investors in denial......

Even with natural gas prices at US$6.70 investors in Petsec continue to be in denial. There is no demand for the stock and what selling there is is holding it below 1.20, maybe even $1.15 today.

Yet in a couple of months time Petsec should be producing around 42 mmcf a day, if as I am told, the accelerated development wells at Vermilion double the production there from 16-17 mmcf a day to 32-34 mmcf a day. Add in 8 mmcf from West Cameron which I also confirmed recently and you have the 42 mmcf a day figure.

At say US$6 net an mcf then the net operating cash flow for Petsec will be A$355,000 a day at an exchange rate of 0.71. That's over $10 million a month and doesn't take into account resumed production at Ship Shoal and any production from the new onshore wells if they are successful. (Of course if they are not successful the market will appropriately punish the stock!)

So even allowing for the disappointments we have had this year in China (not over yet) Vermilion (lower end of the production estimate) Petsec, like Arc Energy seems headed for a bonanza year next year.

I guess the reason why the market doesn't share my (our) enthusiasm for these stocks has something to do one with investors short time high horizons and two, with Xerxes post of a press article this morning on the market being in denial about the high prices of oil and gas. Would be investors don't think they are going to last because anlaysts tell them they won't. Well they may be right but personally I can't see it.

So I guess we just sit tight and wait for the realisation to dawn in the market that these stocks are real cash cows and that investors with a time frame greater than a day ought to have some!!!

But it does try your patience when you see other stocks with little or no cash flow at all doubling in price in recent months and weeks even. And I don't blame investors looking at some of these counters.