MMT- Q2

As usual, good analysis. Only change I'd make is to use higher line loss assumption. The grapevine says theft increased during the Q.

2P numbers should see nice bump on U10 results. I assume about ~3MM 2P increase net to MMT (roughly 15%/$100MM net increase in NPV).

While 3P offers nice upside, there is SIGNIFICANTLY more potential on the two step out targets (close to ~100MM gross 2P). That means reserves have potential of tripling. I think there is good to excellent chance of at least seeing 100% gain in NPV (with corresponding implications for production/cash flow/earnings/share price).

As such, focus on current numbers is somewhat myopic - the really interesting developments for MMT are coming in the next 12 months. As such, MMT remains far and away my biggest holding and will hold every share tight (and add more if the usual nitwits and nimrods do what they always do).

INA vs IAE -

There is significant risk with Ithaca since Athena is underperforming. It is all but certain that one Athena well will require an expensive workover. And since they have 3 wells with similar design, potential for needing workovers on each well is high. Additionally, production is down qoq, which is totally unexpected development, as Athena was on for half the quarter, mostly at high rates. Rates "should" have nearly doubled.

I think the market remains blissfully ignorant of the potential problems with Athena. And falling production qoq even with big bump from Athena means older fields are under performing. Q3 will likely see continuation of poor performance -

I think IAE is risky at current prices due to Athena issues - and I was a big fan of Ithaca before Athena issues cropped up. I sold a large position on the news and will not re-enter until there is clarity.

INA will do a farm out - no equity. Anywhere from 30-50% depending on if they want to fully fund Orlando and Kells together or separately.

The problem with INA is that they now say Q1 '14 production at Orlando. In the last 3 months, production has slipped a year due to rejiggering start up of Kells and Orlando.

That said, at current ~$35MM EV, very hard to see downside risk considering NAV >$700MM (including $90+MM cash). Plus cash flow will zoom over $200MM when Orlando is online (and close to $300MM with Kells). They are trading at a huge discount to Proven reserves (16MM boe), let alone 2P (33.5MM boe).

Farm out process is on-going and expected to conclude mid Q4. Then expect credit facility to be increased and finalized (hoping for boost in facility based on increased Orlando ownership). Then about the same time, we should see results from the Trent 5z well (previous well produced as high at 20MMcfd), closing of the West Wick purchase, plus potential for sizable bid round awards with existing reserves should provide catalysts over the next few months.

I think INA will be a multibagger. Whether it is only 2x or 5x, only time and execution will determine. But I see it as one of the best risk-rewards around and am investing accordingly. For such returns, I am prepared to be patient. And should we see some year end tax loss selling (I hope we do), I'll add even more.

Novus - they won't meet cash flow guidance as they are assuming $95 WTI. They continue to significantly outspend cashflow even assuming their generous energy prices. So debt will continue to rise. They already trade at full value on 2P NPV10 after tax basis, so current EV is one of the most generously valued in Canada - expecting much share appreciation is not realistic methinks.

While Novus has decent land package and outlook, they are not cheap - looks like it will take several years to get to self funding status - in the meantime, they are increasing debt. And with WTI looking to hover closer to $80 than $95, their production growth will slow as they tap out their credit facilities.

Novus is following the tired old game in Canadian juniors where they "grow" via debt in the hopes of finding a buyer before their debt load crushes them. Go look at high netback Arcan/SCS and see how that's worked out...

MMT -Plenty of nimrods will sell. It's the nature of the beast. But I won't be selling - just the opposite - I'm looking for a nice entry below $1.35 so as to grab ~15% divvy for a new divvy portfolio I recently funded.

Show me another play that pays 15% divvy, is certain to grow reserves near term with upcoming U10 results, and offers potential to double reserves when that step out well is drilled later in the year. And then is likely to grow production 2-3x when the new pipeline comes online a year or so from now - and be able to raise the divvy even higher.

JBR - looks like a small offshore field = expensive to develop. JBR had ~$5MM in cash as of Mar 31, so significantly underfunded to develop this field.

Mira estimated they needed $60MM to drill a development well on their TSB field, install a platform and an export line. These JBR guys say they expect to tie-back to a near-by field. I presume they need to install a platform and perhaps drill a development well as well. If so, they need $60MM plus working capital. Maybe a $75MM equity raise - for a play with a current $15MM MC (and over valued at that).

Finding cash in this market to develop the field will be extremely difficult. Equity will result in ruinous dilution.

