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Deja vu !
Congrats Panama.
JFF7
MMT.v - CPTMatt
I like the news too but you can't add up those capacities like that.
The first 5 represent what they are pumping from the two zones (what the limit is for the hole currently) while the last represent 5 zones (they can only pump from 2 of those at the same time). Still the total pumping capacity would be close to the 21K.
JFF7
Well I was critical of Mr. Ralston's and Zacks report and I will continue to be critical of it. I could care less if Panama and you don't like what I have to say.
But don't worry, you can come to the US and Canada and we won't threaten to put your sorry ass in jail for saying what you think.
I surprised Loj the libertarian is not on your case for these attempted suppression of freedom of speech.
To me, it's sad how many nonsensical rules the world's societies are now enforcing.
JFF7
Yes some honest dialogue would go a long way at improving this board.
On the positive side PTQ still has a ;pt pf long term potential if they can ever get their operational act together and catch a break from the continual political fallout in Panama.
JFF7
VB who's splitting hairs? You said Zacks 2 dollars was a 12 month price target and I said it was a 6 month target according to Zacks. It's right there in the report as a 6 month target.
As to the chances of PTQ getting the Spanish mine permitted, dewatered, refurbished and producing gold / silver etc and shipped to Panama within six months.....well it just isn't going to happen in my opinion.
And there is the additional time needed to prepare to process the ore when it gets to Panama. The metallurgy is bound to be different than the ore they currently are set up to process. Heck the Zacks report says they have three different types of ore potentially coming out of the Spanish mine.
JFF7
The only answer that matters is ....Not PTQ.
JFF7
VBgood, your wrong about the 2.00 price target being a 12 month target.
A quote from the Zacks report.
"Six- Month Target Price $2.00"
There is absolutely no way PTQ will be worth 2 bucks in six months. Zacks own report says that they will loss money this last quarter and will break even next quarter. They will finish the year with 5 cents earnings. 2 bucks would put them at a P/E of 40. In today's market, who gets that kind of valuation? Give your head a shake and think about this?
JFF7
well i read Loj's link on Zacks methodologies and most of the their work is based on earnings and projected changes to earnings. But their report is not based on PTQ's current earnings or projected earnings.
So although Zacks may normally do good work, I would suggest that this is not a report prepared using their usual methodologies and does not reflect the same standards that they may normally be known for.
JFF7
MJ what are you talking about? PTQ pays Zacks for the report and Zacks pays Ralston. It's as simple as that.
The 2.00 price target issued by Zacks is not based directly on a calculated increase in earnings. In fact the 2.00 price target is not based on earnings at all. For you to suggest so it misleading at least. It's based on a sum of the modeled valuations of the company's assets. A computer model based on arbitrary metrics which can be just as easily chosen to make the company look like it is worth 2 dollars or 50 cents.
As you to your constant chatter about libel, that is a smoke screen to divert attention from the issues at hand. Ralston did not write report with a target price based on earnings projection (like the majority of the Zacks reports are based on).
The Zacks report is weak because it ignores the lack of the companies ability to meet it's own guidance as far as production and the implied earnings that flows from that production. It takes the company's assertions at face value that production can be brought online before the end of the year even though this directly contradicts the reports own details about the difficulties of successfully bringing this Spanish mine into production.
And again, where did the 750 dollars a tonne figure come from?
JFF7
LOj, Zacks 2 dollar recommendation is not even based on earnings expectations. And they do get paid by PTQ for writing their report.
I'm not saying the Zacks can't do some good work but this report does not seem to be one of their main stream type of reports. They have been creative in how they have arrived at a 2 dollar price target. It may have been a lot of work to produce the report but the method used is not based on earnings estimates and expectations.
I thought that was what you were after. A company with growing cashflow and profits. This Zacks report gives you no insight in to PTQ's earnings beyond what the company is telling you.
As for Thomson One Analytics, I fully expect that they will drop the number one rating on PTQ once the loss from this quarter works it's way into their formulas for calculating their rankings because they will use earnings as a main criteria.
JFF7
Wait a minute. Don't take much comfort in reports like Zacks that say your PTQ shares will be worth 2.00 dollars in 6 months time.
