Thursday, December 30, 2010

Deepwater Permit Tracking - ATP's First of Six is Inevitable

Deepwater permits are now finally being approved.

BHP December 29, 2010 - 4,337 Feet of water - From a drillship

Chevron December 28, 2010 - 4,298 Feet of water - From a drillship

Shell December 22, 2010 - 2,945 Feet of water - Platform rig on production platform

Global LNG Market

Saw this on a message board and thought is interesting reading.  Shale gas has turned North America into a likely exporter.  But what troubles me is why wouldn't similar shale plays be available across the globe and closer to or actually in Asia ?

With all the fervor surrounding the US shale gas revolution--it’s not every day that a country transitions so quickly from a growing importer of natural gas to one with an oversupply--it’s easy to overlook the international implications of this domestic supply glut, particularly on the global market for liquefied natural gas (LNG).

Disconcerted by the breakdown between domestic natural gas prices and drilling activity, North American commentators tend to regard global LNG markets as a potential outlet for production from the continent’s prolific shale gas fields.

What is LNG? When natural gas is cooled to minus 260 degrees Fahrenheit at a liquefaction facility, it condenses into a liquid that’s roughly 1/600th its original size. In this form, large amounts of natural gas can be safely transported overseas in specially designed ships. Re-gasification terminals warm the LNG to return it to its gaseous state before pipelines transmit the product to end users.

This technology is far from a recent innovation; the energy industry has relied on this technology for over 50 years. In fact, the Kenai LNG plant owned by ConocoPhillips (NYSE: COP) and Marathon Oil Corp (NYSE: MRO) has operated since 1969 and remains the sole US export terminal.

Three recently proposed liquefaction terminals have captured the imaginations of many investors.

US-based producers EOG Resources (NYSE: EOG) and Apache Corp (NYSE: APA) are behind the Kitimat LNG joint venture, an export facility sited in Bish Cove, British Columbia that would supply Asian markets with natural gas sourced from the partners’ operations in the Horn River Basin.

In 2009 the duo announced a memorandum of understanding (MOU) with Korea Gas Corp (Seoul: 036460) whereby the world’s largest LNG importer would purchase up to 40 percent of Kitimat’s output. The agreement also included an option for Korea Gas to buy an equity stake in the project.

The initial plan calls for a facility capable of processing 5 million metric tons per annum (mmtpa), though capacity could eventually double in size if warranted. The partnership recently filed with Canada’s National Energy Board for a 20-year permit to export up to 10 mmtpa of LNG per year and expects to bring the facility onstream in 2015.

The two other proposed exports terminals would be built on the US Gulf Coast. In June 2010 Cheniere Energy Partners LP (AMEX: CQP) proposed adding liquefaction capacity to its Sabine Pass LNG receiving terminal in Cameron’s Parish, La. The sourced gas would come from a number of prolific fields in the region, including the Permian Basin and the Barnett, Haynesville, Eagle Ford, Woodford and Bossier Shale plays.

Initially, the company would add two liquefactions trains, each capable of producing 3.5 mmtpa of LNG. In the event of strong demand from customers, Cheniere would consider installing two additional trains. Thus far, executives from independent gas producers Encana Corp (TSX: ECA, NYSE: ECA) and Chesapeake Energy Corp (NYSE: CHK) have voiced their support for the project. Cheniere also recently announced MOUs with Morgan Stanley (NYSE: MS), Spain’s Gas Natural (Madrid: GAS) and ENN Energy (Hong Kong: 2688) for some of the planned export capacity.

On Sept. 7, 2010, the Dept of Energy approved Cheniere’s request to export about 803 billion cubic feet (bcf) of natural gas annualy over the next 30 years to nations with which the US has a free trade agreement. This was only the first regulatory hurdle. That same day Cheniere field a second proposal to export 803 bcf annually to World Trade Organization (WTO) members and non-WTO countries.

On July 26, 2010, Cheniere also initiated the process to gain approval from the Federal Energy Regulatory Commission (FERC) for the siting, construction and operation of its proposed liquefaction facilities.

Freeport LNG and Macquarie Energy, the North American energy trading and marketing arm of Australian financial giant Macquarie Group (ASX: MQG), in late November announced that they would develop export capabilities at the terminal in Brazoria County, Texas. The proposed expansion would cost about USD2 billion and would be able to export 1.4 bcf per day by 2015.

Freeport, the owner and operator of the LNG facility, will submit requests to the Dept of Energy for an export license and to FERC for the project itself. Management expects the approval process to take roughly two years.

These projects underscore the gradual transition of natural gas from a regional fuel to a (somewhat) global commodity and growing demand in emerging-market Asia. But these proposals aren’t the only international ramifications of the US shale gas revolution; not only has output from unconventional fields flooded the domestic market, but this oversupply has also indirectly flooded global markets with excess LNG.

Earlier this decade most analysts projected that US LNG imports would increase steadily, offsetting lower domestic production. Back in 2003 there were at least two dozen proposals to build new re-gasification terminals. But US LNG imports never reached the 812 bcf per year that the Energy Information Administration projected in its Annual Energy Outlook 2004 and have fallen off a cliff after peaking in 2007.

This decline in US imports, coupled with the demand destruction that occurred during the great recession, flooded the market with low-priced LNG. Much of this gas has found its way to European markets such as Spain, Belgium and the UK, which this year became the fourth-largest LNG importer. This influx has prompted some Continental countries to reduce purchases of pipeline gas to the lowest levels allowed by contract, replacing these volumes with lower-priced LNG.

Some analysts have suggested that while this trend won’t mark the end of the long-term gas export contracts favored by the likes of Gazprom (Moscow: GAZP, OTC: OGZPY), this competition could force the Russian giant to become more flexible and reduce the duration of contracts.

Even more impressive, rising demand for LNG in--where else--emerging markets has also helped to absorb excess supply and should continue to drive demand over the long term.

For example, the Chinese government’s long-term plans call for natural gas to account for 10 percent of the country’s energy mix, one-third of which will be imported via pipelines or LNG.

Natural gas has been growing in popularity in China, particularly in power-generation facilities located near major cities. Concerns about air quality mean that many of the high-rise residences constructed during China’s recent housing boom are equipped for piped gas. Further migration to urban areas will only increase demand.

LNG imports will be part of the solution. China’s first re-gasification terminal opened in Guangdong province in 2006, and the country currently boasts three import facilities. But that capacity is slated to expand substantially over the next decade.

In addition to a source of demand growth, Chinese energy companies continue to invest in projects overseas that will ensure a steady supply of natural gas.

For example, CNOOC (Hong Kong: 0883, NYSE: CEO) on Dec. 8 agreed to pay AUD50 billion for a 50 percent stake in Exoma Energy’s (ASX: EXE) five exploration blocks in Queensland’s Galilee Basin. Once the deal gains regulatory approval, the resulting coal seam gas will contribute to CNOOC’s LNG supply.

India’s lack of energy resources represents another opportunity for LNG producers, primarily in Australia and Qatar. The country’s Ministry of Petroleum and Natural Gas expects LNG imports to increase from 33 million cubic meters (mcm) per day to 162 mcm per day by fiscal year 2029-30. Over this period the government expects natural gas to grow to 20 percent of India’s energy mix from 9 percent. LNG imports could easily exceed estimates if expected pipeline imports don’t materialize--a distinct possibility--or domestic production falls short of expected production.

Two LNG terminals currently operate in India, Petronet LNG’s (Bombay: 532522) 10 mtpa facility at Dahej and Royal Dutch Shell’s (LSE: RDSA, NYSE: RDS.A) 3.6 mtpa installation at Hazira. Petronet LNG plans to add 2.5 mtpa of additional capacity. Ratnagiri Gas and Power’s 5 mtpa plant in Dabhol remains under construction, though 1mtpa of capacity could come online before the project is completed. Two additional LNG import terminals are in the early stages of planning.

Wall Street Journal on Noble's Gas Discovery in Israel

TEL AVIV—Two years ago, Ratio Oil Exploration LP, an energy firm here, employed five people and was worth about half a million dollars.

Today it sits at the center of a gas bonanza that has investors, international oil companies, Israeli politicians and even Hezbollah, Israel's sworn enemy, clamoring for a piece of the action.

Ratio's market capitalization now approaches $1 billion. The rally at Ratio is thanks to the company's 15% stake in a giant offshore gas field called Leviathan, operated by Houston-based Noble Energy Inc.

On Wednesday, the frenzy got fresh fuel: Noble confirmed its earlier estimates that the field contains 16 trillion cubic feet of gas—making it the world's biggest deepwater gas find in a decade, with enough reserves to supply Israel's gas needs for 100 years.

It's still early days, and getting all that gas out of the seabed may be more difficult than it seems today. But Noble and its partners think the field could hold enough gas to transform Israel, a country precariously dependent on others for energy, into a net-energy exporter.

Such a transformation could potentially alter the geopolitical balance of the Mideast, giving Israel a new economic advantage over its enemies.

Even before Wednesday's announcement confirming the size of Leviathan, the big field was causing a ruckus in Israel and the region.

Leviathan, named after the Biblical sea monster, and two smaller gas fields nearby have kicked up a broad speculative craze.

The energy index of the Tel Aviv Stock Exchange rose 1,700% in the past year. In recent months, energy stocks accounted for about a quarter of trading activity on the exchange, once mostly the domain of real-estate companies.

It's also shaken regional relations. Lebanese politicians are trying to lure companies to explore their nearby waters, while the two countries—still technically at war—have threatened each other over offshore resources.

A minor diplomatic furor has erupted between Israel and the U.S., which is lobbying hard against Israel's plans to raise taxes on energy companies, including Noble.

Leviathan sits some 84 miles off Israel's northern coast and more than three miles beneath the Mediterranean's seabed. Noble began drilling its first exploratory well in the field in October.

Even before Leviathan, a series of finds had put the so-called Levant Basin, stretching offshore in the Mediterranean, on the international energy map.