I am dubious about this field since it has been sitting around almost a decade without any work being done. Marginal Fields have seen a lot of tire kickers since they were awarded in 2003 due to the superior fiscal terms. As such, I suspect the economics of such a small offshore field are tenuous.

Wouldn't touch this play until a lot more details are known, funding is in hand and drilling imminent.

Suggesting this could be another MMT is difficult to believe. The economics of offshore development are much less attractive than onshore, absent a very big discovery (which is not going to happen).

INA - $60-$80MM PP announced.

IONA ENERGY ANNOUNCES FILING OF PRELIMINARY PROSPECTUS FOR AN OFFERING OF A MINIMUM OF CAD$60 MILLION AND A MAXIMUM OF CAD$80 MILLION OF COMMON SHARES

Iona Energy Inc. has filed a preliminary short form prospectus in connection with a public offering of a minimum of $60-million of common shares of the company and a maximum of $80-million of common shares. The offering is led by Casimir Capital Ltd., and includes a syndicate of agents consisting of Clarus Securities Inc., Mackie Research Capital Corp., AltaCorp Capital Inc. and National Bank Financial Inc. Iona has also granted the agents an overallotment option to place, on the same terms and conditions as the offering, up to an additional 15 per cent of the total number of common shares sold in connection with the offering. The option is exercisable, in whole or in part, by the agents at any time up until 30 days after closing of the offering. The offering is being made in each of the provinces of Canada, other than Quebec. Closing of the offering is expected to occur on or about March 27, 2012, and is subject to receipt by the company of credit approval for its syndicated credit facility as further described in the company's news release dated Feb. 28, 2012, and other customary regulatory approvals.

The company has agreed with the agents that the net proceeds of the offering, including any net proceeds received upon the exercise of the overallotment option granted to the agents, will be used by the company to finance the company's development of its Kells oil assets, to acquire the West Wick oil assets, for development engineering of the Orlando oil field, for general and administrative expenses, and for working capital and general corporate purposes.

A preliminary prospectus containing important information relating to the offering has been filed with the securities commissions or similar authorities in each of the provinces of Canada, other than Quebec. The preliminary prospectus is still subject to completion or amendment. Copies of the preliminary prospectus may be obtained from the agents, care of Casimir Capital Ltd., and are also available electronically on SEDAR. There will not be any sale or any acceptance of an offer to buy the securities until a receipt for the (final) prospectus has been issued.

INA - $130MM syndicated debt facility. So much for the rumor of all equity. I'm very pleased as this keeps equity portion low and leverage high...

IONA ENERGY ANNOUNCES PROPOSED CORPORATE SENIOR SECURED RESERVE BASED LENDING FACILITY OF USD$130 MILLION

Iona Energy Inc. has reached an agreement in principle with a syndicate of lenders composed of Royal Bank of Scotland PLC, Lloyds Banking Group and a third U.S. bank for the purposes of providing a $130-million (U.S.) secured reserve-based credit facility. The lenders have delivered to Iona an indicative term sheet, final credit approval has been obtained from Lloyds Banking Group, and first-stage credit approval has been obtained from Royal Bank of Scotland and the U.S. bank based on terms and conditions within the term sheet in the usual manner. Final credit approval from Royal Bank of Scotland and the U.S. bank is anticipated to be obtained on or about March 27, 2012.

In accordance with industry practice, the credit facility is subject to continuing and customary due diligence, as well as completion of definitive credit agreements. Drawdowns on the credit facility will be subject to such conditions precedent and covenants as are typical of reserve-based credit facilities. The credit facility is intended to be for a term of five years. All amounts advanced under the credit facility will be related to Iona's interests and development work programs within the Trent and Tyne gas fields, the Kells oil field, and the Orlando oil field.

INA - that's what the rumor is. I don't like it, especially as they repeatedly said they would float debt (but they were also "supposed" to announce that weeks ago). Now the question is how much dilution?

The upside is still there, but not as much. The offset is no debt/lower risk profile. I'd expect to see a PP around $0.60 level and then a rush to push it higher as INA will be significantly derisked. My plan is to enter on "news" of the PP.

INA - expecting significantly more dilution, so be careful. Looks like they will be using all equity and not debt/equity. Dilution effectively doubles. I'd expect some sort of PP around current prices.