If you think the report provides an independent unbiased objective valuation of the company in six months time, you are sadly mistaken. Zacks report is a paid for report. PTQ pays Zacks to provide the report. Zacks relies on the company to provide them with the information that goes into the report.
The report does not even base that 2 dollar valuation on cashflow or earnings estimates. The report only estimates cashflow / earnings for the last quarter (3rd) and the quarter we are currently in (4th). Even this report indicates that they estimate the company will lose money this last quarter and just break even in the current quarter. They expect to finish 2012 with 5 cent per share earnings which would put us at a 9 P/E right now based on the current 45 cent share price.
There is no breakdown of what the expected earnings will be based on ounces to be produced and associated production costs. The 2.00 target is simply the sum of arbitrary valuations of each of the company's assets based on some chosen metrics. It's a spreadsheet model of the value of the company assets that could be pretty much any value you want it to be simply by changing the metrics you choose to use.
And don't be swayed by arguments that management is world class and you would be stupid to question them. If they blitz and boggle you with technical mining explanations to the point that you can't follow their arguments, don't just give up and accept their conclusions. Judge them by their actions and the accuracy of their performance vs their guidance. If that doesn't measure up, you have every right to be suspicious and leery of the promises they make.
Zacks reported increase in valuation to 2.00 bucks is based on the Spanish mine advancing production 18 months. They were told this was possible by management so they just update their part of the spreadsheet that relates to the Spanish mine. Again this is not adjusting expected earnings or cashflow but just a tweak of a metric based valuation of the Spanish mine.
Did Zacks actually evaluate the proposition that production could be moved up 18 months or did they just take managements word for it. Maybe you should check with the analyst that prepared the report to find out. This Spanish mine is a former pyrite mine (not a former gold mine). The appropriate government approvals have to be obtained before work can begin. How long will this take? The mine has been underwater for 20 years. It has to be dewatered before the mine can be prepped for production. How long will this take?
The ore coming from the Spanish mine is supposedly worth 750 dollars a tonne. That's pretty high grade stuff compared to what they are currently mining in Panama. Where did this number come from? The Spanish mine has only inferred resources which is the lowest quality estimate you can have. I'd want a lot more confirmation that inferred resources are real before I hang my hat of a valuation based on unproven high quality grades.
An 18-month, 50,000 meter core-drilling program was planned to upgrade the inferred deposits to an indicated mineral resource and/or probable mineral reserve but now the plan is to move to production within 9 months.
And what does the Zack report say about the Spanish mine and the probability / challenges of getting the mine into production?
"Despite having some of the higher gold grades in the Iberian Pyrite Belt, extracting the resources at Lomero-Poyatos may prove challenging. As a consequence of the diversity of ores (60% cupriferous, 32% arsenic/pyrite, 8% massive sulphide)33
, metallurgical testing is required to better define the nature
and distribution of the gold, silver, zinc, copper and lead mineralization (the mineral deposit anatomy), along with the optimal extraction process. Cupriferous ore would likely require a grinding and copper flotation plant while arsenic-pyrite ore involves grinding, sulphide oxygenation and cyanide leaching. In
addition, the depth of the deposit would require an open-pit depth of at least 250 meters, which is on the verge of the transition depth from open-pit to underground mining. As a consequence, the permitting would be difficult, and the waste:ore ratio would probably exceed 50:1. "
Difficulty in permitting? 50:1 strip ratio? 3 different types of ores? Does this sound like something that can be brought online in 9 months? Is PTQ management setting itself up for more missed deadlines?
All I am saying is don't believe everything management tells you or what "in-the-know" local investors spoon feed you. When deadlines and production guidance comes and goes without being met (how many dates have come and gone, what did they miss production guidance by this quarter ? by 30+%?). Think for yourself a little and don't just sit back waiting for your ship to come in based on information from a management team that tells you what you want to hear. Measure them by their delivery record and act accordingly.
JFF7
Don't worry, Be happy ! In 5-6 years, PTQ will be producing 600,000 ounces annually. I wonder where they are going to import it from? Is Panama going to include that in their national export numbers?
