Written up in this weeks Bulletin....from my post earlier this morning. Might wake the market up.
"The Speculator: 06/06/06 The Speculator
Rampant dumping of petroleum stocks means some promising explorers are at a low ebb and ripe for plucking. David Haselhurst prepares to swoop.
Bargains galore littered the sharemarket last week among petroleum “specs” after the big sell-off that began in the previous week. The rot only stopped in the middle of last week as the world oil price crept back over $US70/barrel, but there’s no guaranteeing it will stay there.
Emerging producers and successful explorers tumbled from their previous week’s highs and many remained close to their week’s lows last week. Examples are: Amadeus (previous week’s high $1.35; low $1.21), Cooper Energy (74.5¢; 63¢), Drillsearch (20.5¢; 16.5¢), Hardman ($2.24; $1.87) and Samson Oil and Gas (43¢; 37¢).
Many mum and dad punters may be bewildered that a temporary dip in the oil price could precipitate such severe falls in the price of hopefuls with a record of producing improving results. But remember that huge professional punters, such as the big-borrowing hedge funds which infest the market majors, will stifle confidence when they decide to lock in profits. Panic then swamps everyone in second-rung stocks, who either join the sell-off or freeze and watch their paper losses mount.
I believe all the stocks mentioned above will have every chance to test and even surpass their highs again. World reserves are being consumed at a faster rate than new supply. Therefore, the price of oil must stay around today’s high prices so that formerly sub-economic resources (such as smaller oil reservoirs) can be exploited.
No one put it better than Drillsearch’s managing director, Philip Kelso, at that company’s annual meeting last November. He reminded shareholders: “World oil consumption is 84 million barrels a day, or 1 billion barrels every 12 days. Given an average recovery factor of 33% just to maintain reserves, this implies the need to discover a new 3 billion-barrel oil pool every 12 days. That is not happening.”
Samson Oil and Gas (ASX code: SSN) was one stock to recover slightly, rising by mid-week to 40¢. At that price it carries a $44.7m market capitalisation. But that ignores a major fund-raising Samson is due to complete by the end of May – and institutional investors are locked in to pay more than the current market.
The Australian-listed Samson is an oil and gas producer in Wyoming through its 93%-owned offshoot Kestrel Energy. In March, Samson said it would pay $US36.3m for new production-exploration assets that would almost double Samson’s proven reserves. The acquisition would add 22.7 billion cubic ft of gas equivalent to Samson’s proven reserves of 25.8bcfe.
The purchase is being financed through a $US21m convertible facility with Macquarie Bank plus a $27.3m placement of 65 million shares at 42¢ each, of which 49.7 million have been sold to US institutions."
SSN Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
