Petro One Market Commentary
I have been doing my best to simply observe and record the poaching on POP over the past few days, and now it is time for a report!
A quick snapshot of the last 10 trades speaks 1000 words. This is a textbook case of cycling. The best thing to do is simply sit on your hands or buy alongside at the bottom edge and sit on what you get.
Recent Trades - Last 10 of 212
THESE DO NOT PASTE WELL....GO TO STOCKHOUSE TO SEE FULL POST
POP’s bid last week was very strong and rallied all the way through a sullen market. Millions of shares traded hands and the stock moved up smartly. There’s no way that was retail money, it was sophisticates with deep pockets.
Today’s POP market smacks of the same, in reverse. The trades shown above are miniscule in terms of volume and dollars. However, because the stock is so tight, and retail investors remain jittery, it is a great time to “shake the tree”. As we see above, 8400 shares changed hands between the same parties at an average price of $1.52. That’s about $12,768. The loss on these trades was about .06 cents per trade. This represents a total dollar loss between these players of *ahem* $500 bucks, a meaninglessly small number to any power player (!)
The gambit is real simple: Retail investors look at L1 on Stockhouse or their E*trade account, see the stock is down a few pennies over a few days (never mind the massive run-up on large volume last week) and they fret, put in stop losses, and / or sell. This is the idea environment for powerful players, with a much higher degree of sophistication and professional traders to come in and accumulate what they want, at the price point they want.
Pros want stock as cheap as they can to sell as high as they can. If they wanted the stock last week, they had to buy it through us. This sure isn’t their preferred method. Folks, they’re here to make money, not help you. They don’t mind sacrificing a few hundred bucks to get you to flee. When this is going on, we need to stand strong like a crack Civil War Era brigade: Either hold the line, or better yet—advance in lockstep. Don’t let them scatter you.
You are all being tested right now. They want to know if you have guts. They want to see if you have conviction.
If you do, the best thing to do is sit on your hands or buy along the bottom edge. If you are waffling, call the company and read the corporate presentation and make up your mind. And if you can’t hack it, get your jacket, so the bold can march forward together.
Petro One Oil Exploration and Development Update
WTI oil is $84 / BBL and POP’s costs are projected to be $4 /BBL. The news of July 28, 2011 clearly states that POP has at least 6 more targets in addition to the discovery well that have as much or greater potential than the discovery well. That suggests a potential 7 wells with of at least the same quality.
EVERYBODY KNOWS THEY HAVE AT LEAST 3 WELLS CASED ON J5 RIGHT NOW AS THIS HAS BEEN FULLY DISCLOSED BY SASKATCHEWAN GOVERNMENT, AND PETRO ONE IS WORKING ON MANY MORE.
POP wouldn’t case a well unless it is going to drive significant cashflowing production. News is of course coming soon.
So let’s do the math:
3 wells * 60 BOE / day = 180 BOE / day
180 BOE / day * $80 BBL profit = $14,400 revenue / day
$14,400 * 30 days = $432,000 revenue / month
$432,000 * 12 = $5,184,000 annual revenue
*AND THIS IS IF POP NEVER FINDS ANYTHING EVER AGAIN ON J5 OR ANY OF THEIR REMAINING 17 SECTIONS OF LAND, EACH WITH 16 WELL POTENTIAL*
How many juniors ever achieve revenue like this, let alone within months of getting started on their very first drill program?
GSR Deals and News Update
Yesterday, GSR announced that they believe they are about to drill on what could be another Coffee Creek. Petro One has a 30% carried interest in this property and millions of shares in GSR on this deal. Best of all POP paid nothing for this project, and will pay nothing to advance it. Clearly, POP’s management has a strong eye for value and knows how to crystallize it. The GSR deals have already meant about $9 million dollars of cash and shares to the bottom line at no cost to POP. Let’s do the math on this one too:
Lucky Strike Claims 70% optioned to GSR:
· Petro One receives $500K cash, 2 million common shares of GSR on closing, 5 million common shares over 5 years, and 4 million warrants @ .25 more over a five year period.
BRC Claims 100% optioned to GSR:
· Petro one receives 2 million common shares of GSR and 3 million warrants @ .70 on closing, with another 1 million shares and 3 million warrants @ .70 in November 2012.
Most conservative total value of Yukon deal with GSR at today’s stock price:
· $500,000 cash
· 10M shares @ .70 cents = $7,000,000
· 4M warrants @ .25 is =.45 cents residual value * 4M = $1,800,000
= $9,300,000
Setting the $9.3M dollar current value aside, the sum total of these two transactions is $500K cash and 20 million shares of GSR at end of the 5-year period.
GSR has 24 excellent Gold projects in every major exploration camp in the Yukon. They will be actively drilling on all key targets this season. We are now in an environment of $1850 Gold. Just imagine if they hit on POP’s grounds—or any of their other targets, for that matter.
Fundamental Investment Case Update
The Saskatchewan Government has telegraphed POP has been successful on at least 3 more wells on J5. News is certainly pending on these wells. If the independent experts at Chapman are right, and I expect they are, then it is likely Petro One could soon be driving nearly half a million dollars a month cash flow from these 3 wells alone. This is an excellent accomplishment in such a short period of time and I cannot recall when I have seen a junior oil company advance so efficiently and quickly.
At the same time, Petro One’s Yukon Gold claims, optioned to GSR are the closest claims to the Underworld / Kinross Golden Saddle discovery, with all the geological and structural earmarks of significant deposits, now confirmed by the news of significant Gold numbers in silicified schist, taken from felsenmeer, which is precisely how Coffee Creek got started. Risks and costs associated with Yukon Gold exploration have been divested to the experts at GSR in exchange for bare-minimum $9 million dollars value, and a 30% carried interest. GSR is well funded and already executing a significant exploration program.
I restate Petro One Energy as my number one pick. Anyone who gets bumped off it at this time does so at the peril of their portfolio!
Happy hunting,
James Hudson, AlphaFlight Portfolios Inc.
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