Missing guidance by 30% means nothing. Large stockholders or institution don't have any problem with this "progress".
And remember that it takes a management team that is first class and well respected all over the world to deliver those sorts of results.
PDI spin-out is going to happen, any day now. Remember, the company was 100 % committed to do this originally...and then, they weren't ... and now they are, again...100% committed to making the spin-out happen...unless...
The market only looks at the short term so these are only short term issues. If there truly were long term problems, the share price would have to stay this low or lower for a long time. No chance of that happening.
The share price has been manipulated down 15-20 %. The rest is due to the sector under performing. The current share price has nothing to do with the inability of management to reach targets for the last year. Large shareholders don`t care though because they are in this for the long haul.
Yup, I think I got it straight in my head now.
Don't worry, be happy !
JFF7
yes you heard him correctly say they had done about 50,000 ounces in the first three qtrs but your a little high on their updated guidance. They are only predicting 18,000 ounces for the 4th qtr now. so 68,000 for the year. That's a miss of about 32% if they were guiding for 100,000 ounces originally for the year.
Further guidance was to doing 8000 ounces a month by the end of the year.
PDI shares might be approved by May. Might take a month or two to make it to our accounts. June - July? If they hold their schedule. (Doh, what am I saying !)
JFF7
"Only a 5837 oz. miss from the low side estimate. LOL "
that's only a miss by 25-30%.....the market was certainly going to let that slide...hopefully this is mostly built into the price
I have a feeling that real nice trailing P/E ration is going to take a sizable hit.
JFF7
importing gold from Spain to "gold rich" Panama....didn't see that one coming.
JFF7
It's pretty obvious from the price movement recently that the market believes they will miss their numbers once again. I hope when they talk about the future they don't make promises again they can't meet.
JFF7
I guess the board has become a little more objective in the last couple of weeks and will celebrate when there is something worth celebrating.
JFF7
I strongly doubt that PTQ is buying back their own shares cheaply by pushing the shares down. The bankers and their friends are the ones that would have the ways and means to keep the prices low and accumulate shares.
JJF7
markets often depress the share price of a company (beyond what is reasonable and understandable on the face of it) if it anticipates there will need to be further dilution to raise money for ongoing mine development.
and that certainly ties in to missing guidance which affects your ability to pay your bills / raise money for future development. Not saying that PTQ will have difficulty raising money but just that the terms will be affected by how strong they are financially and operationally.
JFF7
it's amazing what truths can come out in the absence of the spin-masters. Nice digging JAL.
JFF7
snf there is another 300,000 shares up fro sale on the way to 55 cents.....I can't believe I'm tempted to buy more at these prices...
JFF7
3rd qtr results came out at April 14th last year.
JFF7
ya it seems everyone still lives in fear down there. Even Winner back peddles on his commentary so as to try and mollify any offense that might be taken. Guess he does not want to "disappear" in the middle of the night.
I suspect that Martinelli's "overwhelming support" was mostly made up of people willing to jump on board to see how far they could ride Martinelli's coat tails but that they are just as willing to jump off and go the other direction as soon as a rough patch appears.
JFF7
" it's becoming more evident that Martinelli's not as popular as pumpers would have this board believe"
whaaaaaat? Say it isn't so?
Is Winner the ignorant foreigners or are we?
JFF7
PTQ will probably get more institution support after the Spanish mine opens (more than one operating property) and they have more track record of producing profits (4-5 qtrs is a good start).
JFF7
I understand the logic of focusing on profitability but I would suggest grades do have more importance to most mining stock investors than you give credit to. However, I do agree with you the future importance of the heap leach operation. If PTQ becomes known as a heap leach operation primarily then grades would become less important. I don't think we are there yet.
Mine life is also important. 7-10 years expected for most western mines. Australians seem to accept a short mine life and just assume companies will prove up more each year as needed (should be replacing at least what you are pulling out of the ground each year). If investors don't see that mine life proven up by a 43-101 they anticipate the company will have to find capital to buy or develop additional properties. The stock price would be discounted until that is fixed.
I think Jovre's chart points out how undervalued copper stocks are right now. Moving into the same undervaluation that gold juniors are already at and many oil juniors are just breaking out of.
