$heff's $tation of $tocks & $olid DD

[closenow]

GSX Due Diligence for all. Take a SERIOUSLY look all.

www.gascoenergy.com

http://www.portengineering.info/20091014...

http://www.reuters.com/article/pressRele...

http://online.wsj.com/article/SB12529489...

The Rex pipeline is doing its job-the price differential between spot and rockies gas has essentially disappeared.Last qter gsx received $2.6 for its gas.But july1 the hedges kicked in at $4.42 and the henry hub prices are now approaching $5!this means that ebitda goes from zero last qter to over $6 million.operating cash flow should triple and increase further in the 4th qter.Plus winter has arrived early in the rockies with a strong shot in the arm for ngas usage.And at these prices proven reserves will more than double yearend.

starting 1/01/2010 new sec rules will allow company to report probable and possible reserves.They can use a 12 month ave for pricing ngas reserves as well as hedged values.They can include producing properties from non convential sources ,in gsx case,the possible oil shales and diatomite oils in california.In 2009 they reported only 53bcf reserves of proven gas at $4.63/mcf.This years ave should exceed $5 proven reserves will increase .but more significantly they will include proven undeveloped-200 bcf,probable 500bcf and possible 2200 bcf.all this is known ,of course,but when included as sec allows in annual report it should draw attention from investors and potential suiters alike!

The resource potential of a field typically lies within the area of wishful thinking;this is how many wells we can drill and if all are successful we get so many reserves.But gsx may be a different story.Gsx has drilled 128 wells in the Uinta basin with 100% success.These wells are distributed throughout the geographic area with implications that all of the tract is productive.Most of the wells are multistacked plays in the upper 13000 foot sections but more recently they have 20 mancos wells afew 1000 ft deeper.The mancos seems to underlies the entire section.This is important because the mancos has an EUr equal to the EUR of the shallower wasatch to Blackhawk section.Again gsx has 128 wells with no dry holes.Gsx estimates that there are about 8000 possible well sites or one every 10 acres.Using a conservative 0.5 bcf for each well-a mancos well typically has 3.5-4 bcf-gsx calculates a resource potential of 8,ooo bcf or 8.5 tcf. Are we to take this number seriously? Well until they come up dry why not!But ngas prices must stabilize above $5/mcf in the rockies for this to bare fruite.Also gsx will need to give up at least half in Jv.but 1/2 of 8.5 tcf is a huge deal.There is no way that gsx can not make this happen.

All in my truly honest opinion here. Good Luck investing all.