My Perspectives on the Great Potential of AMEP
For those new to AMEP, for those who are unsure of the company’s future, you need to consider a few facts. If you are a short-term trader looking to gain a quick in-and-out profit, stop reading now. Just come back in a few months, say in early 2006, and then calculate what you would have then made had you held on to even a fraction of those shares you flipped when AMEP started appearing on daytrader’s boards. This message is for those who wish to invest (and get rich), instead of just trade a stock with some momemtum.
Presently, AMEP is an opportunity that rarely presents itself. While diligent study of a few moving penny stocks will reveal potential one- or two- bagger gains, AMEP in a few years will be a 10-, 20-, or 30-bagger or more. Why?
For the reasons any stock authentically gains value, the company continues to grow in net worth and revenues. Right now, AMEP has insignificant revenues, as they have only a few producing oil and gas wells. Those who bet against AMEP must think that this situation will continue. It won’t, for a number of major reasons.
What is required for a young O&G (oil and gas) company to grow and prosper? Everything that AMEP has (and few others do). Here’s are the things not yet factored into AMEP’s stock price.
1. Rights to drill oil and gas wells on 7000 acres over the blanket Barnett Shale formation. Don’t take my word for it. Do a Google search on “Barnett Shale.” Every published report on this large formation shows that it has remarkable – and now – newly accessible reserves of natural gas. For decades, many wells were drilled right through the Barnett Shale in search of hydrocarbons in lower strata. Until recently, no one knew how to efficiently extract either oil or natural gas from the tight Barnett strata. But in the 1990s, a number of Texas oilmen learned how to pressure inject liquids into the Barnett, fracturing (“fracing”) the tight shale layers. The results of these new fracing techniques are plainly astounding, with virtually every new well producing copious amounts of methane, natural gas. A few wells also produce oil, including AMEP’s first test well.
In short, AMEP has gigantic Barnett holdings, with remarkable reserves of natural gas that will be released with modern fracturing techniques. Not only will the Barnett rights produce high natural gas yields, the evidence from the earlier fractured Barnett strata of other companies shows that gas production continues undiminished for years. Then, when the gas begins to wane, a re-fracturing restores copious production yields. The Barnett Shale is as good as it gets when it comes to accessible natural gas reserves, and AMEP’s 7000 acres will produce tens, or even hundreds of millions of dollars of revenues in the coming decade.
3. How could that be? It all depends on how many wells can be drilled or refurbished over the Barnett. From my readings, it is not clear if the Texas Railroad Commission (the agency that regulates oil extraction) will allow wells on 80-acre or 40-acre spacings. Either way, AMEP , and those of us who own hundreds of thousands of sub-nickel shares, are going to rake in piles of dollars. If only an 80-acre density is permitted, that’s 87 wells. To be conservative, let’s presume that AMEP will be able to drill only 75 wells. What revenues might those wells cough up? No one can know for sure just yet, as they haven’t been drilled (using new equipment and techniques below). But it appears that with the present high natural gas prices, AMEP wells over the Barnett could easily produce a million dollars a year each. That, of course, is a corporate income of $75 million. For a stock now selling at less than a nickel, diligent investors (not day traders) can discern the potential.
In fact, newly drilled or refurbished Barnett gas wells may yield close to two million dollars each year. Only actual drilling results will tell. But anyone who worries that AMEP wells on the Barnett will be “dry” simply don’t understand that modern fracturing techniques always produce gas, and in large quantities in this formation.
If you wish to dream, start punching in potential yields from closer 40-acre well spacings. ‘Nough said.