JFF7
My uninformed impression (maybe much like most casual observers of the stock) is that they have a lot of gold but it is spread all over and is very low grade.
Getting to the higher grades once the aggregate scraping has cleared the way will be important to me as someone interested in the stock.
JFF7
Well that didn't format so well.
Here's a link.
http://apps.cnbc.com/view.asp?country=US&uid=stocks/ownership&symbol=ptq-t&country=CA
JFF7
why does this feel like a balanced discussion of the stock? It's much better. Almost feels like a normal stock board.
The continual drop of price of PTQ does not bother me so much because it is on low volume and there are a lot of other good gold stocks suffering the same fate. But these low prices are a mystery.
here's some info on institutional holdings
HOLDINGS SUMMARY
Shareholders
Top Shareholders
Large Block Owners 16
Total Number of Shares Held 38.7M
% Change in Ownership 0%
% Shares Owned 15%
Monthly Rotation Number
of Shares Value of
Change (MM) % of Shrs.
Outstanding
Buyers 3/9/12 14,511,118 $8.63 10.4%
Sellers 3/9/12 14,916,908 $8.60 7.0%
Institutions 11 Holders
Mutual Funds 22 Holders
Other Major Holders 5 Holders
SHAREHOLDERS CONCENTRATION
16.9% 0.6%
Top Institutional Holders
Concentration of Current % Held
Top 10 Institutions: Top 20 Institutions: Top 50 Institutions: All:
Low
Avg. Turnover Rating
Name
Shares Held
Position Value
Percentage of
Total Holdings
since 3/9/12
% Owned
of Shares
Outstanding Turnover
Rating
Sprott Asset ...
15.5M $8,965,732 +40% 7.0% Low
Libra Advisors LLC
8.2M $4,770,070 +21% 3.7% Moderate
Fifer (Richard)
4.3M $3,136,395 +11% 1.9% Low
Wells Capital ...
2.7M $1,641,053 +7% 1.2% Moderate
U.S. Global ...
2.7M $1,697,495 +7% 1.2% High
Gabelli Funds, LLC
2.5M $1,470,225 +7% 1.2% Low
Degroof Banque ...
976.2K $622,968 +3% 0.4% Moderate
Orrell Capital ...
500.0K $299,222 +1% 0.2% Low
Neuflize OBC ...
400.0K $292,146 +1% 0.2% Low
Dimensional Fund ...
380.0K $219,954 +1% 0.2% Low
Top Mutual Fund Holders
Percentage of Outstanding Shares per Holdings Style
Sector Specific 2.6%
Core Value 1.2%
Core Growth 0.9%
GARP 0.5%
Growth 0.4%
Index 0.0%
Momentum 0.0%
Aggres. Gr. 0.0%
Specialty 0.0%
Low
Avg. Turnover Rating
Name
Shares Held
Position Value
Percentage of
Total Holdings
since 3/9/12
% Owned
of Shares
Outstanding Investment
Style
U.S. Global ...
2.7M $1,697,495 +7% 1.2% Sector Specific
GAMCO Gold Fund, ...
2.5M $1,470,225 +7% 1.2% Sector Specific
Wells Fargo ...
2.2M $1,312,148 +6% 1.0% Core Value
Sprott Small Cap ...
1.8M $1,195,889 +5% 0.8% Core Growth
Share SICAV Gold
976.2K $622,968 +3% 0.4% Growth
Sprott Canadian ...
900.0K $597,945 +2% 0.4% GARP
Wells Fargo ...
518.4K $310,233 +1% 0.2% Core Value
OCM Gold Fund
500.0K $299,222 +1% 0.2% Sector Specific
The Canadian ...
150.2K $171,038 0% 0.1% Core Growth
DFA ...
99.8K $72,898 0% 0.1% GARP
JFF7
as you can see from the comments on Stockchase, PTQ has a pretty low profile still.