In March, the U.S. Geological Survey released its first assessment of the zone, estimating it contained 1.7 billion barrels of oil and 122 trillion cubic feet of gas. That's equal to half the proven gas reserves of the U.S.

The finds also exposed a grittier underside to Israel's financial sector. A string of criminal investigations launched by Israeli authorities into share-price movements and company disclosures have dogged some of the bonanza's highest flyers.

And a long-running shareholder fight at Ratio spilled into the public this fall, featuring a cameo appearance by a man wanted by U.S. authorities on racketeering and conspiracy charges.

Except for the occasional small oil and gas find in its early years, Israel has searched in vain for energy. Big Oil shied away, worried about antagonizing Arab and Iranian partners.

A hardy group of Israeli explorers kept at it anyway. Ratio was one of them. In the early 1990s, Ratio's chief executive, Yigal Landau, from a family of infrastructure magnates, and Ligad Rotlevy, whose family textile business goes back 80 years, formed the company to search for oil onshore.

By then, companies were also venturing offshore. In 1998, another Israeli energy firm, Delek Group Ltd., persuaded Noble, one of the first independents to operate offshore in the Gulf of Mexico, to start looking in Israel's slice of the Mediterranean.

Noble drilled its first Israeli well in 1999, and quickly scored two modest finds. Financial firms and local businessmen with little energy experience began snapping up offshore leases from the government.

Thanks to a 1952 petroleum law still on the books, Israel offered some of the world's best perks to energy companies, including low royalties and corporate taxes on exploration.

Ratio tried to buy into the offshore projects that Noble and Delek were pursuing, but was rebuffed. Instead, in 2007, Messrs. Landau and Rotlevy put up $40 million and took a gamble on the rights to an offshore license neighboring the Noble and Delek fields. It would eventually become the Leviathan field.

Armed with promising seismic data, the pair then convinced Noble and Delek to buy into their lease. They sold a 45% stake to Delek and a 40% stake to Noble.

In January 2009, Noble made a landmark discovery. The Tamar field contained premium quality gas—almost pure methane. Noble had expected to find three trillion cubic feet at the most. The reservoir ended up containing nearly three times that. Two months later, the company found a second, smaller deposit of gas at the nearby Dalit field.

Then, last summer, Noble dropped a bomb shell. The Leviathan field appeared to be a supergiant, according to three-dimensional seismic studies, with almost twice the gas reserves of Tamar.

Ratio's shares soared, and so did those of other energy firms in Tel Aviv. The rally set off alarm bells among regulators.

"We saw new players, and these skeleton entities that had nothing to do with oil, had no experience or know-how, buying and trading leases, making baseless claims," said Industry, Trade and Labor Minister Uzi Landau. "We decided we had to stop this crazy atmosphere engulfing the market." He wouldn't discuss specific companies.

Officials at the Israeli Securities Authority declined to comment on specific cases, but said they were concerned about an ongoing pattern in which small energy companies publish vague or misleading reports that cause their share prices to skyrocket, and often to plummet later.

In September, the ISA raided the offices of two energy-exploration firms related to probes into trading irregularities.

In the case of EZ Energy, regulators stormed its offices Sept. 20, seizing computers and files after its stock shot up 150% in a single session. The ISA says EZ Energy is being investigated for criminal wrongdoing, but hasn't been specific.

EZ Energy declined to comment. The company has disclosed it held a private meeting with Ratio to discuss buying a small share of another, unstudied offshore gas license. Ratio said the company has stopped taking meetings with other energy firms. Ratio isn't accused of any wrongdoing in connection with EZ.

Amid the stock-market frenzy, the Israeli government started considering changing its 1950s-era energy royalties and tax regime, to boost the government's take of any gas find.

Earlier this year, Finance Minister Yuval Steinitz said he was considering changing terms retroactively—meaning the government could extract better terms on previously assigned leases. Noble and Israeli oil executives went on the offensive.

A retroactive change would be "egregious" and "would quickly move Israel to the lowest tier of countries for investment by the energy industry," Noble's chief executive, Chuck Davidson, wrote Mr. Steinitz in April.

The company enlisted high-level negotiators, including the U.S. State Department and former President Bill Clinton, to lobby against any change.

Mr. Clinton raised the issue in a private meeting with Israeli Prime Minister Benjamin Netanyahu in New York in July, according to a Clinton aide. "Your country can't just tax a U.S. business retroactively because they feel like it," the aide said Mr. Clinton told Mr. Netanyahu.

Mr. Netanyahu was noncommittal, the aide said. A spokesman for Mr. Netanyahu declined to comment on the meeting.

Finance Minister Steinitz has so far ignored the pressure. Last month, he said a government-appointed committee had made preliminary recommendations to abolish tax breaks for energy firms and impose steep tax increases of 20% to 60% on windfall profits. Any tax changes are subject to approval by Israel's cabinet.

"Israel is sovereign to make its own decision and change its tax regime," Mr. Steinitz said in an interview.

Shares in energy companies plummeted on news of the tax increases. Delek Energy said it would have to reevaluate the Tamar field. "This really threatens our ability to deliver the project on schedule," said Gidon Tadmor, the CEO. Funding for development of the gas field is now on hold, he said, due to banks' concerns about the new tax regime.

Despite these problems, Israel's gas find is making waves abroad. Lebanon has staked out its own claim to offshore gas. In August, lawmakers in Beirut rushed the country's first oil-exploration law through its normally snarled parliament.

Lebanon's oil minister, Gebran Bassil, an ally of the Shiite militant group Hezbollah, said in late October that his ministry hopes to start auctioning off exploration rights by 2012.

Iran, Israel's arch-nemesis and Hezbollah's chief backer, has also weighed in. Tehran's ambassador to Lebanon, Qazanfar Roknabadi, last month claimed that three-quarters of the Leviathan field actually belongs to Lebanon.

Mr. Landau, the Israeli infrastructure minister, denied the claim and warned Lebanon that Israel wouldn't hesitate to use force to protect its mineral rights.

Meanwhile, the poster child of the boom, Ratio, has seen its star fade after authorities launched a criminal probe of the company's relationship with an Israeli wanted by the U.S. on racketeering and conspiracy charges.

The Israeli investigation is ongoing and charges haven't been filed.

A disgruntled investor, Shlomi Shukrun, has publicly accused Ratio's founders, Messrs. Landau and Rotlevy, of recruiting Meir Abergil to pressure Mr. Shukrun out of his shares and money he says they owed him.

Mr. Abergil, along with his brother, currently sits in an Israeli prison awaiting extradition to the U.S. to face a 32-count federal indictment. He declined a request to comment for this article.

Ratio officials, meanwhile, say Mr. Shukrun hired people with links to a Georgian crime syndicate to threaten Ratio's Mr. Landau and his family into making up Mr. Shukrun's losses. Mr. Shurkrun's lawyer said his client did send people to collect money from Mr. Landau, but he denied making any threats and denied any connection between his client and Georgian organized crime.

Instead of turning to the courts, the two sides say they turned to Mr. Abergil to help broker a solution. When Ratio's share price started its steep ascent, the dispute over a few hundred thousand dollars became a dispute over a few hundred million dollars.

The case is based on a quarrel that began in 2005. It only came to light in September, when Mr. Shukrun went public with his version of the story, and tapes and transcripts of the private arbitration hearings were leaked to the press.

Mr. Landau, Ratio's CEO, says that after Mr. Shukrun threatened him, he turned to a private security company, run by the brother of a convicted (and now deceased) Israeli crime boss. That firm, in turn, brought in Mr. Abergil, Mr. Landau has said. The brother couldn't be reached for comment.

"The smell of gas in Israel has driven people crazy," he says.

Bill Gross Buying Muni Bond Funds With Personal Cash

Over the past couple of weeks I can't go twenty minutes without seeing a warning about municipal bonds.

So imagine my surprise to see the guru of bond gurus Bill Gross buying muni bond funds with his personal cash.

Earlier this month Gross spent $4.4 million of his own money this month to purchase shares of five municipal-bond funds run by his firm after tax-exempt debt tumbled. This more than doubled his holdings of the firm’s closed- end municipal bond funds, according to Securities and Exchange Commission data. He bought about 451,000 shares of Pimco municipal bond funds in December, bringing his total holdings to about 878,000 shares.

Today Gross was interviewed by CNBC on these investments.

His basic position is that:

- The high yields are attractive on a risk/reward basis

- He agrees that State and Muncipal finances are similar to what is facing Europe

- He doesn't believe a state would ever default

- He thinks Illinois should be avoided as only 50% of their budget is funded through revenues

- Believe Uncle Sam will always stand behind the states

Here is he video of the inteview:

The comptroller of Illinois agrees with Gross about his state. Here is what he had to say to 60 minutes:

"And nowhere has the reckoning been as bad as it is in Illinois, a state that spends twice much as it collects in taxes and is unable to pay its bills.

"This is the state of affairs in Illinois. Is not pretty," Illinois state Comptroller Dan Hynes told Kroft.

Hynes is the state's paymaster. He currently has about $5 billion in outstanding bills in his office and not enough money in the state's coffers to pay them. He says they're six months behind.

"How many people do you have clamoring for money?" Kroft asked.

"It's fair to say that there are tens of thousands if not hundreds of thousands of people waiting to be paid by the state," Hynes said.

Asked how these people are getting by considering they're not getting paid by the state, Hynes said, "Well, that's the tragedy. People borrow money. They borrow in order to get by until the state pays them."

"They're subsidizing the state. They're giving the state a float," Kroft remarked.

"Exactly," Hynes agreed.

"And who do you owe that money to?" Kroft asked.

"Pretty much anybody who has any interaction with state government, we owe money to," Hynes said.

That would include everyone from the University of Illinois, which is owed $400 million, to small businessmen like Mayur Shah, who owns a pharmacy in Chicago and has been waiting months for $200,000 in Medicaid payments. Then there are the 2,000 not-for-profit organizations that are owed a billion dollars by the state.

