stock reccomendation

Please see attached update on epe from fat prophets hot of the press.

It may well hit 50cents before XMAS

Investor sentiment toward Enterprise Energy received a firm boost in May upon the acquisition of Bandanna Coal Ltd. As visible on the daily chart, prices rallied more than five-fold in just three weeks, reaching a high of 31.5 cents.

Any stock would struggle to sustain such rapid gains. Enterprise Energy is no exception. Therefore, it is not surprising that the stock subsequently retraced 50% of the rally, finding support at 17.5 cents.

In the weeks ahead, we anticipate a period of consolidation above this support as balance returns and volatility subsides. This will allow for the formation of a base that we believe will be capable of supporting future gains and an eventual extension to new highs beyond 31.5 cents.

n previous reports we have devoted considerable coverage to the company’s proposed acquisition of Bandanna Coal and its associated coal interests in Queensland. This deal has the potential to be a company-transforming transaction for Enterprise and has our full support. In this report however we turn our attention to the company’s existing petroleum exploration interests and focus on the upcoming developments within the Cooper Basin.

Enterprise announced this week that its wholly-owned subsidiary company, Traditional Oil Exploration Pty Ltd, was granted a five-year renewal with respect to petroleum exploration licence (PEL) 88, which is located within the south-western corner of the Cooper Basin.

We spoke with the company’s Executive Chairman Ray Shaw this week and he confirmed the significance and strategic benefits of the block for Enterprise. The recent discovery by Victoria Petroleum and Santos at their Cuisinier prospect, which lies west of the Cook oil field, highlights the potential of the western flank of the basin.

It has long been postulated that the relatively unexplored western edge of the Cooper Basin is prospective for petroleum discoveries and that theory has now been supported by the evidence from recent nearby wells.

A picture tells a thousand words and that is certainly the case with the image below, which demonstrates the proximity of recent oil finds to Enterprise’s acreage.

Of significance therefore is the upcoming drilling programme within the James oil field production licence (clearly seen on the map), which encompasses PEL 88, and is being led by Santos as project operator. Enterprise will hold a 50% stake in PEL 88, with Victoria Petroleum holding the other 50% as project operator.

Enterprise also holds interests in two adjacent blocks, ATP 539 and ATP 549 West, which are also clearly defined on the map.

With respect to ATP 539, Enterprise acquired its 50% earn-in stake through a farm-in with Great Artesian Oil & Gas during 2004. The permit comprises a large acreage position of almost 6,000 sq km. The Ballera-Mt Isa gas pipeline traverses the northeastern portion of the permit. Structurally the Permit is dominated by a large anticlinal high known as the Curalle Anticline, which trends roughly north-south and extends into the adjacent ATP 549 permit.

Regionally, the permit is considered to be located in a very strategic setting, because any hydrocarbons generated in deeper areas, such as the Arrabury Trough to the south and south west, and the Windorah Trough to the east, would have migrated up through the reservoir beds towards the Curalle Anticline, a regional high which dominates this permit.

Enterprise believes the supporting evidence is there in the form of the producing Inland Oilfield, together with numerous shows found in wells drilled in and around the area. Several of the regional wells previously drilled intersected hydrocarbon shows within the Jurassic-age reservoir. Enterprise believes that these wells were not optimally located optimally, due to the lack of quality seismic data at the time.

One of the best examples was the Curalle-1 well, which was drilled during the 1980s to test the potential of the Curalle Anticline, the well failed to encounter commercial quantities of hydrocarbons. However the recovery of a minor amount of condensate film within the Adori Sandstone did provide evidence that hydrocarbons have migrated onto the Anticline.

Turning our attention to ATP 549 West, this permit is dominated by a thick Jurassic and Cretaceous-age Eromanga Basin sequence. To the north of the permit lies the Cook oilfield and to the east the Marengo gasfield, as well as a number of other Permian gas fields.

Several wells have been previously drilled within the permit, including MacKillop-1 in which Triassic gas pay was interpreted, as well as a second well Wyerie-1, in which more than 50 metres of oil staining was encountered within the Hutton Formation.

Enterprise drilled the Nulla Nulla-1 during 004 as part of its farm-in agreement to earn its 41.66% in the block. This well tested a large fault related anticlinal structure in the western portion of the block, although only minute traces of oil were encountered in the Hutton Sandstone during drilling.

Enterprise says the future focus within this permit will be on the deeper, eastern portion of the block and the MacKillop Anticline, which are more proximal to Permian source rock sequences.

With respect to the company’s company-making Bandanna Coal acquisition, we remind Members that shareholders will have the opportunity to vote on the proposed transaction in the near future. We understand that the delays so far have related to the final preparation of the independent report, but that the company should be making an announcement in this regard, and a further update on the Dingo West resource, within the next week. This should enable the shareholder meeting to be held in mid-August.

Enterprise Energy will continue to remain firmly held within the Fat Prophets Mining & Resources portfolio, but for Members with no current exposure we believe that there is still an appropriate buying opportunity in the market at present. Accordingly, we recommend EPE as a Buy to those investors at around 19.5c.