the australian today, page-2

part of write-up
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.....Mosaic Oil (MOS) 10.5c
WITH global oil prices breaching the unchartered $US110 a barrel level overnight, expect the traditional Easter petrol price bleatings to be even more robust than usual.
While the weak greenback is supporting the oil price, on fundamental measures oil should be heading south. According to US data, crude inventories last week rose by 6.2 million barrels, well above average expectations of a 1.7 million barrel rise.
According to Goldman Sachs JBWere, petrol inventories also registered their 18th consecutive gain and are at their highest level for 15 years. "Both data would normally be interpreted as exceedingly bearish, but the US dollar is the overriding influence now," it says.
The oil surge is also unseasonal as northern Europe is entering the spring-summer period, when demand eases off. And while the US hasn't convinced OPEC to boost production, the cartel usually acquiesces before the yanks get serious about hydrogen or converting their Hummers to solar power.
Most of our oil producers have been unable to capitalise on the superheated prices because of production delays and rising costs. Even if oil slips to $US80 a barrel, they should be able to make decent money. We'll trust minnow Mosaic Oil to buck the trend as it embarks on a $17million drilling program across its Surat-Bowen Basin acreage.
This week, Mosaic finally put away the final $300,000 of a $1.6million shortfall on its 12c a share rights issue last November.
In the December half, Mosaic reported production of 211,000 barrels of oil equivalent, with less oil and condensate than expected, but more gas. EBITDA was $3.8 million on revenue of $9.36 million.
Exploration-wise, Mosaic is looking at 30 drillable prospects. On its track record of a 40 per cent hit rate over the past five years, Mosaic should find something to supplement its reserve base.
Mosaic's attraction is that its infrastructure is underused: the Silver Springs processing facility is operating at only 25 per cent of its daily capacity of 15 terajoules, while its part-owned pipelines are also well below capacity.
Mosaic scrip appears to be undervalued on its current production alone and we suggest a speculative buy. ABN AMRO Morgans reckons the stock is worth 22c, while Tolhurst ascribes a 24c target.
source: The Australian
CRITERION: Tim Boreham | March 14, 2008
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