Lutheran Social Services of Illinois has been around since 1867 and provides critical services to 70,000 people, mostly the elderly, the disabled, and the mentally ill. The state owed them $9 million just before Thanksgiving, and they nearly had to close up shop.

Asked how long his organization can go on like this, Rev. Denver Bitner, the president of Lutheran Social Services of Illinois, told Kroft, "Well, we wonder that too because we really don't know."

He says they were forced to tap their entire line of credit and all their cash reserves before the state would finally pay them as a hardship case.

"It has to be that you've sold off all your assets, you have borrowed from everybody that you can borrow from, and then, we'll think about it," Rev. Bitner explained.

And according to Bitner, that's even though the state owes his organization the money.

"The first words out of my mouth are usually an apology, because they have been you know put in this situation, that is really unacceptable. And you know there is very little I can do or say other than apologize," Comptroller Dan Hynes said.

It's not just the social safety net that Hynes has to worry about: there have been Illinois legislators that have been evicted from their offices because the state didn't pay their rent, and stories about state troopers being turned away from gas stations because the owners refused to take their state credit cards.

"The state's a deadbeat," Kroft remarked.

"Yeah. I mean, the state of Illinois is known as a deadbeat state. This is a reputation that has taken us years to earn and we've reached, you know, the heights of, I think, becoming the worst in the country," Hynes said."

It is always interesting to see someone considered an expert doing the opposite of what the general market perception is telling you. I think it is well beyond my circle to be able to evaluate the finances of various government bodies, but perhaps I can learn something by watching.

Wednesday, December 29, 2010

Will We See Petrobakken Hit as Hedgies Create New Parentco Stub ?

I wonder if the next couple of weeks will see Petrobakken sell off and Petrobank rise as funds short the subsidiary and go long the parent in an effort to create a new "parentco" stub ?

With the intial drilling results confirming that Wright and the boys actually acquired some good property in the Cardium I would certainly welcome a chance to load up on PBN at lower prices.

Hard to have imagined a year ago that we would have $90 oil and PBN would be down 50% with really nothing other than weather delays.

I can hardly believe it, the deepwater permit logjam is easing !

Check out the approved column for new well and revised new well.  We actually have something in there finally !

Now I just wish CEO Paul had kept his yapper closed so that the BOEMRE wouldn't have to sit on ATP's for a little extra time just so it doesn't look like they are snapping to his attention.

Larry Robbins (Glenview) Very Bullish on Equities

Amazing how opinions vary amongst even the most successful investors.  I also find it amazing how virtually none of the top hedge fund managers seem at all interested in the concept of peak oil.

Noble Finds More Natural Gas Off Israel,1597328.html#

Perhaps ATP might consider selling off some of Telemark and Gomez to improve their balance sheet and diversify away from the GOM.  After the next 5 wells are drilled though please.  I would like a fair price.

HOUSTON, Dec. 29, 2010 /PRNewswire-FirstCall/ -- Noble Energy, Inc. (NYSE: NBL) announced today a significant natural gas discovery at the Leviathan exploration prospect offshore Israel. Drilled in the Rachel license, the well encountered a minimum of 220 feet (67 meters) of net natural gas pay in several subsalt Miocene intervals. Apparent reservoir quality is very good, and the intervals discovered are geologically similar to those intersected at Tamar.

Leviathan-1, located in approximately 5,400 feet (1,645 meters) of water, is about 80 miles (130 kilometers) offshore of Haifa and 29 miles (47 kilometers) southwest of the Tamar discovery. The results from the well confirm the pre-drill estimated resource range, with a gross mean for Leviathan of 16 trillion cubic feet (450 billion cubic meters). The Leviathan field is estimated to cover approximately 125 square miles (325 square kilometers) and, as a result of its size, will require two or more appraisal wells to further define total gas resources.

Charles D. Davidson, Noble Energy's Chairman and CEO, said, "Leviathan is the latest major discovery for Noble Energy and is easily the largest exploration discovery in our history. In the past two years, we and our partners have made three significant natural gas discoveries in the Levantine basin. Total gross mean resources discovered are estimated to be approximately 25 trillion cubic feet (700 billion cubic meters), with nearly 8.5 trillion cubic feet (240 billion cubic meters) net to Noble Energy's interest. The Leviathan discovery has further confirmed our geologic models and interpretation of this basin and validates that it contains significant natural gas resources."

David L. Stover, the Company's President and COO, added, "Our exploration program continues to deliver outstanding results. This discovery has the potential to position Israel as a natural gas exporting nation. For nearly a year now, we have had a team evaluating market possibilities, which includes various pipeline and LNG options. It's our belief that the natural gas resources at Leviathan are sufficient to support one or more of the options being studied. We are excited to be leading the exploration and development in this new basin and look forward to determining the best development option."

Drilling at Leviathan-1 will continue to a planned total depth of 23,600 feet (7,200 meters) to evaluate two additional intervals. Current well depth is 16,960 feet (5,170 meters). Results from the deeper tests, which have a low chance of success, are expected over the next couple of months. The Company's second contracted rig will arrive in the Eastern Mediterranean in early 2011 to spud a Leviathan appraisal well located 8 miles (13 kilometers) northeast of the discovery well.

Noble Energy operates Leviathan, offshore Israel, with a 39.66 percent working interest. Other interest owners are Delek Drilling and Avner Oil Exploration with 22.67 percent each and Ratio Oil Exploration with the remaining 15 percent. The Company also operates Tamar in the Matan license and Dalit in the Michal licenses with 36 percent working interests.

John Embry Says Munger Not Rational and Buffett Should Have Listened to his Father

A little more humility John ?

Tuesday, December 28, 2010

Coastal Energy - Another to look at or maybe avoid

Coastal Energy Corp~cen.v, & ceo.l~ trade within Canada,USA & London~ current price around $5.64

We rate Coastal Energy with a strong buy rating & anticipate a huge move during 2011!

Coastal Energy engages in the acquisition and exploration of oil and gas properties in the Gulf of Thailand and onshore Thailand. CEN.V or CENJF.PK holds 100% WI in G5/43 and G5/50 blocks comprising a combined area of approximately 5000 sq. kilometers. The company also holds 12.6% WI in block EU-1 & E-5N located in the Sinphuhorm gas field as well as owns interest in various other exploration blocks.

Please visit Coastal's website and review the Nov. 2010 Corporate Presentation~ We believe just from reading this 26 page report you will become a believer & see just how cheap this oil and gas opportunity really is!

It is also important that you read the 2 most current press releases from the company as well~The Dec 8th corporate update and the Nov 18th 3rd Q report.

Third Quarter 2010 Highlights:

1. Average total company production of 11,795 boe/d including average offshore production of 10,065 bbl/d.

2. EBITDAX is $44.5 million, or .39/fully diluted share; up 49% sequentially and over 550% yoy.

3. Net income of $9.2 million, or .08/fully diluted share.

4. First production from the Bua Ban field in the Gulf of Thailand.

5. The closing of a $80 million senior secured revolving credit facility.


Company Snapshot:

113 million shares fully diluted and outstanding

market-cap-- $640 million

From Presentation: After-tax 2P NAV/sh (fully diluted)~$7.07~ It is our belief that this number is now much higher after the announcement in early Dec of a "new" discovery offshore~the Songkhla A-09 well was tested and flowed at approximately 2,000 bopd at 2/3 pump capacity.

The average Unrisked NAV/sh (including prospective resources) equals $25.00!

Company plans High impact exploration from Dec 2010 to June 2011( would anticipate capex plan to be announced during early Jan 2011 with exact plan of wells to be drilled)~ the area of interest will be testing over 150 mmbbl prospective resources.

1.4 million acres in the Gulf of Thailand and over 30 identified prospects (1 million acres is contiguous in the southern area of the block and the remaining 400k is contiguous in the northern area).

70% of the outstanding shares are owned by management and top 4 shareholders-Extremely Bulllish- huge sum of wealth invested in the success of Coastal Energy by management!

Rig is contracted through June 2011; expect 50% development drilling and 50% exploration drilling.

From presentation; CENJF.PK is currently producing 12,500 boepd and generating significant free cash flow which will finance its exploration and appraisal program as well as build cash on the balance sheet.

Company talks about the possibility of 361 mmboe from grand total offshore prospective and contingent resources~ an additional 80 mmboe ( from Coastal estimates) the 361 mmboe is an estimate from Huddleston & co. as of 12/31/2009.

Total 1P+2P+3P = 48.4 mmbbl

Total regional brokerage firm that we follow have placed a strong buy recommendation on Coastal Energy Company:

Stifel Nicolaus- Sept 15th target of $7.75 for 12 months target of 6X cash flow est. Dec 2010 update~ 12 month target raised to $8.25

Cannacord - Dec 2010 report target of $9.25 for 2011~ estimates $196 million in CF or $1.69 cf/sh and estimates $65 million net income or .57/fully diluted shares. If we assign a CF value of 6X a share price of $10.14 results.


Many investor types will not want to play because or cen.v is not listed at present on a major exchange. Many will not play because it is foreign operation governed by a foreign law. Many will not want to play because they may not trust the audits or geological reports, Many will not play because he or she is just afraid!

The Auditor, Deloitte & Touche is ranked a top 5 Auditor in the world! ( Read the Annual report message for 2009~ visit website for report). When you look at management, property, CF, income/sh actual and potential, production and potential production and cannot see the discounted value in Coastal Energy~ then investing is not for you!

We rate Coast Energy Company with a Strong Buy Rating and believe that with higher oil prices and continued success offshore that the share price could easily double or triple from current depressed levels. We see almost zero downside risk at current levels and also believe that Coastal Energy would make for a juicy takeover candidate! We know that China and India are always looking for Oil worldwide and this company is just to cheap to ignore when there are some 360 mmboe potential resources within their acreage!