WATCH 0.650 Jim Huang Hit by the Panama mining law that was passed and then repealed. Existing operation is not affected by any mining restriction, but political environment has probably got a little bit worse for them and they need to be careful with environmental enforcement. In the process of buying a copper/zinc mine in Spain so questions their strategy. Probably a lot of upside once they get their hands on it. 2011-07-13
HOLD 2.170 John Embry This flies under the radar. They are planning to spin their copper off. Have an interesting gold property that still doesn't have enough ounces on it, but it is showing well. 2007-02-08
JFF7
i'm still hanging in there ....sometimes in situations like this where your confidence in a company and management goes south, it's best to switch horses. Wait for a significant pullback where all players get whacked down hard and then flip over quickly to a stock you think has better fundamentals. Do you due diligence now and be ready for the opportunity to switch. When you find a company your happy with, ride it as far as it goes. PTQ on the face of it would seem pretty well beaten up already so pullback don't always effect beaten up stocks as much...it's one strategy that works sometimes. No guarantees in life though.
JFF7
Wow down 8 %, that was really positive news today.
JFF7
MMT.V More trouble for AGIP?
http://tribune.com.ng/index.php/front-page-news/36932-bloodbath-in-bayelsa-4-soldiers-4-policemen-killed-by-gunmen-explosives-create-panic-in-yenagoa
Details are at best sketchy. Needs more investigation when I have some time.
"Further checks by the Nigerian Tribune indicated that oil installations were not also spared as two pipelines belonging to the Nigerian Agip Oil Company were also attacked by unknown persons at Ogolobiri, in Brass Local Government Area and Tundaba community in Southern Ijaw Local Government Area."
JFF7
aia.v
alright 30% after having dropped so much recently...still have a ways to go to get it back...
News looks great though. Very high grade, in widths that support underground mining but also close enough to the surface for open pit mining.
It will be interesting to see what way they go.
I have no position in this company.
JFF7
I'll keep holding for a while longer....the shares have been dead money for so long. Ball crusher coming online, heap leach changes, PDI spinout vote....I can wait a couple more months.
The rest of my portfolio can carry PTQ shares for a while longer.
I'm not buying the "things are improving" message yet. The overwhelming debt in the US and Europe is still there.
JFF7
I'm not selling my shares at these levels. we've had a year of bad share price performance....most of the bad should be behind us.
I'd really like to buy more but they sure make it hard. But that's probably why you can get it for these prices.
JFF7
Energy Service companies
Great run. My sell orders are in and are being hit.
Has oil has just about peaked out for the time being? When it falls, oil services companies get whacked again.
JFF7
Jal,
You nailed it very well. My sentiments as well.
When the company starts making targets then the share price can start to advance. Lots of potential but the market doesn't pay particularly well for potential these days.
JFF7
MMT.V - Interview with Chen
Energy Profits with Undervalued Producers
02/28/12 by Guest Contributor
Filed under Bourbon & Bayonets
ShareThis
The idea of finding an undervalued stock is enticing, but how can investors distinguish between an international value tap and a bottomless money trap? Private investor and newsletter writer Chen Lin combs every continent to find junior exploration and production companies whose balance sheets outshine low stock valuations. In this exclusive interview with The Energy Report, Lin shares some lesser-known names that offer major profit potential.
The Energy Report: Chen, you follow world events very closely. Do events in Europe, especially Greece, have any effect on any of your decisions to buy or sell?
Chen Lin: Yes, but I look more at the fundamentals. Greece is on the edge of bankruptcy, but I think the market is well prepared for that. I’m looking more at whether there’s a major impact to the financial markets.
TER: How would it affect the way you trade?
CL: If we have another round of a huge deleveraging, I think I will be more conservative in general. I’ve become very aggressive in my investing since the beginning of the year because the European Central Bank (ECB) did another round of money printing and low-interest loaning to all the banks for three years. That dramatically expanded balance sheets, just like quantitative easing (QE) did in the U.S.
TER: You have had stellar returns in your portfolios. You grew $5,411 as of Dec. 31, 2002, to $1,383,041 by Dec. 31, 2011, but your portfolios were down 11% in 2011. What were the issues that resulted in that downturn?