Iona (INA.V). Best value in the NS and my best newish idea. Going from 600 boed gas to exit around 10K boed - and to 12-15K boed mid '13 to 16-20K 2014. Current MC is around $75MM. 2P NPV10 after tax is around $400MM. Should cash flow close to $250MM in 2013. Needs to raise $200MM. $100MM via syndicated debt, $50-$70MM equity and the rest from cashflow. I expect 100% dilution, but post dilution should cf $0.70 to $1 in 2013 (vs current sp of $0.56). Even low 2x cf multiple implies very healthy share price.

TECO - oil "discovery" is complete fraud/scam

Govt of Belize publicly repudiates TECO's claims:

MMT - the lower zones won't be reamed out at a later date - no re-accessing the lower zones once they complete the upper zones of the well. The lower section was purely for exploration results/reserve information. Now they've got the info, they can design a well to handle the added depth and pressure.

But that's a problem for another day. They need to somehow get all the current behind-pipe oil into the p/l in the meantime. And without any explanation as to what may be the solution to the issues, nor timing of same, the market is left to assume the worst.

Wade deserves to be horsewhipped for this NR. It is disgracefully incompetent.

Blackbird - people need to be much more careful when bandying about boe's these days. 1000 boed may sound impressive, but when mostly natgas, it's barely worth anything beyond the value of the liquids.

And NA natgas supply is still expected to increase yoy despite low prices - solely due to continued fast pace drilling of liquids rich gas and oil shales that have meaningful associated natgas. And the glut will get worse over time as the high declines from early wells morphs into long life slow decline base production.

Anyone investing a dime in plays that are predominantly natgas need to give their head a shake - it's not going to get meaningfully better any time in the next decade - not until there is significant export capacity available.

C <<If you have a good year, boom, next year SRB goes through the roof. >>

In some cases, perhaps. But not likely for CEN while they are still in heavy capex phase of development/exploration (ie next few years).


SRB is based on several criteria - mostly capex spend coupled with amount of drilling - the more drilling done/capex you spend in relation to your revenues, the less SRB kicks in.

As for POE, they got hit with SRB when they enjoyed some high rate wells and were seeing oil spike to ~$147 - a double whammy as they couldn't raise capex fast enough to shield themselves from SRB.

Cl001 - SRB has been analyzed - repeatedly - over the years on the CEN IV board (easily the most-informed board around). And CEN does give guidance on both cash flow and provides sample SRB calculations right in their presentation.

POE's SRB terms are different than CEN's - POE has lower drilling allowance offsets and thus lower threshold for SRB to kick in. That said, POE has only been paying ~30% taxes in recent years as they've maintained fairly aggressive drill campaign.

Net effect of SRB on CEN for the next several years while capex spend remains high (and likely to head higher) is minimal.

CEN - Sigh. There is a misunderstanding of how/when SRB kicks in. While under active exploration /development, Thailand offers very competitive tax rates, which are better than Indonesia in almost every instance. Thailand's tax regime is excellent for juniors as it allows deductions for capex, which shields them from paying taxes when it is needed most (ie early in a field's life when capex is high and production/cashflow modest). Tax rates climb once development slows and fields mature and go into "harvest mode" - from my perspective from someone who invests exclusively in juniors, I find that sane taxation policy as it incentivizes companies to aggressively drill and develop while allowing fast return of risk capital.

MMT, until they renegotiated their operator status in 2011, was paying ~60% tax plus 8% royalty- significantly higher than CEN. (MMT now pays about 35% effective tax but royalties will rise to ~20% in the next year or two as production rises).

Those that think 50-60% is outrageous might be shocked to learn that effective tax/royalty rates in the UK/US are often very similar (particularly in sought-after plays like the Bakken/Eagle Ford etc where land owners demand fat royalties).

Anyone who is concerned about the effect of taxation in various companies operating in different countries merely needs to look at the 51-101 reserve reports which value reserves after all taxes/royalties are accounted for. So long as everyone compares apples to apples (ie look at similar reserves at similar oil prices), there shouldn't be confusion.

SDX vs TGA - As c said, you are comparing apples to oranges. SDX has no cash, is raising highly dilutive capital (and a bunch of debt), with production growth ~18 months away (and subject to usual delays). Is offshore, with significantly higher production risk profile (vs relatively shallow, low risk, low cost onshore). Plus Arata is a piece of work - I remember his scummy large insider sells at Centurion just before they announced their wells were watering out prematurely - and "guidance" (aka fantasy) was slashed and the shares collapsed. WAY different from uber conservative management at TGA...