2011 story

We believe that 2011 could reward investor again with quality returns. As long as interest rates remain low and inflation remains tame Wall Street will be rewarded. See little chance in the unemployed number dropping much below 9.2% for all of 2011. The extension of the "Bush Tax Cuts" will help, but the pork that was loaded into the bill is just plain disgusting~ our National debt stands at some $14 trillion~ that is some 90% of our economy! Obama does not favor Capitalism and business does not trust him or like his policies~ Business will not hire and this economy will slug along. The rest of the world except Europe and the US will recover much faster especially Asia, India and South America, which will keep crude prices firm & headed towards $100/barrel by the summer of 2011. NG is the sleeper and one day this fossil fuel will wake up and investors in this group will be rewarded ( favorite penny NG). Another penny oil that we find very interesting and is worth a nibble is Mart Resources (mmt.v or .70), a Nigeria energy company. Visit their website and review the recent annual meeting 1 1/2 video conference~ good and worth the play!

Houston Chronicle on ATP's Wait for a Drilling Permit

When federal officials lifted the ban on deep-water drilling in early October, Houston-based ATP Oil & Gas was ready to roll.

The small production company was finishing up work on a well that tied into its Telemark production hub about 100 miles south of the mouth of the Mississippi River. It had filed a permit to drill a sidetrack off an existing well — a relatively low-risk proposal for the world of deep-water drilling. It was even revised and updated to meet all of the new requirements imposed on deep- water permits in the wake of the Deepwater Horizon accident.

"So I kept the crew out there because I felt certain the government meant what it said," ATP Chairman and CEO Paul Bulmahn said - that permit applications that met the new guidelines would be granted.

More than 70 days later, the company is still waiting. At a price of about $330,000 per day, Bulmahn has started to get impatient, leading him to take some actions unusual for the company.

First, ATP hired Washington, D.C., lobbyists for the first time to help push its cause.

"I usually look with great disdain on lobbying efforts," Bulmahn said.

Then he wrote a personal letter to President Barack Obama - copied to Secretary of the Interior Ken Salazar and Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement - pleading with him to "Please issue a permit so we can go back to work."

And on Sunday he ran the letter as an advertisement in the Chronicle.

"I can't afford to keep these workers employed and playing cards," Bulmahn said.

De facto moratorium?

It's a notion shared by many in the industry, which says a de facto moratorium remains despite the Oct. 12 announcement that the Gulf was open again for business. The administration says that's not the case, however, and that the bureau has added staff to work through the backlog of permit applications.

The bureau doesn't comment on specific permit applications that are still pending because the information is considered proprietary to the companies.

In the next few days, Bulmahn said he may have to pull the plug on the project, meaning some 200 workers will be off the clock or headed to work on offshore projects overseas. It's not just an idle threat: On Monday Israeli media reported that ATP was considering taking a stake in several offshore natural gas projects there.

"I can't comment on such speculation," Bulmahn said. "But the technology we've brought to bear in the deep water is being courted by governments around the world to help open up their natural resources offshore."

25 in shallow water

That's not to say there are no permits being issued in the Gulf of Mexico. Since July there have been 25 shallow-water permits issued, including six in December. Only 10 of those permits have seen drilling, however, meaning companies are choosing to hold off on putting crews back to work.

Only one of 15 new deep-water well permits has been granted since the moratorium was lifted on Oct. 12, with two pending as of Monday, according to the bureau's data.

But federal officials note 60 permits to modify existing deep-water plans have been granted, as well as 49 revised permits to modify well plans.

That a company like ATP must wait to get a deep-water permit is particularly frustrating to the industry, said Stephen Berman, a senior research analyst with Pritchard Capital Partners.

The company buys proven, undeveloped reserves - wells that have been drilled but deemed uneconomic by larger companies. That means it's often drilling in existing wells, often less risky than exploration wells such as BP's Macondo well that was being completed when it blew out in April, killing 11 workers and leading to the largest oil spill ever in the Gulf of Mexico.

Extra safeguards

The company's equipment tends to have more safeguards than many other operators' - deploying blowout preventers on both the seafloor and onboard the rig, for example, Berman said.

"ATP has the right business model and equipment for the post-Macondo world," Berman said. "They should be near or at the front of the line when the new permits for deep water start. But I can see their frustration as what appears to be a lot of foot-dragging."

While new wells can take years to reach production - meaning there's little direct correlation between current oil prices and new drilling - Berman said he suspects rising oil prices will likely increase the pressure on the administration to move forward issuing deep-water permits.

"The deep-water Gulf is where the large finds are, so if you're not making them, there's even more of a feeling of supply being constrained," Berman said.

ATP Management Open Letter to Obama

Monday, December 27, 2010

Looks Like ATP has a Tentative Agreement on Israel Fields

I'm surprised at the size of the prize here. 30% of 5 TCF of gas is more than all of ATP's current reserves.

Sources inform ''Globes'' that ATP Oil & Gas Corporation (Nasdaq: ATPG) has reached an initial agreement to acquire 30% of the offshore Myra and Sarah licenses and 50% of the Daniel license and Shimshon permit. No deal will actually be signed until after the Sheshinksi committee releases its final recommendations on gas and oil and gas royalties and taxes.

In October, Yuli Ofer acquired 50% of Israel Petroleum Company's (IPC) holding in Myra and Sarah, and committed to investing $28 million into the two exploratory wells planned for them in late 2011. Each well will cost $80 million to drill, and if they are successful verification wells will be drilled at an additional cost of $60 million each.

Shaldieli Ltd. (TASE: SHDL-M), which carried out a reverse merger with IPC in October, said that Myra could have 3.12 trillion cubic feet of natural gas and Sarah could have 1.65 trillion cubic feet, which gives them a value of up to $7 billion. However, the value plunges to $2.74 trillion when the 40% probability of geological success is taken into account. The values are based on Israel's current royalties and tax regime, but if the Sheshinski committee's reiterates its interim recommendations in the final recommendations, the values will be slashed.

Sunday, December 26, 2010

10 Risks to Watch in 2011

From Absolute Return Partners:

Reuters Picks Up ATP/Israel Story -

Note that this article suggests ATP is looking at one third of Myra and Sara and one half of Daniel and Shimshon (which I hadn't seen mentioned before).

Dec 26 (Reuters) - ATP Oil & Gas Corp (ATPG.O) is seeking to enter Israel's growing natural gas industry, the Globes financial daily reported on its website Sunday.

The newspaper said Houston-based ATP is looking to buy one-third of the rights and licence to the Mira and Sarah prospects and one-half of the rights to the Daniel and Shimshon sites.

Globes said ATP, which mainly operates in the deepwater Gulf of Mexico, will make its decision to enter the Israeli market after the Finance Ministry decides on its new taxation for natural resources.

A ministry-appointed panel has already issued an interim report calling for a rise in the government's take on oil and gas revenues through a progressive tax on companies that ranges from 20 to 60 percent.

The world's largest natural gas find in 2009 was the Tamar site off Israel's Mediterranean coast, which is believed to hold 8.4 trillion cubic feet of natural gas.

Israel has already issued a licence to Israel Land Development Energy IE.TA to develop Mira and Sarah, considered promising by industry exports since they are close to Tamar.

Globes noted the decision to enter Israel was based on an analysis of the seismic findings at Mira and Sarah.

Friday, December 24, 2010

Aberdeen International - I missed a 100% return in 6 months - still a big discount to NAV

Another pitch taken that I maybe should have swung at.

Time to Get a Little more Serious on Rose

I've been dancing around this one for months without doing enough work.  Exposure to whatever they have in the Alberta Bakken for virtually free.  And what they have could be pretty big.

Most recent update from Barrons

Back in mid-June, Barron's published an upbeat piece on Houston-based Rosetta Resources, a smallish oil-and-gas firm run by a team of seasoned execs who left the likes of ConocoPhillips and Burlington Resources to strike out on their own. Decades in the oil patch enabled them to snap up outsized stakes in a couple of the most intriguing shale plays, long before rivals began bidding up land prices in the Eagle Ford in South Texas and the Southern Alberta Basin in Montana.

The stock (ticker: ROSE) was trading at 25. As the accompanying chart shows, following publication of the story, the shares dithered for a spell, until spurting to an all-time high of 38 last week, closing Friday at 36.

What sent the stock soaring was more than just the sharp rise in oil prices. The sparkling gain also was powered by Rosetta's smashing success in the Eagle Ford.

In barely a year, production there has surged from scratch to an awesome 55% of the company's total output. And since the Eagle Ford is rich in premium-priced liquids, margins are expanding apace.

Rosetta caught Wall Street by surprise as it sharply bumped up its estimate of recoverable reserves from the Gates Ranch area of Eagle Ford, where it has drilled 22 wells with a 100% success rate, to 7.2 billion cubic feet equivalent per well, a huge leap upward from the initial estimate of four BCFE.

What the revised estimate implies at current prices is that each well's discounted net present value is $13.4 million. Assuming all 240 development locations were drilled this year, the value of Gates Ranch alone approximates a cool $3.2 billion—a stunning 40% more than Rosetta's entire enterprise value (stock-market value, plus net debt). And Gates Ranch comprises less than half of Rosetta's acreage in the Eagle Ford.

A wild card with potentially huge investment upside is 300,000 acres that Rosetta acquired in the Southern Alberta Basin in Montana. The acreage surrounding its first five exploratory wells, all of which hit pay dirt, contains 13 million to 15 million barrels of oil per square mile, according to Rosetta's early reckoning, an amount comparable to the famed and enormously productive Williston Basin just to the east.

Management, which has tended to understate and overdeliver, says it will release details about the Alberta Basin after drilling six more exploratory wells. However, CEO Randy Limbacher recently raised the possibility that Rosetta might "step up" exploration by taking on a partner, "if we can get the right deal done."

Rosetta's earnings are growing by leaps and bounds: from 38 cents a share in 2009 to an estimated 60 cents or so this year and $1.20 to $1.30 next—which translates into $3.30 in cash flow this year and a formidable $4.80 to $5.20 in 2011.