CL: In 2008 I had a down year by a similar amount. I usually invest mostly long in the market, and I like to invest in undervalued stocks. Sometimes if they are extremely undervalued, I overweight them. So that tends to concentrate those stocks. When the market is down and investors don’t recognize the value, my stocks can be dragged down along with the overall market. Considering how tough the market was in 2011, I think I did relatively well in the period. I’m up quite significantly since the beginning of this year. People were seeking refuge in U.S. Treasury bonds, and now are suddenly starting to put money back to work. There has been a huge run-up of commodities and commodity-related stocks.
TER: At the end of 2011, you said that energy stocks were on a year-end clearance sale. After some price appreciation, are they still on clearance?
CL: A lot of the stocks I own have already appreciated dramatically since the beginning of the year, some even close to 100%. However, because they went down very hard last year and people panicked and sold everything they could to raise cash, I think there are still a lot of extremely undervalued energy stocks right now. Historically, if you compare the risk-reward, they’re still extremely undervalued. So I’m still overweighting energy versus precious metals.
TER: Are you currently trading out of equities that have greatly appreciated since the beginning of 2012?
CL: No, I am not. Well, some stocks I have, but mostly I’ve stayed with what I’m holding. I believe this rally still has legs. My largest position is Mart Resources Inc. (MMT:TSX.V), and my second largest is Pan Orient Energy Corp. (POE:TSX.V). Although I’ve been mentioning them in my newsletter for quite some time, I am still holding and riding those two stocks. I believe they are still very much undervalued.
TER: You’ve written that you’re expecting some big news from Mart pretty soon.
CL: I’m hoping the company can deliver a dividend. Its cash has been increasing dramatically in the past few months. It’s going after light sweet oil in Nigeria and selling it at a premium to Brent crude, so the company has a lot of free cash flow. The money is just piling up on its balance sheet, and I expect that to continue for the rest of the year. It’s pretty amazing that only two years ago the company was close to bankruptcy. Since then, it has just changed dramatically, and I don’t think it is appreciated by the market. I’m still very optimistic about the company and holding my position.
TER: Mart Resources has given back about 6% over the past month. Is this a buying opportunity?
CL: I think so. If you compare the valuation of Mart to other companies in the space, seldom do you see a company trading potentially at one or two times this year’s cash flow. Potentially, it could more than double its cash flow next year because it is finding more and more oil. Every well has been great in the past two years. That’s very unusual for a junior company. In addition, its wells have no decline. That’s something that amazes me because if you look at nearly all energy companies, you’re looking at very sharp declines in the first three to six months.
TER: Is there no sign at all of depletion? This huge oil field just continues to keep producing?
CL: That’s the thing. My guess is that it is sitting on a huge oil pool that’s interconnected and extends over a very big range. Once it pumps oil out, still more oil flows to the area, and so there’s no decline. This type of well is very hard to find on earth except in Saudi Arabia and a few other countries.
TER: So, Mart is producing oil that gives the company a marketing advantage because light-sweet refinement is low cost and therefore commands a premium price to Brent crude. Plus, depletion is not notable yet. What am I missing? I’m sure the picture can’t be this bright.
CL: Exactly. Well, the issue is Nigeria. It is a country where there are frequent protests and attacks on the pipelines. But those conflicts are mostly in the north, whereas Mart operates in the south, near the coast. So it’s pretty far away from the major violence. There is still tremendous opportunity and tremendous cash flow for this company. I think this will be the year when people see a dramatic rise in cash on its balance sheet and hopefully, with all that cash, it can pay dividends and bring in more rigs. It will build a pipeline and do everything organically without coming back to the market. That’s the beauty of this.
TER: A year ago you said you expected investors to begin accumulating shares in Pan Orient based on anticipated production from its big land position in Indonesia. You were correct. Shares are up more than 60% over the past three months. How much more growth can we expect?
CL: Pan Orient has a slightly different thesis than Mart Resources because there is some exploration/discovery risk. It is drilling wells, potentially very big wells, but I don’t know if the wells will be successful. With Mart, there is much more certainty. However, though there is risk for Pan Orient, it is a very experienced oil exploration company, and it’s been in Thailand for five years, drilling and fine tuning its technology.