I wouldn't touch SDX - not when they pay 20% royalties to the vendors on the new production they are taking the risk (and suffering huge dilution) to develop. SDX shareholders better hope that this new purchase doesn't turn out like the much touted Kom Ombo disaster...

If you want VASTLY better value with similar production and development risk, I'd buy Iona (INA) long before I'd touch SDX. INA is trading just above cash with a bit of natgas production (that gets $8-$10mcf). Will get to ~8K boed exit this year when Staffa comes online (about 60% oil weighted). Will get to ~12-15K boed mid '13 when Orlando and Tyne NW are online.

Any reasonable comparison shows Iona is significantly better value than SDX. That said, INA needs to raise some cash to fund their $200MM capex program this year - ~2/3rd is expected to be coming from a syndicated debt facility (expect news in a few weeks) and the remainder is equity - could suffer ~100% dilution, but they'd be funded to get to ~$1 cash flow next year on fd post-dilution basis (vs current share price around $0.38). Thus even uber low 2x cf multiple implies a $2 stock (which would also be supported by about 25MM boe 2P reserves). Equity placement waiting on news of currently drilling Orlando horizontal development well (TD in the next week - logging to follow - a twin of the original Chevron vertical discovery well, so low risk) - this horizontal well is expected to produce ~10K boed gross when on production (INA has 35% WI).

I have a small position in INA right now, but am eagerly awaiting financing news to load up (and using my recent TGA sales to fund the buying). INA could go from ~1000 boed natgas to ~15K boed (60% oil) by mid '13 - run any comparison you like vs SDX and INA likely wins hands down...

MMT.V More news indeed. But even with the Shell deal, improved balance sheet, it's U9 results/reserves that everyone should be focused on. That's what drives value - the rest is short term noise (although I sure like the noise MMT has been making in recent months).

Verbonac/Union Securities bumped target to $1.20 based on extremely low cf projections of only $0.57 share in 2012. MMT will generate around ~$0.47 this year alone. 2012 should see significant bump - at least 50% rise above 2011 is my low end expectation, or $0.70. Using Verbonac's uber low 2.1x multiple for the so-called peer group (none of whom came close to the growth that MMT is seeing), that's a $1.50 target. By rights, MMT deserves to see a "premium" 3x multiple (which is a joke as in normal years, 6x multiple is typical). I'm looking for a $2 target. Verbonac will raise his target as even nimrods will eventually see the wall of cash that's hitting the bottom line.

Digi- MMT.

I heard p/l max available capacity from Agip is 21K. Am I misinformed? Your numbers assume much higher thru-put. I'd be happy to be misinformed.

While I agree with you on COS of U9 (imo, could be the most important well they'll drill in their history), MMT has cobbled together several sets of seismic, so my confidence in their interpretation isn't all that high (I still remember their first spud - which they missed the structure - ugh - and which caused years of subsequent pain due to lack of cash flow/low share price/lack of market confidence).

Clearly a breakout today. Something is definitely up. Hopefully the conclusions of the p/l deal.

MMT should be pushing $1 right now, even with current subdued market valuations. If U9 comes in, $2 is very realistic.

Digi - MMT

Your numbers assume U9 etc will be a success, which is far from certain - the well is targeting a new structure. While I think there is very good potential, the downside may be being "stuck" at ~14-15K bopd until the horizontals are drilled.

As such, rough numbers indicate MMT would be generating ~$20MM earnings per Q while cost recovery is in the current ~68% range and declining as capex spend slows. Perhaps $70MM annualized with ~$200MM cash flow.

On success, your numbers are optimistic - we can surely expect numbers to slide as once they hit ~21K, there isn't any more Agip export capacity available. Have to add more pump stations to increase capacity or build another p/l to Shell. That will take ~1 yr or so. Again, MMT will plateau with earnings around $100MM and cf around $250MM annualized until new export capacity is arranged.

MMT offers a play trading at a PE of ~2.5 on base "no growth" case, to PE of ~1.5x on success case. On cash flow basis, trading at 0.9x fwd cf to 0.7x.

Even accounting for Nigeria "risk", the numbers are hugely compelling.

POE - they found thin gas pay on the first well and there is a chance of a deeper oil discovery. which they are sidetracking now (several fields in the area have gas caps). But absent an oil discovery, I doubt they'll bother testing the gas. If they do, I doubt they get commercial rates.