Despite the stock's nice run, there still seems plenty of room on the upside. At $35, it's selling comfortably below a current net asset value of $40 to $45, which by no means fully reflects the terrific potential of the Alberta Basin.

Jeff Rubin Interview - Calls for Triple Digit Oil Prices in 2011

Colin McConnell/Toronto Star

Nearly two years ago Jeff Rubin, former chief economist of CIBC World Markets, left Bay St. to focus on spreading a simple message: oil scarcity and higher energy prices are going to make our world smaller.

He wrote a book, embarked on a global speaking tour, won awards – including this year’s National Business Book Award – and now writes a blog that is picked up by the Huffington Post, among others.

Rubin has always been a maverick, and during his time at CIBC never hesitated to tell Canada’s oil and gas industry what it didn’t want to hear. A Cassandra of sorts, Rubin’s book, Why Your World Is About to Get a Whole Lot Smaller, talks about a coming age of triple-digit oil prices and how it will throw the machinery of globalization into reverse.

The Star recently sat down with the economist to find out if our world has, in fact, started to get smaller.

The Star: What’s your assessment of the latest oil supply and demand data coming out of the International Energy Agency?

Rubin: If you look at the world energy outlook from the IEA two things really stand out. About 80 per cent of the oil they expect the world to be consuming by 2035 hasn’t been found or developed. About 70 per cent of the oil being produced today will be depleted by then. The second interesting thing is that for an organization that’s always denied the existence of peak oil, they’ve basically acknowledged it by saying that conventional oil production – that is, the type we can afford to burn – peaked in 2006. I think that’s quite a ways for this agency to come.

The Star: What, in your view, does that mean for oil prices in the short term?

Rubin: The reality of this for prices is that we’re going to be at triple-digit oil prices within the first quarter of 2011. We may even be taking a run at the $147-high watermark (per barrel) before 2011 is over. The question is whether the world economy is any better prepared to operate at that level of fuel cost than it was in 2008. If it isn’t, we’re going right back into a recession, which is really the point of my book. It’s about how do we grow with triple-digit oil prices. That requires going from a global economy to a much more local economy. That hasn’t happened yet. It will happen. Certainly, that will happen if we have another oil-induced recession.

The Star: How much has the blowout of BP’s Macondo well in the Gulf of Mexico this past spring changed the dialogue around offshore drilling? Is the $40 billion that this is expected to cost BP sending chills throughout the sector?

Rubin: It’s taken the Gulf of Mexico, which was America’s great white hope of growing domestic production, off the map. BP has had to sell assets all over the world to pay for that, and this is the real moratorium on Gulf of Mexico drilling. It’s not the moratorium that Obama has extended to November 2011; it comes down to how many companies have $40 billion? If you look at how many are drilling in the Gulf of Mexico, how many of them can afford to lose $40 billion? BP can and survived, but if you’re a BP shareholder you’re taking a haircut. Exxon could survive too, and so could Chevron, but how many other guys can afford to take a $40 billion haircut? And even for Exxon and Chevron, do they really want to risk it? All of a sudden, this disaster changed the risk-reward scenario. People like to say BP was a rogue operator, which is wrong. BP was the most technologically sophisticated oil company in the world. If BP messed up, believe me, that’s the real embargo. If you’re the board of Exxon or Chevron, you’re saying look, “Those guys at BP just messed up, they were the No. 1 at deep water drilling, and they lost $40 billion—is this really worth it to us? Let’s go to Edmonton. Let’s go to Fort McMurray.”

The Star: What has the impact been on talk of offshore drilling in Canada?

Rubin: The toughest speech I ever had to give in my life, including my 20 years at CIBC World Markets, was last June when I was the keynote speaker at the Newfoundland and Labrador offshore oil and gas drilling convention. The president of Exxon was at the head table. Chevron was at the head table as well. I’m speaking in June and the Macondo well is leaking 50,000 barrels a day. And at this conference the talk is about drilling a well twice as deep as the Macondo well 400 kilometres northeast off the St. John’s Coast. And they’re all going, oh, it could never happen here. That’s bull. Over there, the people in St. John’s say we don’t have hurricane season. They say 400 kilometres northeast of St. John’s the hurricane season is 12 months of the year! Any day on the North Atlantic is equivalent to hurricane season in the Gulf of Mexico.

The Star: To what extent has the BP spill focused more attention on oil sands and other unconventional plays?

Rubin: It has certainly made people go one step down the bottom of the barrel, and the next step down from deep water is tar sands. All of a sudden China has invested $28 billion in the Orinoco tar sands (in Venezuela) and all of a sudden Fort McMurray is once again in the limelight, and on a scale never thought of before. We’re going to go to about four million barrels a day out of there. What would be next after Fort McMurray? That would be oil shale, and in a world of $200-a-barrel oil that becomes a real possibility. As we get closer and closer to that price we’ll see more capital spent developing oil shale technologies.

The Star: What will this renewed focus on the Alberta tar sands mean for the Canadian economy?

Rubin: Alberta is going to have Middle Eastern-type cash flows in this world. But the polarization, the impact of that, the mirror image of that is a $1.20 Canadian dollar against the U.S. dollar. That exchange rate is not going to deter Alberta’s bitumen exports to the U.S., but how many motor vehicles will Ontario be producing at $1.20 exchange? So we’re going to have a hell of a political fight over energy. Maybe the way that fight takes place is through pricing carbon emissions. You just put a lid on carbon emissions. The Harper government won’t touch that right now, but last time I checked Quebec and Ontario had more seats than Alberta. Right now people don’t see it in those terms, but believe me, they’ll start seeing it. They’ll see a few things happening together: higher oil prices, bigger exports form Alberta, higher exchange rate, more plant closures in Ontario and Quebec. When the Canadian dollar is trading at $1.20 U.S. and they’ve just announced Exxon has taken out Imperial Oil and plans to double their investment in the Canadian tar sands, this will get on the radar screen.

The Star: What’s your take on shale gas? Has it truly changed the fortunes of the natural gas sector, as much as many experts claim?

Rubin: The debate is about the real cost. If you exclude the natural gas liquids that come with most shale projects, is the real cost $4 per Mcf (1,000 cubic feet) or is it $8? If the real cost is $8 then a lot of people, like Chesapeake Energy, the biggest gas producer in the U.S., have a big problem. Is shale gas the sub-prime mortgage market of the natural gas market? Is this one giant con and investors are being conned into thinking there’s a huge supply of gas at $4 when it really costs $7 or $8 to bring it to market? In the fullness of time economics will assert itself, just as it did in the sub-prime mortgage market. But let’s, for the sake of argument, say shale gas is sustainable at $4 and that we don’t really care about the ground-water contamination or we’ve figured out a way to manage that in some sense, the question is, what has it done? It certainly hasn’t pulled down the price of oil. Boone Pickens aside, we can’t use natural gas to substitute for oil as a transit fuel. So if shale gas is real at $4 all it means is oil is going to be increasingly used only as a transit fuel around the world, though gas will be able to substitute for oil entirely as both a feedstock for petrochemicals, as a home heating fuel, and as a power generation source.

Thursday, December 23, 2010

And more info on the Sara and Myra Fields ATP is looking at

Start at page 24

Andira Energy

Source for more info on the ATP Israel field of interest

Tamar - field potentially similar to what ATP is looking at

ATP Potential Israel Venture Is a Big, Big Gas Field

In its notice to the Tel Aviv Stock Exchange (TASE) yesterday about its reverse merger with Myra and Sara offshore license partner Israel Petroleum Company (IPC), Shaldieli Ltd. (TASE: SHDL-M) included a revised report by Chapman Petroleum Engineering Ltd., which says that the licenses' gas fields are smaller than previously estimated, but that they have a greater probability of commercial production. IPC owns 13.6% of the two licenses, located offshore from Netanya, near the Tamar discovery.

On the basis of 3D seismic surveys of the Myra and Sara licenses, Chapman estimates that they contain 4.77 trillion cubic feet of natural gas in the best-case evaluation, based on Petroleum Resources Management System (PRMS). The high-end evaluation is 6.24 trillion cubic feet of gas, and the low-end evaluation is 3.29 trillion cubic feet. The Tamar gas field has 8.4 trillion cubic feet of natural gas.

The 4.77 trillion cubic-foot evaluation is less than the 5.71 trillion cubic foot estimate that Chapman estimated in its previous evaluation, in September. At the same time, Chapman increased the probability of geological success of the best-case evaluation at 43%, and the probability of commercial production to 40% from 30%.

The lower best-case evaluation gives the Myra and Sara licenses a value of $7 billion, less than the $7.68 billion value estimated by Chapman in September.

Myra and Sara license partners Modiin Energy LP (TASE:MDIN.L) and Israel Land Development Company Energy Ltd. (TASE: IE) said in response today that the evaluation of the licenses was based on a fast-track analysis of the 3D seismic survey by WesternGeco Ltd. The companies added that the full analysis was not yet complete, and that it will be published in a few months.

IPC is a subsidiary of Canada's Bontan Inc. (Bulletin Board: BNTNF).

ATP Heading to Israel ?

Another US energy company is considering joining Noble Energy Inc. (NYSE: NBL) in Israel's oil and gas exploration industry. Sources inform ''Globes'' that executives of ATP Oil & Gas Corporation (Nasdaq: ATPG), which has a market cap of $820 million, visited Israel in recent days and met with developers and owners of offshore leases, as well as with Petroleum Supervisor Dr. Yaakov Mimran.

The sources added that ATP is considering becoming a major partner in the Myra and Sara offshore licenses, or in the Daniel license and Shimshon permit owned by Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L). In contrast to the Myra and Sara license operator, GeoGlobal Resources (India) Ltd., which owns 5% of the licenses, ATP wants to own a large stake in them - up to 50% - in the same way that Noble Energy is the largest shareholder in Tamar, Leviathan and the Mari B (Yam Tethys) licenses.