I shared with my subscribers a report that estimates each of the three Pan Orient wells in Indonesia is worth about $3 of net asset value (NAV)/share if successful in the first half of 2012 and $2 for each of the other three wells in the second half of 2012. In addition, Pan Orient also has an oil sands property in Canada that it wants to sell. The company has $1/share cash on the balance sheet and cash flow over $1/share right now, and this is in addition to the oil sands property that it has for sale. Thailand is ramping up production and Indonesia has the big wildcat wells at work. So in terms of risk-reward, it’s an ideal situation. I wouldn’t be surprised to see the stock be a ten-bagger by the end of this year. The company could be a $1 billion (B) company. It was a $2 stock when I recommended it in my newsletter. Right now it’s $3 and change. With some success in drilling in Indonesia, I’m looking for a ten-bagger. Seldom do you have those in one year, so I have pretty high hopes on the stock.
TER: What other companies do you like?
CL: This year, I have put a new fracking company in my newsletter, New Zealand Energy Corp. (NZ:TSX.V; NZERF:OTCQX). It has done very well so far. The stock has really exploded, and some of this excitement is about the company getting ready to explore for shale oil in New Zealand. The company has a big land package, and I think Apache is going to start drilling in April not far from their huge land package, and so we may see some results in H212. In the mean time, the company has drilled a nice conventional well, which has 500 barrels per day on restricted flow. It is drilling the second well and planning the third. The success of the current drilling program can move the stock as well.
I still have Porto Energy Corp. (PEC:TSX.V) on my list. It was one of my biggest losers last year. You win some and lose some. The stock has been down to about $0.11 recently, but I’m seeing significant insider purchases. The company has about $10 million (M) in working capital, but it doesn’t intend to use all the money to drill the well on its own and then have to come back to the market to raise money at this depressed level. Instead, it is looking to do a joint venture (JV). So basically it would like its partner to pick up the costs and risk. I just spoke with the company, and management is still optimistic about getting a JV deal very soon. Porto is unique in that it has a huge land package in Portugal of over 1M acres on trend with the North Sea.
TER: You’ve said that the Portuguese government wanted to do anything it could to help Porto, and so it’s disappointing to see that the stock has been so weak. What is the government doing to help the company?
CL: I think the government is making it easier to get permits. Porto has drilled three dry holes. It hasn’t found any major oil yet, and that was its big downfall last year. I was told last year that if it found oil it would be easier to work with the government to bring the oil into production.
Portugal is trying to do everything it can to avoid the fate of Greece, and so an oil discovery would be very significant. Porto is being run by very experienced oil guys, and most of them came from Devon Energy Corp.’s (DVN:NYSE) international division. In fact, Joe Ash was running the International division, but he left a comfortable, high-paying job to run Porto because he believes in the potential. You can see from insider trading reports that he has recently purchased more shares with his own money. So that tells you the people still believe in the whole thesis of finding massive amounts of oil in Portugal.
TER: At this low $25M market cap, it seems like Ash with a few other people could easily buy this company and take it private.
CL: Yes. But when the stock went down, the company adopted a poison pill. I think it’s afraid of a hostile takeover. Taking it private is possible.
TER: You mentioned New Zealand Energy. Its shares, as you indicated, have gone to the races. The company is up well over 100% over the past three months. That’s a lot of conviction.
CL: I believe there is the potential of doing fracking on this Bakken-like land. There will be some development later this year, and that’s actually driving the stock price. This stock is still very undervalued.
TER: Are there other companies you like?
CL: There are quite a few still that I like. PetroBakken Energy Ltd. (PBN:TSX) has been a big winner for me. It was paying a 10% dividend when I picked it up, but it’s up almost 70% since then, and now it is paying a 6-7% dividend. The key is that if you compare the company with other North American-based fracking companies in Bakken plays, it’s still relatively cheap. I think it could potentially have more upside, but the easy money has been made with this stock.
I am also holding Prophecy Coal Corp. (PCY:TSX; PRPCF:OTCQX; 1P2:FSE) and Prophecy Platinum Corp. (NKL:TSX.V; PNIKD:OTCPK; P94P:FSE). Both stocks are rising this year. I like Prophecy Coal as it is getting close to a contract with Mongolia’s government. That will lead to financing and construction of the power plant. Prophecy Platinum should have its preliminary economic assessment very soon, so investors can get a peek of the project’s huge potential.