Turning the story around soon will have to be via good drill bit news on exploration - which is always high risk and usually unsuccessful. And w/o at least stable base production (vs the growth they promised), the downside risk is too much for my taste at anywhere near current prices.

POE - FE us being generous in their comments with a so-called Market Perform rating. If POE "market performs" after that update, I'll give up investing. POE has red flags waving at full mast.

I guess after the recent PP, there is little reason to flog the story - but you don't abandon coverage just before their high impact drilling in a cashed up producer unless you have very serious doubts.

Absent good drill resultsin Indo near term, I expect to see POE see at least in the low $5s as people realize (as FE has) how disastrous the recent update is and the negative implications it has for reserves, let alone cashflow.

Pan Orient - POE - horrific update.

Can't quite remember a more depressing update considering all the activity - dusters and disappointments wherever you looked.

Production is pitiful. Guidance is sure to be cut - perhaps in half. Reserves surely will be cut - again.

Indonesia may turn out to be a savior (but it's exploration, so odds are likely that it will be an expensive dud as well).

I was willing to play the exploration game with some confidence they'd be able to at least maintain production in Thailand. But I can't justify holding with current production and negative reserve outlook.

I notice that guidance was conspicuously absent in this NR...

Check out Bengal Energy (BNG.T).

Attractive entry with $1.80 PP just announced. Combo of lower risk onshore Aussie lands with high impact offshore India/Aussie concessions.

Wellington West initiated in Feb with $3.50 target. Recent Presentation on their website.

Reasonable valuation/decent share count. A well designed spec with good potential. PP offers a good entry and you get in just before they start drilling up their onshore Aussie lands.

POE also looks attractive now that they are so close to TD in Indo. Liked that they had confidence to up their WI in the Citarum concession. Switched a few CEN to POE in the last few days. HNR also should be getting close to TD. A few successes in Indo and the market might start waking up to its potential. Niko has very large land position in Indo with a big drill campaign set to kick off around year end. I suspect the market will be treated with a lot of news out of Indo in the next few years.

POE - surprised to see such a large cash raise. What happened? Where did all their cash go? And why not arrange an asset backed debt facility rather than diluting at such large discount to NAV? And why didn't the sell Andora months ago to avoid this dilution??

With such pathetic production, seems like they were caught with their pants down and equity was the only near term solution...

POE has good potential in Indo, but fiscal terms are much worse than Thailand, even with SRB. Will take a large discovery to move the needle, but I think they have good potential to do that.

HNR has more favorable Indo fiscal terms due to Frontier designation.

EGY - owned it last year and made some nice $. Angola is definitely a nice prize should it be successful.

HNR will be drilling a well adjacent to EGY's Etame concession in the next quarter. I like their chances.

POE - can't believe a word of what they say. Missed guidance by a country mile two years running. With volcanic reservoirs, no one should have the slightest confidence about production. And Indo is 18 months later than they originally said - they said they'd be drilling in late '09 - but they "forgot" to mention they still needed to shoot seismic...

Simply disgusted despite the near term Indo drilling. The fiscal terms in Indo are vastly inferior to their Thailand production - need some big oil discoveries (gas isn't worth much these days) to make it worthwhile. As such, decided to move on - don't need the aggravation...

Bob re: MMT

U6 is capable of producing significantly more than current production IF they indeed completed the well with dual strings (as they said they would). However, the lack of discussion as to why U6 is only producing from one string is conspicuous, and has led to needless confusion/concern vs what the market was led to expect. Clearly, insiders and friends of insiders had the heads up long before we did.

That said, Digi said there are mechanical problems with the pump on the second string (there are pumps on each string). IF that's the case, it is a good buy opp. If Digi's info is incorrect, then we've effectively been lied to. That's what I am trying to determine. MMT (Halpin) won't answer the phone and isn't returning emails, so I'm stymied trying to get answers.

I'd also like clarity as to when they can get existing pipeline capacity to 10K bpd and how long (and how much $) an alternate route to the Shell pump station would take.

Based on U6 and expectations for the next two follow on wells, plus workovers, MMT is clearly capable of getting production to well over 20K bopd gross - the question is when?

Where/when did you get the info that there is a pump issue on the second string? Any idea when they can expand existing pipeline capacity to 10K bpd? They said they are installing equipment now - curious how long they expect it to take.

My biggest beef is the lack of discussion wrt the second string and the low production rate vs the 6-8K potential that was once bandied about.