During meetings with government officials, the ATP executives expressed concern about the Sheshinski committee's pending final recommendations. "They said that if the recommendations were not changed, they would reconsider coming to Israel. They asked to appear before the committee to say this to its members," said a source in contact with the executives.

Colin Campbell 2000 Peak Oil Presentation

Really quite amazing that he seems to have called the peak in conventional production to the year (2005).  If you will recall even the IEA now admits that conventional oil (you know the cheap easy to get out of the ground stuff) has peaked.

50. IEA

The International Energy Agency was established by the OECD countries in the aftermath of the shocks of the 1970s. In 1998, it succeeded in delivering a coded message.

· It showed how a "business as usual scenario" could not be fulfilled without inventing a so-called balancing item of Unidentified Unconventional, which miraculously rises from zero in 2010 to 19 Mb/d in 2020, when the identified makes a ceiling of only 2.4 by 2010. Since the identified deposits are huge, no one needs to find more. The so-called unidentified unconventional is accordingly a euphemism for rank shortage.

· Can anybody really imagine that oil price will still be $25/b when the Middle East supplies 62% of the world's needs.

As a political institution it could only send a coded message and was pleased when journalists decrypted it.

Wednesday, December 22, 2010

Passport Capital Q3 Investor Letter

Always worth reading.

Deustche Bank See Oil Price Spikes In 2012

Can't say I disagree.  The Saudis control the market as they have all the spare capacity.  We have seen that they are willing to withhold enough to quickly get oil prices back up from the $30s.

Once they run out of spare capacity.  There is none.

We refresh our Peak Oil Market work; spare capacity gone by 2012?

We've argued since early '08 that the oil age is ending owing to the
concentration of remaining reserves into government hands, & an attendant
under-investment cycle. Our focus: no supply growth + demand growth = price
spikes until demand growth = 0. The fact that 2010 demand growth (+2.2mb/d)
will likely be the second fastest for 30 years raises a red flag, especially as we work through OPEC spare capacity - prices will be spiking by 2012 if demand continues to grow at this rate.

* Staring into the crystal ball

What were the main developments over 2010? In this note we run through the
demand and supply side highlights, compared to our view a year ago, and look
forward with a refreshed view. Demand side, we highlight the surprising demand strength of 2010, despite $80/bbl average and rising prices, and focus on the major long term drivers: US cars, Chinese cars, and Middle Eastern demand. The battle is between US efficiency growth and GDP/population-driven emerging market growth. The shift from gasoline to diesel in the mix is a major theme.

* Is supply growth easy to predict because there is none? Not that simple

On the supply side, clearly Macondo was the biggest issue on the bull side
for oil prices, with Iraq the obvious offset. Deepwater Gulf of Mexico will
never resume its previous activity levels. We are confident of Iraqi growth,
but history says we shouldn’t be. Mexico has also surprised with lower declines and an opening to investment. Canada continues to do well. Global NGL growth is a major theme that is extremely hard to pin down – Eagle Ford liquids growth is hard to count.

* Near term outlook – which side of 2mb/d growth in 2010 are you on?

Although our commodities team expects tamer demand growth of 1.5mb/d in
2011, we see major upside risk to this view, starting with cold winter
globally. Recent backwardation and market tightening are bullish; the
fundamental drivers of demand are there: DB expects a weak-ish US$ through
mid-2011 and strong, 3.8% global real GDP growth. We look with interest to sub salt Brazil, Ghana, and Colombia supply growth, offset by North Sea and Mexico. OPEC seems to have moved its price target to $90/bbl at its most recent meeting with no supply raise.

Complete Growth Investor

I'll be writing articles periodically going forward for Complete Growth Investor as a "Value Voice".  I've known Tom Jacobs for quite a while and enjoy the product that the new portfolio managers put out.

By the way that isn't an actual picture of me, I used one of my brother as a joke.  I'm much more hairy.

Tuesday, December 21, 2010

Contango Spinoff of Core

If Ken Peak is interested, I'm interested.  But this tiny little company that he is spinning out looks like pure speculation.

Meredith Whitney Sees Spate of Muncipal Bond Defaults Coming

She talks a little too much, but she certainly had the credit crisis nailed.

Whitney Tilson the Marketing Machine

Full disclosure, I think he is a good investor and I enjoy reading his opinions.

But what a marketing machine.  First he lays out his NFLX short thesis for the world to see:

And manages to draw out a reply from the CEO:

Monday, December 20, 2010

CIBC On Petrobakken - Believe it was Profoundly Oversold

PetroBakken provided a Cardium operational update on December 17 that

we believe was very positive, demonstrating both above-average
productivity and addressing concerns over the timing of production

Initial seven-day production from PetroBakken's first 13 slick water fracced
Cardium wells averaged 415 Bbls/d, while 30-day production rates from its
first 11 wells averaged 245 Bbls/d.

Before year-end 2010, PetroBakken expects to have 57 (47.9 net) Cardium
wells drilled, of which 37 (31.7 net) are also expected to be on production
before year-end.

We maintain our Sector Outperformer rating and 12- to 18-month price
target of $27.00. We believe the stock was profoundly oversold

Howard Marks on Gold - You should likely own it, but is this the price to start at ?

Saturday, December 18, 2010

Petrobakken Cardium Results at High End Of Industry

It has brought 16 wells into production from November to date. The average initial 30-day production rate from the first 11 wells was 245 barrels of oil per day and average initial seven-day production rate from the first 13 wells was 415 bpd, PetroBakken said in a statement.

"The (production) numbers are at the high end of what any other competitors are saying for the same period of seven and 30 days, so I think they are getting top results for sure," Haywood Securities analyst Alan Knowles told Reuters by phone.

Friday, December 17, 2010

Quite a Few Forces That Should Start Improving Natural Gas Prospects

I haven't wagered money on it yet, but I am struggling not to.

Why is Petrominerales Up So Much Today ?

I understand that the market likes this news out of PBN:

And that explains why PBG and PBN are up 6% today, but why is PMG up 6% as well ?  Have they hit something big at Mantis ?  Or is Mr. Market not bright enough to distinguish between the entities.

If anyone knows what is up please let me know.

Some Well Results from Various Companies in the Cardium


IP7 Average has been 314 bpd
IP30 average 224 bpd
Low IP7 was 127 bpd
High IP7 was 615 bpd with 20 fracs.

IP7 average is 415 bpd
IP30 average is 245 bpd

IP30 average 250 bpd.
Has had a IP30 of 860 bpd.

Sparten Exploration
IP7 average is 322 bpd
IP30 average is 306 bpd

High IP is 774 bpd
Low IP is 116 bpd

2 wells
IP of 530 and 948 bpd.
IP30 range 175 to 500 bpd.

Link to December 8 Chesapeake Presentation Webcast

Insider Buying at Petrobakken

I count 8 insiders who have purchased shares over the past month according to  See the link below.  It certainly helps an outside investor add to a position when people inside are doing the same.  Buyers include the 3 big dogs Wright, Ruttan and Smith.

Thursday, December 16, 2010

Tilson Goes Into Serious Detail on His Netflix Short Thesis

We've lost a lot of money betting against Netflix (NFLX), which is currently our largest bearish bet, in the form of both a short and put position. In this letter, we share our investment thesis in depth and describe why, at a stock price of $178.50 and a market cap of $9.3 billion (based on yesterday's close), we think it's an exceptional short idea.

Time for a Good Old Fashioned Hostile Takeover of CHK

Big oil companies are willing to pay big prices for tiny slices of their assets.  Why not pay a tiny price for the whole thing ?

Wednesday, December 15, 2010

Petrobank abandons talks with on IOC

Article in the Calgary Herald that includes comments from Bloomer.  They still have one other that was supposedly close to finished (they said by year end a couple of weeks ago).

Negotiations with an unnamed international oil company to license its patented fireflood heavy oil recovery method have been abandoned, Calgary-based Petrobank Energy and Resources said Tuesday.

Chris Bloomer, senior vice-president of heavy oil, said the potential client was given an agreement signed by Petrobank in July through a third party, but since then it has delayed and attempted to reopen negotiations on use of the technology.

"We're not going to give the technology away," he said firmly in an interview. "We will say no and we'll move on."

Petrobank stock fell $1.03 or 2.4 per cent to $41.51 at the close of the Toronto stock market.

The tentative deal was similar to that offered other licensees, Bloomer said, giving Petrobank a 10 per cent royalty plus the right to access resources in future on a joint venture basis.

In Canada, the joint ventures have been 50-50. Bloomer said the international deal was different but wouldn't give details. He also wouldn't say who the customer was but said it is not in North America or South America.

Although Petrobank never formally announced the tentative contract, Bloomer had been quoted as saying earlier this year that a deal was imminent and he said investors have been asking about it.

Friday, December 10, 2010

Are you kidding ? Stonegate Agricom hits $1.40

I was buying this thing at 60 cents in August which is very nice, but I was selling in October at 90 cents.  Hard to watch this one sail least I benefit through Sprott Resource.

Here are my earlier comments

Dan Loeb Third Point Q3 Letter

Dealbreaker has the letter.  Interesting to see that he was fishing in the Gulf of Mexico during the days of the BP oil spill as well, his catch was Anadarko debt.  Mine was a basket of ESV/SGY/CIE/DO/ATPG

Sabre Value Investing Directly in Single Family Real Estate

Edelheit investing directly in single family real estate.  And why not ?  Sensibly leveraged, sensibly priced with a sensible amount of liquidity to pass through any storms and you will always do all right.

Penn West Energy - The Player in the Cardium

They own half the Cardium.  Good article with Andrews.

The near-death experience is slowly ending. Over the past two years, provincial royalty changes and low natural gas prices all but eliminated field activity in central Alberta beyond routine production. Now an exploration frenzy is gradually building up, with a flock of companies and crews targeting Cardium tight oil and other emerging plays. At stake are billions of barrels of light crude.

