More recent due diligence:
We believe that now is an excellent opportunity to start getting into the energy equities. We’ve been very bullish on Oil for a while now. We appreciate Devon Shire’s due diligence and suggest reading his latest article Petrobank Energy: An Exceptional Risk / Reward Opportunity.
I’m a man of few stocks. I’m not sure why, but I’ve always been that way. I guess I figure that if you have what you think is an exceptional idea then you better make sure that when it works out it makes a difference to your financial well being.
I’m far from mistake free (ask me about ATPG which is a work in progress), but this philosophy has worked out pretty well for me. The most important part of applying an investing approach like this is making sure that the worst case scenario is one that you can live with.
In other words as Pabrai says “Heads I win, tails I don’t lose much”.
And being a man of few stocks I’m very pleased to introduce you to what I think is an exceptional opportunity in a Canadian oil company called Petrobank Energy (PBEGF.PK).
In my opinion we can modify the Pabrai saying to “Heads I win huge, tails I win pretty big”.
I’m going to give you a high level recap of Petrobank and will in future articles dig further into the details.
The investment thesis is actually pretty simple. There are four parts to Petrobank:
110,000,000 shares (58%) of Petrobakken. Current share price of PBN is $23 which is a market value of $2.5bil.
66,000,000 shares (65%) of Petrominerales. Current market cap of PMG is $1.65bil.
A heavy oil business unit that sits within the parent company that has 670 million BOE.
Ownership of a potentially game changing oil sands extraction technology that could be worth billions.
Now, as I have boldly claimed above, I’m focused on rule #1 first and foremost which is trying to make sure I don’t lose any money. Petrobank itself has 106,000,000 shares outstanding with a current price of about $40 per share. That is a market cap of $4.2bil. The company has minimal net debt. The shares owned in just 1) and 2) above are worth in the market today $2.5bil + $1.6bil = $4.1bil.
Petrobank market cap = $4.2bil
Market cap of the two public subs = $4.1bil
So the market is implying that 670 million BOE and the THAI technology are worth $100mil. I know, it is ridiculous. http://turnkeyoil.com/2010/10/21/100-oil-coming-we-think-so-are-buying-oil-equities-opportunities-petrobank-energy-is-one-of-them/