TER: Most of your stocks are microcap companies. I find it interesting that you own Petrobakken, which has such a large market cap at $2.8B.
CL: As far as market cap, it’s one of the largest I own now, but it had been hit very hard, and thankfully I was able to pick it up when it was quite depressed.
TER: What about another company that you like?
CL: Another company I like, which still hasn’t appreciated much, is Harvest Natural Resources (HNR:NYSE). This company has had bad luck like Porto. It drilled three dry holes in a row, and the stock is still very close to its 52-week low. The main attraction is that it has a big oil field in Venezuela. If you are looking at normal valuations, and if it’s not in Venezuela but rather a country friendlier to the U.S., then the company is probably worth at least $20/share. The stock is trading at $6–7. Venezuela is going to have an election this year in the fall, and Hugo Chavez will be seeking his third term. With all the things happening around the world, like the Arab Spring, I wouldn’t be surprised if Venezuela has some major changes this year. If that’s the case, this stock can have a huge upside.
TER: Harvest Natural just hit another dry hole, but clearly the dry holes don’t make you as nervous as the Venezuelan government, is that right?
CL: If it gets a hit in Indonesia that would be great. But this company already has a huge oil field in Venezuela that is self-funding. It doesn’t need to put money in. It was hoping to get money out as dividends for shareholders, but so far it has been having trouble getting any money out because of the government. But this could change overnight if the government has a change of regime.
TER: What other companies did you want to mention to us today?
CL: Another company is TransGlobe Energy Corp. (TGL:TSX; TGA:NASDAQ), which I own. It is operating mostly in Egypt and Yemen. If you compare the company, cash-flow wise it is very, very cheap. Due to political problems, the company has mostly stopped production in Yemen. If it can start flowing again in the country, that would be another big catalyst. I like the stock, and I own the stock and options.
TER: What effect has the Arab Spring in Yemen had on TransGlobe’s business? Its shares have been above water for the last six months.
CL: The Arab Spring in Yemen actually depressed the stock. It used to produce from Yemen but because of violence, it stopped producing there. Any peaceful resolutions and new production would be a big plus.
TER: Any other positions you could talk about briefly?
CL: I also have two companies in the North Sea. Both did very well. One is Ithaca Energy Inc. (IAE:TSX). It just went up 40–50% because of a potential takeover. Another is a Iona Energy Inc. (INA:TSX.V), which was funded by the founder of Ithaca Energy. Both of these have done very well.
TER: Do you have any new positions?
CL: I recently purchased Coastal Energy Co. (CEN:TSX.V), operating in offshore Thailand. It has been growing its production quite dramatically in the past year, and it continues to grow.
TER: Coastal is another larger name with a $2B market cap. But just the opposite is Groundstar Resources Ltd. (GSA:TSX.V), which you owned last year.
CL: Yes. Groundstar was one of the worst stock picks I had last year. It drilled a well in Iraq and one in Egypt, and every well it drilled turned out to be a dry hole. So I had to cut my losses and get out of the stock when I saw it was raising money and diluting shareholders at a very low share price. The stock would have probably had a difficult time rebounding.
TER: It is so nice speaking with you again, Chen. Thank you for your time.
CL: I enjoyed it. Thank you.
Chen Lin writes the popular stock newsletter What Is Chen Buying? What Is Chen Selling?, published and distributed by Taylor Hard Money Advisors, Inc. While a doctoral candidate in aeronautical engineering at Princeton, Lin found his investment strategies were so profitable that he put his Ph.D. on the back burner. He employs a value-oriented approach and often demonstrates excellent market timing due to his exceptional technical analysis.
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George Mack
The Energy Report
http://oakshirefinancial.com/2012/02/28/tap-energy-profits-with-undervalued-producers/
MMT.v
OK Alice. We're only down a cent now and volume has been pretty decent (850,000 on TSX). It would be nice to be celebrating new highs while oil prices soar but we will have to be patient with this one (as always).
JFF7