Penn West Energy Trust owns the mineral rights to at least half of the entire Cardium geological formation. "The ERCB [Energy Resources Conservation Board] recognizes 10 billion barrels of original oil in place for the Cardium, including 1.7 billion that have already been produced," says Bill Andrew, Penn West's CEO. "In our view, original oil in place could easily be 15 billion barrels and I'd say a 20 to 30 per cent recovery rate is a realistic prospect. So there's potential there for production totalling tens of thousands of barrels per day."

Andrew gives full credit for initiating the Cardium play to other producers, particularly juniors. "NAL, Nexstar, Bonterra, and others saw the opportunity and moved quickly," he says. In essence, the technology that unlocked the Bakken tight oil play in southeastern Saskatchewan over the past few years has been applied by a handful of smaller companies to tight rock in Alberta. With Cardium estimates of oil in place running to eight million barrels per section, the outlook is bringing the junior sector back to life.

Penn West, now in the process of converting from trust to corporation, is Western Canada's largest producer of light and medium oil. These grades, which are significantly more valuable per barrel than heavy oil, make up 44 per cent of its total output, which currently stands at about 175,000 barrels of oil equivalent per day. The remainder is heavy oil (15 per cent) and natural gas (41 per cent). "Cardium oil is light-36 or 37 degrees API-and sweet. This is first-class crude," Andrew says.

In his view, the trusts and other larger independent producers are well-positioned to develop the play. "We have the resources to run pilot projects and refine the best methods for producing from difficult reservoirs," the Penn West CEO explains. "Once they've built up production to thousands of barrels per day, many juniors are happy to exit through a sale to a larger independent such as ourselves. They're explorers more than operators. The trusts, on the other hand, were always intended to be operators who specialize in squeezing as much oil and gas as possible from known fields."

The native of Prince Edward Island, an engineer by profession, joined Penn West in 1992 when its production was 500 barrels per day. Previously, he'd worked for Shell Canada, Gulf Canada, Canadian Occidental (now Nexen), Ocelot, and Opinac. Under his leadership, the trust consolidated a massive position in central Alberta through acquisitions from Petro-Canada, Cabre, PanCanadian, Canadian Occidental, BP Amoco, Petrofund, and Canetic. "We probably own 60 per cent of Cardium play, perhaps more, and we're still buying," Andrew says.

His big-picture goal: to halt and possibly even reverse the long-term decline in conventional oil production from the Western Canadian Sedimentary Basin (WCSB). Daily output from the basin peaked in 1973 at 1.74 million barrels per day. In 2008, WCSB conventional oil production stood at one million barrels per day, a 42 per cent drop. Alberta's output over the same 35 years plummeted by 65 per cent, from 1.43 million barrels per day to 505,000.

A simple fact underpins Andrew's optimism for the future: most of the WCSB's conventional oil is still in the ground. Petroleum Technology Alliance Canada (an industry association) pegs the basin's original oil in place at 98 billion barrels, of which 77 billion remains untapped. Unaided, only a certain amount of oil will flow into a wellbore. Add flooding with water, lighter hydrocrabons, or CO2 and the recovery percentage will rise. In Leduc pools and other reservoirs in which rock has excellent permeability and porosity, recovery rates can reach as high as 60 per cent.

Formations with tighter rock and less permeability have yielded far smaller shares of their oil in place. These reservoirs could not be effectively tapped with vertical drilling and fracturing. "The combination of horizontal drilling and multi-stage fracturing has dramatically improved our capacity to economically produce from tighter rock," Andrew says. One measure of the importance and speed of this development: In 2007, 90 per cent of Penn West's drilling investment went into vertical wells. For 2010, horizontal operations should account for 90 per cent.

The Cardium formation is typical of the tighter oil prospects, with just 17 per cent of its estimated original oil produced to date. The reservoir consists of tight sandstone, with pay zones characteristically about seven metres thick. Where the sand became intermingled with chert gravel beds, porosity and permeability improves dramatically. These "sweet spots" account for central Alberta's prolific Cardium fields, including Willesden Green, Garrington, Caroline, Carrot Creek, Harmattan, and Keystone.

The granddaddy of them all, though, is the Pembina Cardium. This sprawling oilfield near Drayton Valley has produced 1.3 billion barrels since drilling began in 1953. In fact, Pembina briefly was the world's largest onshore oilfield, Andrew says, and it's still considered one of this continent's top 10 conventional fields. Penn West has 485 net sections of land in the west-central Alberta Cardium, producing 25,000 barrels of oil equivalent per day from 2,400 net wells.

"As our technology improves, we'll see higher estimates of the original oil in place for formations like the Cardium," Andrew says. He points out that Cardium production to date has been very concentrated within the permeable sweet spots. For example, less than one per cent of the Pembina field's total area accounts for 250 million barrels produced to date. More than 400 million barrels have been pumped from less than 10 per cent of the Pembina field. At Willesden Green, 10 per cent of the field's area has yielded 500 million barrels.

NAL and other innovators have focused their recent horizontal drilling on tighter reservoir rock along the flanks of the historical sweet spots at Pembina and elsewhere. Their successes indicate that a far larger portion of the formation could very well become profitably productive in the future. That's an exciting prospect. From its heart at Drayton Valley, the Cardium formation arcs south past Cochrane, north beyond Edson, east as far as Calgary, and west to the Rocky Mountains. In area, the Cardium formation ranks among the most extensive in North America. (Andrew says its only real peer on this continent is the Viking formation of Alberta and Saskatchewan, also now emerging as a hot tight oil prospect.)

Much of this immense, easily accessible prospect is well-known to be oil-bearing. A typical Cardium vertical well in tight rock, fraced once, flushes 30 barrels of oil per day, then declines to about seven barrels over a couple of years. On the plus side, that low-rate production continues for decades. Thousands of these stripper wells dot western Alberta. Although the Cardium was rarely a drilling target outside of known oilfields, a producer who'd failed to score on a deeper primary target sometimes chose to frac and complete in the Cardium zone, hoping to recover some of its costs.

A vertical well in the Cardium would typically cost about $1 million to drill, according to Penn West. A horizontal well, fraced at eight points along the wellbore, should generate oil production equivalent to eight vertical wells yet costs only $3 million, including completion and tie-in. That cost is expected to fall with greater experience. Even now, returns from Cardium tight reservoir projects are promising.

Andrew says the existing low-output vertical wells provide excellent well control along with infrastructure like gathering pipeline systems and access roads. "We're in a strong position to get up the operating curve once we learn how to produce from tight Cardium rock," he comments. Penn West's capital expenditures budget, slated to fall between $750 million to $900 million this year, includes 30 to 35 Cardium wells in west-central Alberta. That could rise, as could the $100 million designated for the play this year.

Meanwhile, the trust is also focused on recovering additional oil from the Pembina Cardium's sweet spots, where 70 per cent of the original crude typically remains in place. Here an operating challenge is high water cuts in production due to extensive earlier floods in the historic field. Penn West is reportedly making progress with this work, although much of the results to date remain confidential.

Beyond central Alberta, Penn West has tight oil initiatives at Waskada in southwestern Manitoba, Dodsland in Saskatchewan (a Viking play), and Swan Hills and Otter in northern Alberta. At Otter, for example, the trust is redeveloping a play in the Slave Point carbonate formation through horizontal and stage frac technology. Current production is currently 3,000 barrels per day (40-degree API crude) from 315 vertical and six horizontal wells. Pay thickness is typically 10 to 15 metres, porosity 5 to 10 per cent. Although the horizontal wells will likely produce just 50 barrels per day after flush production, they are expected to be profitable at today's crude prices (again assuming a suitable provincial royalty structure).

Thursday, December 9, 2010

Bromwich Dec 8, 2010 Remarks

Come on Bromwich, just tell me when you are going to give ATP their next permit.

Interesting excerpts:

On October 1, after completing this intensive fact-gathering process, I submitted a report to the Secretary that described the progress that had been made and outlined recommendations on moving forward. The Report concluded that sufficient progress had been made on the constellation of issues that originally supported the moratorium to justify lifting it almost two months ahead of the November 30 expiration date.

What had changed that allowed us to feel comfortable with that decision? First, containment capabilities had improved – industry had developed a number of containment mechanisms intended specifically for use in deepwater. Going forward, we expect further improvements in this area. As you know, industry has committed to develop a permanent inventory and widely available set of containment resources that will be available in the event of future deepwater blowouts. The first initiative in this area was the Marine Well Containment Corporation launched by the four majors in July, and subsequently joined by BP. The second and more recent initiative has been formed by approximately two dozen independent and smaller operators
centered on Helix and its vessels.

A second important development was that the attempts to permanently plug the Macondo well had finally succeeded, and oil was no longer flowing into the Gulf. This meant that a significantly greater number of spill response resources had become available in the event another spill took place.

Finally, we had implemented a number of new rules and regulations, which became effective immediately and significantly raised the bar for drilling safety.

On the basis of this information, the Secretary lifted the moratorium on October 12, 2010. Since that time, BOEMRE has been working diligently to review applications for permits to drill in deepwater and ensure that they comply with the new regulations. We are still facing a severe shortage of resources but have temporarily re-assigned personnel from other regions and reallocated within the Gulf of Mexico region to assist in the review of permits in the Gulf of Mexico. My staff is working hard to process permit applications. We are not slow-walking them in any way or for any reason. Despite frequent claims, comments and slogans to the contrary by industry representatives and their allies, there is no de facto moratorium. Our progress in processing permits has been slower than industry would like, but we have been doing the best that we can with the resources we have. Comments that suggest anything else are neither factually accurate nor helpful in any way. In fact, they are an insult to the hardworking men and women in our agency. I want to be clear: we will not cut corners in the permit review process and permits will be approved only when we are satisfied that all applicable regulatory requirements are met. Our priority remains, as it must, to ensure that oil and gas drilling is done in a safe and environmentally responsible manner.

US Senate Holds Up Presidential Nominee - Seeks Deepwater Drilling Info

Any help is appreciated.  I wish I could sue BP/Bromwich for lost investment profits on ATP.

