i can smell gas

Having so far survived the expected directorial share dilution, I chatted with an informed colleague over the weekend about likely company progress.


My colleague has a sizeable stake in the oil and gas sector.


He made the following points to me: For the first time since the GFC, some ( not all) stars are aligning for the company. Of major significance is that the water disposal issue seems solved at the same time as KL has successfully re-negotiated the crippling bank debt problem.


( KL's efforts cannot be over estimated- part of the European financial consortium to whom the was beholden were desperate, some 6 months ago, to "pull the pin'
It really is a miracle that we are still discussing this stock today.
The large shareholders who showed both faith, fortitude and almost foolishness in rallying to support the company in it's hour of need by investing for shares and options at 2c have been rewarded.
But what about the rest?
My friend leant heavily on me to buy at the darkest hour and I did. Between the two of us we have a large stake in the company.
He has remained gung-ho and still is, saying that at current levels it remains a "buy".)


In addition to the water disposal/bank issues, the team, who are working to a pre-set, deliberate plan, have tangible results already and should be capable of delivering in excess of 4MM cu ft per day( read million), undoubtedly by end of March.
More to the point, he is adamant that this week will, in terms of past news releases, and timing for de-watering, coupled with the director's desires to follow "bad"news with " good", see the beginnings of that output announced, probably from the 2-20. To follow, all by end March, the Utah Fuel cell 2( 1 million) utah state minerals ( 1 million) and production from the 13-17 in in March gearing up to full production in April( 3 MM or more).
He sees it at 5c plus fairly soon, with significant reward at year's end when gas production, 2-3 years behind schedule, should be at 15 MM plus.
He points out that there is an exponential element to production, as more wells produce at higher flows.
He also points out the non-involvement today of the individual who failed for so long to achieve any production........ a significant difference, and the main reason he is still buying.


He sees 20c at year's end IF the company is not sold before then.


Some negatives:- new, large overseas based holders may sell out far below that level, and, in spite of emerging evidence of US recovery, the NG price continues to languish.


On the horizon, however, he mentions the possibility for middle east instability way beyond what is current in Bahrain and Libya. The wild card- a hastened implosion in Saudia Arabia- people powered and fast tracked 10 years ahead of the unknown, but inevitable ,time schedule.
Should that happen guys- hold on for $400 oil and Mae back to it's previous share pricing.


Otherwise, it's probably 1.5 billion shares. $300 million after debt and 20 c per share. Not bad for a 3.5c investment.