PTV - their Brazilian targets are updip from their shallow water Tartaruga well drilled from an onshore surface location. They are not deep water whatsoever.

PTV has 2 discoveries in Colombia that will be tested early Q1 - Morichito and Noelia. Morichito is expected to be an oil well coming on around ~1000 bpd gross (50% net).

PTV expects to bring on 900-1000 bpd by Q1. The first 450-500 will come online at Tartaruga in the next few days into existing production facilities. High netback production will give them their long-awaited cashflow to grow the company. There should be a pop on the news as it is a transformational event for them.

Presuming they get to ~1000 bpd, that implies they are trading about $40MM EV or $40K per flowing. That's cheap for a light oil play in Colombia/Brazil.

That said, MMT has more upside. Better cash flow, better share structure (no warrant overhang), clearer upside from development drilling. But their pipeline "disruption" issues are killing them - and until that is resolved (if it ever is), they will remain cheap and unloved.

What kills me is the piss poor cash flow management of most of these companies. Time and time again these so-called "management" teams take on debt, but don't do much to ensure they can survive if worse comes to worst.

After reading Q3 financials, I was astounded to see so few oil companies hedged above $100, let alone $147. Same thing with base metal guys - did they really think Cu was headed higher than $4? Or Zinc higher than $2? Or Lead higher than $1.50? Or Ni higher than $24? Then why not hedge when you had the chance? Putting in downside protection when prices are spiking is cheap. Buy some options just in case...

Cliff, thanks, excellent article. It looks like acid could easily go below $200 tonne based on current falling copper prices - SXEW guys simply can't afford higher prices as margins could be negative for many - if that happens, they'll shut in production and demand will fall off a cliff causing acid prices to plummet further. Acid suppliers have no choice but to accept lower prices, especially as demand declines in the fertilizer space.

Anyone have current cost of sulfuric acid?

I see CHE.UN is near 52 wk lows. I gather that implies acid prices are a lot lower than the were earlier in the year.

Len, the old saying of "lies, damn lies, and statistics" comes immediately to mind. I couldn't disagree with your conclusions any more if I tried.

World oil demand 1997 = 73MM bbls
............................2007 = 86MM bbls

Says all one really needs to know. There were a few economic crisis in that time period - Asian melt down in '97. Russian melt down in '98. Dot Com bust in 2000. 911 in 2001. At no time did world production decline yoy. Let alone 4MM bpd as you now suggest is possible/happening.

The EIA said on Sept 9:

Consumption. After rising by about 370,000 barrels per day (bbl/d) during the first half of 2008, global oil consumption is projected to rise by about 970,000 bbl/d in the second half of 2008 and by 920,000 bbl/d in all of 2009 compared with year-earlier levels. Sluggish growth in consumption during the first half of 2008 was driven in large part by a 930,000-bbl/d decline in U.S. consumption. Declines in U.S. oil consumption are not expected to be as large in the second half of this year due to both relatively weak consumption in the second half of last year and the price declines over the past several months. The global oil consumption growth projections for the third and fourth quarters of 2008 represent a 130,000-bbl/d downward revision from last month’s Outlook, mainly reflecting weaker demand in OECD countries.

As for your comment about "rapidly increasing production" and "supply increasing at an alarming rate" and your conclusions you draw, I am gobsmacked. You've ignored the recent extreme action of oil prices. You seem blithely unimpressed that oil is a unique market controlled by a cartel (OPEC) and how politics effects supply and demand.

You seem to think that oil is just like every other market - that higher prices spur higher production - that's simply not the case. Oil prices have increased 10 fold in a decade. Supply has increased ~10%. That's not the supply response one would expect if we indeed had "way more than enough oil" as you conclude.

I suggest your "analysis" misses the forest for the trees in so many fundamental ways that it's pointless to argue about them. If you don't see the obvious now, you never will.

Lentiman, you make claims/assumptions that aren't supportable by history or the facts.

The MAJOR thing to realize is oil is in effect priced by a cartel - OPEC. Non-OPEC supply continues to decline as percentage of total supply, making OPEC ever more dominant. That separates oil from all other major commodities. When the price declined to below $100, what happened? OPEC cut production, tightening the market and prices rebounded.