WASHINGTON -(Dow Jones)- A Louisiana U.S. Senator is placing a hold on a key presidential nominee to the National Oceanic and Atmospheric Administration, saying the Obama administration's offshore drilling policies have raised "significant outstanding concerns."

Sen. David Vitter (R., La.), a vocal critic of the deepwater drilling ban, said Thursday he would hold up the nomination of Scott Doney to be chief scientist of the weather agency's commerce department. The president nominated Doney in August.

Vitter plans to hold up the nomination until top-level officials testify before Congress on the deepwater drilling moratorium and until Secretary of the Interior Ken Salazar identifies steps his agency is taking to speed up the approval of new offshore drilling permits.

"I am uncomfortable confirming a high-level science advisor within your administration while there remain significant outstanding concerns over scientific integrity at federal agencies and the White House," Vitter said in his letter.

In the wake of the Deepwater Horizon oil spill, Vitter criticized many aspects of the administration's offshore drilling and exploration policies.

Earlier this year, Vitter accused the administration of misrepresenting the views of a handful of scientists to make it look like they supported the temporary ban on deepwater drilling.

The Interior Department's Inspector General said in November, however, that the administration had not violated any law. The inspector general also said the administration had taken appropriate measures to apologize to the scientists for misrepresenting their views.

Earlier this year, another Louisiana lawmaker, Sen. Mary Landrieu (D., La.) held up the president's nomination of Jacob Lew to head up the Office of Management and Budget. She has since lifted the hold and Lew has been confirmed to the post.

Like Vitter, Landrieu said she was frustrated with offshore drilling policies adopted by the administration in the wake of the Deepwater Horizon oil spill.

A spokesman for the White House was not available for immediate comment.

Schaefer on the Cardium

In his usual marketing some interesting comments on the Cardium.  Of interest to me because of the large position that Petrobakken has.

Here his website, he does good work:

What mergers and acquisitions will happen in the Cardium oil play in 2011?

In the last half of 2009 and the first half of 2010 the Cardium was the hottest play in Canada. Valuations moved up quickly through late 2009 and the buyouts started with Daylight Energy (DAY-TSX) buying Highpine.

Then valuations exploded into 2010 as Petrobakken (PBN-TSX) announced - on the very first day of trading, January 4 - the first of its three takeovers of junior Cardium players, which would happen over three months. Daylight would also buy one more company, West Energy (which was an 80% win for OGIB subscribers in just a few months..)

The reason for all the excitement was that the Cardium has produced more oil than any other formation in Canada – it’s BIG, arcing over 1000 km along the Rocky Mountains in Alberta.

And the oilpatch just realized that a well known but previously unproductive, tight zone in the Cardium – the A Zone - was now economic, thanks to horizontal drilling and multi-stage fracing.

Here was a well known zone that had no exploration risk – it had been drilled through many times as producers went after the deeper B Zone, which was easier to produce from with regular vertical wells. The Cardium A Zone quickly became Canada’s second big tight oil play after the Bakken in Saskatchewan.

There was a Cardium mania for the first three months of 2010 as the BIBA machine – Brokers, Investment Bankers and Analysts – and investors, remembered the billions of dollars they made off junior and intermediate producers in the Bakken as it was developed in the last decade. Cardium stocks soared.

And now, in December, the market can say that well results have borne out earlier investor enthusiasm. But there was a lot of scepticism in the markets through the spring and summer. (Alberta Bakken investors take note!)

The word on the Street – rightly or wrongly - was that Petrobakken overpaid a lot for those companies, and its stock was hit hard.

Between the Petrobakken hangover and the soft market for junior oil stocks in Canada during the spring and summer, most of these junior Cardium producers didn’t see their stocks get back to the levels they hit during the January mania until late in the year. And there has been no M&A activity since Petrobakken’s buying spree ended.

Scott Ratushny, CEO of junior Cardium producer Midway Energy (MEL-TSXv) says 2011 could see more corporate activity in the Cardium, but it depends on what the buyer is looking for.

“I think some of the trusts coming out of the “trust mode” are looking for a focus, but most companies in the Cardium aren’t pure Cardium players, or even a pure oil player,” he says. “They might be 30% oil or 20% weighted to Cardium. That may be too much ‘noise’. I think all the pure plays will eventually get bought up.”

Energy analyst Kevin Shaw from Wellington West Capital Markets in Calgary says that junior Cardium producers aren’t in a rush to get bought out, as “all the players are seeing the play getting better as improvements / technology evolve.”

“And for those players holding key acreage positions, time is on their side to get higher takeout prices, not lower. Some guys have had the ability to sell but have decided not to because time is on their side.”

Shaw adds that M&A activity will pick up in 2011 because companies can’t get big land positions in the Cardium unless they make an acquisition with existing land holdings. Buying land from crown land sales is not really an economic option with prices through the roof, nor is there enough crown land available within the play, he says.

“Skywest (SKW-TSXv) Midway, Bellatrix (BXE-TSX), etc. – these guys will all be candidates for takeouts and I fully expect the Cardium to attract top tier takeout valuations, given that it is a repeatable oil play which the bigger players like, and require, for longer term sustainable growth,” says Shaw.

Vero Energy is one of several gas weighted juniors who discovered they had dozens of sections of Cardium lands as the play got popular. The new Cardium oil play literally saved a lot of gas producers in Alberta from an ugly 2010. CEO Doug Bartole said much of the Cardium has “been held for years; it’s in the heart of the old oil patch.”

He said they recently bought one section, but that no big land packages are left – which lends credibility to Shaw’s contention that any new entrants will have to buy their way in.

Alberta Bakken

I've been following for a while.  Primary Petroleum is about all that I have written about.  There are a couple of companies with big land positions here and they likely got in pretty inexpensively.  Those being Crescent Point and Rosetta.

If you've never heard of the Alberta Bakken light oil play, you're not alone.

Although it has gotten some attention in industry publications, it has yet to make a big splash in the mainstream media.

Beyond the usual army of penny stock speculators and a handful of energy analysts, few people outside of Alberta's tightly knit oilpatch are tracking it.

Keith Schaefer, editor and publisher of the Oil & Gas Investments Bulletin -- and a big believer in the Alberta Bakken's potential -- recently dubbed it the "stealth play" of the year.

Unlike Saskatchewan's prolific Bakken play -- an extension of the Williston Basin, which extends into North Dakota and Montana and ranks as North America's largest onshore oil find in decades -- the Alberta Bakken has yet to produce any oil.

A handful of junior stocks with exposure to the play -- which stretches from southern Alberta into Montana -- have already enjoyed big run-ups, but the speculative buzz has thus far outpaced any tangible results.

"Some big companies on both sides of the 49th parallel have spent millions buying thousands of acres of land -- with almost no well data," Schaefer wrote in a commentary last month.

"This flurry of activity says the industry is convinced the Alberta Bakken could be North America's next big play."

Maybe they're right. Or maybe not. In reality, it's just too early to say, asserts Brian Kristjansen, an energy analyst with Canaccord Genuity in Calgary.

"I'd say the Alberta Bakken is fairly well-known (among industry geologists), but it's extremely undeveloped. There's basically no real data out there in terms of well productivity," he says.

"There are 14 wells that are drilling or being completed that I'm aware of, involving companies like Crescent Point, Rosetta Resources, Newfield Exploration, Primary Petroleum, Bowood Energy, DeeThree Exploration, Argosy Energy and Murphy Oil. And this week we've seen Legacy Oil & Gas entering a farm-in deal with Bowood Energy."

Global energy giant Royal Dutch Shell has also reportedly begun a drilling program in the area.

Still, if one considers the 1,000-plus wells drilled in Saskatchewan's Bakken over the past five years, where reserve estimates have ballooned to roughly five billion barrels of oil, it's clear that the saga of the Alberta Bakken is still in its infancy.

Even so, Kristjansen says producers believe the innovative horizontal multistage fracturing technology that opened up Saskatchewan's Bakken to early players like Mission Oil & Gas -- then led by Trent Yanko, who sold out to Crescent Point in 2007 and formed Legacy last year -- will also unlock the riches of the Alberta Bakken.

"It's a black shale formation with the same depositional geological time sequence as the Williston Basin. It's highly oil-saturated and the expectations are that it could be a Bakken analogue, which is why they're calling it the Alberta Bakken. It's like a twin," he says.

Schaefer, citing recent reports on the Alberta Bakken by analysts at BMO Nesbitt Burns, Macquarie Securities and Haywood Securities, says prospects for rapid production growth look promising. "(They) have all acknowledged that the Alberta Bakken is a deep, overpressured formation. This leads them to believe that the deliverability (economics) may be superior to the main (Saskatchewan) Bakken play in Viewfield, but lower than the North Dakota Bakken," he says.

"Like most horizontal, multi-fracked wells in the Bakken, it is assumed that the initial flow rates of the Alberta Bakken will be high, with high decline rates and a relatively large total amount of oil recovered."

The momentum behind the Alberta Bakken only shifted into high gear in September, when Crescent Point -- the biggest player in Saskatchewan's Bakken -- disclosed that it had assembled more than one million net acres of undeveloped land south of Lethbridge that it regards as prospective for light oil.

At the time, CEO Scott Saxberg said the play could have a huge impact on Crescent Point's output. "We have the potential to more than double our company, if it hits. The area is so massive, and if it truly is similar to the Saskatchewan Bakken, then it's pretty significant."

Crescent Point acquired the bulk of the land from financially troubled, privately owned Darian Exploration for $96 million.

"My understsanding is they (Crescent Point) are drilling under a broker's name, Antelope Land, but that's just speculation at this point," says Kristjansen.

"There are lots of rumours on the street about what their wells have actually done. There have been photos sent around of their well flares, trying to judge how big the oil well is, based on the flare. So there's just a real vacuum of information right now. But I'm sure any positive information that comes out will float all boats immediately."