trend line entry, there is a 83% chance of a profit, with an average annual return for the trade of 248% per annum, with an average trade lasting 148 days. Note that this trend line entry has strict rules for how a trend line is drawn, and requires two weekly closes above the trend line. On the chart below, two weekly closes around $1.15 or higher would trigger an entry.

If we did get an entry, our price extension target from the last major range is $2.20 (100%). The 50%, 61.8%, 75% are also marked on the chart.





Now as a lot of posters on here know, I am not in MPO for the "technicals", but the fundamentals!!!

So now will have a look at what catalysts we could get to wake this grizzly up!

1. First of all, we obviously will have the June Quarterly released this week. In it there should be some pretty comprehensive updates, including an update on the expected pre-tax profit for the full year.

2. Mungi 21 and 23. These are currently dewatering and I would guess we should begin to get some meaningful flow rates in August. I think Mungi 21 is the one to look out for particularly here. Mungi 23 only had 8 laterals, instead of 9. So I suspect that one of the coal seams proved difficult to complete. These flow rates should add significantly to the existing Mungi production.

3. Canadian Oil Updates... any flow rate news, or boosts to production will help.

4. Canadian Oil Reserve upgrage. This is due in August.

5. Power Station Final Investment Decision. This will happen before year end most likely.

6. Canadian Gas - We should get a well drilled by year end. From reading the articles V1 has been posting, I am not going to hold my breath for it in the next couple months. Approvals are a slow process.

Now for the speculative ones...

7. Farm Out of Quebec acreage, this would be a massive boost to MPO if it occured. The lack of progress to date in Quebec is a significant reason for the current buyer hibernation I believe. But again, I am not holding my breath for this.

8. Neighbour flow rates in Quebec. This has been a proven catalyst in the past.... There have been a number of wells drilled by neighbours in recent months. Some positive results will see interest in this play increase significantly again, and might help farm out negotiations.

9. FARM IN's... in Quebec. For the last two Quarterly's MPO has flagged it is conducting farm in discussions. They have shown with other acquisitions to date that they are very astute in taking opportunities. It looks as though MPO has its sights set on increasing its more higher prospective areas in Quebec (also possibly to get a foot in where drilling approvals are already in place).

10. More Oil Acquisitions... This has been flagged in the past as well. Would not be surprised to see MPO add to it's Canadian Oil projects.

11. QLD CSG reserve upgrade. The core hole drilling program at Timmy and Harcourt should have commenced by now. I would expect that there will be a reserve upgrade from this data by year end.

12. Timmy well recompletion... not entirely material, but I would expect that now MPO is operator, it will revisit it's Timmy 1 well which Anglo drilled back in late 2007. I believe there were problems with coal fines blocking the pump, and it never received the work over it required by Anglo, but was rather just given up on by Anglo.

13. No brainer, but obviously a stronger Oil & Gas price will help out.

14. Sanish/Three Forks exploration in Canada. This has significant potential to add to existing oil production.

15. TSX Listing. I think this will be a major catalyst for the share price when it happens, but it won't be any time soon, because it should only happen if it will give existing shareholders fair value. The only time I would want to see a TSX listing is when the share price is around $2. Do the listing via a large offering to Canadian holders, that way our next capital raising to expand the Canadian Oil & Gas project is done at the same time. So I would be targetting this after a well has been drilled in Quebec and Oil Production is well above 2000b/d. I think the target for this will be 1Q 2011, as this is most likely when more cash is required, and also the share price should have jumped a fair bit by then.


Finally I will finish with a quick calculation of value:

QLD Assets 218PJ 2P or 600PJ 3P.

2P average CSG transaction is $1.55/GJ. So take a discount and say $1/GJ and you have $218 million.

3P average CSG transaction $0.58/GJ. So take a discount and say $0.40 per GJ and you have $240m.

So consensus is about $220m to $240m for MPO's QLD Acreage, as it currently stands. There will be further reserve upgrades coming.

(Note I think people have really misunderstood the "cheap" acquistion of Anglo's stake by WCL. This field was underperfoming badly, and also had overhanging litigation issues regarding sales contracts that were on very unfavourable terms to Anglo. This really worked into our favour, as we were able to pre-empt for a very very cheap price!!!! Importantly now as well, MPO has operatorship, which is much more attractive to suitors than a part share).

Canadian Oil:

I can't believe more hasn't been made of MPO's proposed drilling campaign. A target of 2000b/d by year end and 3000b/d by mid 2011 is a great result. Obviously they will never set an aggressive target either, so it is possible we could be significantly above these levels. Originally, MPO only planned to be hitting 3000b/d in 2012. By 2014 they were targetting 5000-1000b/d, so it is possible with futher success that we will be targetting that by 2013, even late 2012 now.

Simple calcs...

2000b/d x $C55 profit margin ($C20 costs, $C$75 sell) is $40m. Say tax takes 40%, left with after tax profit of $24m.

Put that on a PE of 8 and worth C$192m. PE 8 is probably a bit low though given the scope of potential increases in production. So in Australian dollars (assuming 0.92 exchange) would be $208m.

Quebec Gas:

Estimated 375000 net prospective actes at US$500 per acre at which Cambriam farmed into Gastem, Petrolympic, Squatex.... = US$187.5m... = AU$208m at $0.90 exchange rate with US$. That ignores the rest of the 1.8m acres or so that aren't "highly" prospective.

South Africa:

This is a sleeper, and has the potential to be a nice little earner. But it will take a while to commercialise I reckon. Give it $20m of value, but could be surprised!

So a conservative market cap in my book should be:

Australia $218m
Canada Oil $208m
Canada Gas $208m
South Africa $20m
Cash $30m (after current oil exploration).

Total $684m.

Shares on issues = roughly 251m.

So Fair Value = $2.72

Anyway, if anyone has bothered to read this far, they must be as excited about MPO as me.

Good luck to all holders.... I am going back into hibernation now until I see the bear begin to stir!

Cheers

Pukin