Last winter CL was ~$70. Then OPEC announced a 400K bpd cut. Oil then ran to $147 and only came down OPEC opened the spigots and flooded the market and calmed the market. If you listened to the nitwits on CNBC or read your local paper, you'd be told that the drop in oil was due to demand destruction caused by "high prices" in the US. But world demand is UP yet again, so that's obviously not the answer. OPEC opened the spigots as a favor to GWB in conjunction with a serendipitous deleveraging in the financial markets causing many long positions to be closed. That is a temporary phenomenon.

Average world oil consumption has increased about 1MM bpd, year in, year out for nearly two decades and accelerated in recent years to about 2MM bpd as BRIC countries grew strongly. In the last 15 years, only after 911 recession/Dot Com crash in 2001 did US demand fall (ie about 100K bpd). But it recovered in 2002. And even when US demand fell in 2001, world demand still rose over ~1.2MM bpd.

The notion that if the US sneezes that the world will catch a cold with regard to oil and world economic growth is outdated.

This year, world demand will rise yet again despite the US using about 700-800K bpd less due to a sluggish economy and demand destruction from high oil prices.

And WORLD demand will continue to rise for the next ~50 years as Chindia et al regardless of what the US does. Their per capita consumption is a tiny fraction of what the West uses and that gap will continue to close. Looking at world demographics and it's clear that oil demand/prices has only one direction - up. The real question is if the world can supply enough and for how long.

On the supply side, it has remained stagnant for nearly 3 years despite hugely rising prices. Your claim that supply has increased strongly with the price of oil is totally in error. What has happened is that the supply cushion had narrowed dramatically. In the 90s, excess supply was estimated at close to 10MM bpd. Right now, it's about 1-2MM bpd depending on who you believe. And that's why CL keeps hitting ever higher prices.

Why POE when you can get CEN?

CEN headed to 20,000 boed (almost all oil) in q4 '09 per their latest presentation. Exit '08 at ~6000 boed.

2P after tax reserves at 10% = US$7.50 fd. Trading C$2.70. Could cash flow their market cap next year. Are not subject to SRB until 2010.

40+ well offshore drill campaign by exit '09 starting by month end. One well about every 10 days for over a year...

Bob - those LNG import facilities are simply regassification plants and unable to produce LNG. In this market they are expensive pink elephants.

The request was to re export LNG that was previously imported and stored. Unless they spend many billions more, those plants will remain pink elephants.

POE vs CEN - Comments? Are my production/cash flow numbers correct for POE?

POE - 17MM 2P Reserves in Thailand - NAV = $5/fd share after tax at 10%. Current share price = $7.39 POE owns 55% of Sawn Lake, with another $5.60/sh NPV.

CEN - 40MM 2P Reserves in Thailand - NAV = $7.50/fd sh after tax at 10%. Current share price = $3

EV to flowing boed in 2009: CEN: $26,000 POE = $37,500

2009 production: CEN = ~12000 boed net. POE = ~8000 boed net. Both could be (much) higher depending on exploration success.

2009 cash flow: CEN = $260MM (RBC estimate using $85 Brent) POE = $225MM (extrapolated from the Carnavon Bell Potter report that uses $126 Brent). If using $126 Brent assumption for CEN, add another $125MM in cash flow. Note: CEN gets higher oil price for their offshore production than POE - CEN sees Brent less $8 bbl or so.

CEN trading ~1x '09 cf using $85 Brent (0.73x if using $126 Brent). POE trading 1.5x '09 cf using $126 Brent.

Criky - can always count on the usual suspects to dream up another conspiracy to explain why gold isn't $5000 and silver isn't $50...

Nothing can be so simple as taking profits when it appears the dollar is strengthening. And never mind there was huge selling in ALL commodities - oil, corn, platinum, copper...

Petrominerales looks interesting. So does PetroRubiales (PEG).

But the way the sector has been hammered, I suspect you can throw darts and make great buys. The only plays I am staying away from are domestic NG plays.

OIL looks tasty too. ~$13 is gonna look like a gift in a few months if they can get another 20-25K bpd online without too many delays.

Ithaca is perhaps the most undervalued play in the NS right now. Big ramp starting at year end. Going from 2K bpd now to 10,000 exit '08, to 20,000 exit '09 to 30,000 exit '10. Are now fully funded after a horrific equity financing, so it's only up from here.

Antrim is in another cheap play, but big ramp won't happen for a year, so probably won't see much interest for a while.

Serica is also dirt cheap. Their Kambuna field comes online at year end. Likely to announce an increase in production as they tested almost twice what they hoped to produce.