4. The real problem with the Barnett Shale, or any other hydrocarbon-yielding formation in Texas is not in the rock strata. It’s with the paucity of available drilling rigs. There just aren’t any. Any producer or contractor with an operating big rig is presently drilling. Until recently, AMEP was going to have to get in line and wait with all the other small producers and twiddle their thumbs until a drilling contractor became available – at a very high price. But in Mexico, AMEP just purchased a moth-balled big rig that is capable of drilling down 8000 ft, far deeper than the Barnett strata. More importantly, the new rig is able to drill horizontally at depth, sending a hole sideways up to 3000 ft into the gas-bearing shale. AMEP is now able to combine the new fracturing techniques with lengthy horizontal boring technology. Instead of being able to extract only the nearby gas surrounding a single vertical borehole, which of course can’t be any longer than the depth of the formation, AMEP can now extend horizontal holes out as far as 3000 ft, entirely through paying rock. Let’s see what the returns really turn out to be when the new rig completes its first few horizontal boreholes. Will these wells yield two, three, or four million dollars of annual methane? One thing is certain. Not a one will come up dry.
AMEP has the best acreage, in large quantity. It now has its own state of the art drilling rig, which apparently will be able to drill a fully producing well in a few weeks or less. It appears that AMEP should be able to drill a minimum of 15 wells each year. If each produces $2 million of corporate revenue, that’s $30 million total, and since the outstanding shares count is about 300 million (read the financials, as one “guy” always suggests), in a year AMEP may be taking in revenues equivalent to 10 cents a share. Project that growth out for a few more years, even at a moderate 15-wells per year drilling rate, and you will understand why those of us who have followed AMEP for several years see this as an investor’s opportunity of a life time.
5. The problem with natural gas is that it can’t be poured into a tanker and hauled off. It has to be pumped into high pressure steel pipe, which to install is time consuming and expensive. Guess what. AMEP apparently has rights to use existing NG pipelines on much or most of its Barnett Shale lease lands. These pipes were installed by others to transport hydrocarbons extracted from other, more conventional non-shale strata. The ability to move natural gas to market through existing nearby pipes is a great plus.
6. Many of us who have been around AMEP for a year or more were first attracted to the company by its unique development and rights to a proprietary oil well additive, some strange solution that causes thick, tightly-bound heavy oil to flow more freely. AMEP has rights to the substance’s use in all of Texas, and if it works, it has the potential to reopen old, worn out wells where the only remaining oil is heavy oil. Recent reports from AMEP show that using a combination of heat and the additive has resulted in a 300% increase in oil flow in old, abandoned heavy-oil wells that it operates.
In the near future, AMEP’s additive isn’t likely to produce substantial revenues. But as AMEP’s well managers continue to perfect the additive’s use, there is tremendous potential for hundreds of abandoned wells that could be returned to production with this new extraction technology. The potential results could be worth many tens or hundreds of millions of dollars, if the technology proves applicable across the hundreds of abandoned heavy oil wells in Texas.
That’s for the future, if it develops. The real AMEP story today involves a propitious confluence of other favorable factors, including the high and elevating price of natural gas, the large Barnett Shale reserves AMEP has the rights to, existing distribution pipelines, two company-owned drill rigs, a smaller one that will rework existing well casings, and the new Ideco big rig capable of drilling wells deeper and longer than any needed in the Barnett shale.
What are the possible liabilities for investors in this company? There are a few bashers who continue to post the same “concerns,” especially one particular “guy” basher. He claims that he invested in AMEP some time ago and sold out for a $200 loss. He claims that AMEP is only a share-printing mill, and that’s all they can sell, worthless new shares. For much of the last year, AMEP did produce and sell large amounts of shares, now totaling just over 300 million (according to official financial reporting documents). At the time, all of us were a bit concerned at the outstanding share expansion. But now we can see that this was extremely brilliant, as it gave the company funds to quietly purchase rights to the Barnett Shale before landowners learned of the new fracturing technologies. By shrewd business practices, AMEP got into the Barnett Shale patch before anyone else knew it was going to be worth millions. An oil or gas company without rights to drill doesn’t have a future. AMEP has both the acreage and a great future.
The basher guy also likes to point out that AMEP has some unpaid debts. But these belong to a precursor company, now extinct, from which AMEP bought stock listing rights. In short, AMEP not only has large valuable drilling acreages, machinery and knowledge to drill with, it doesn’t have any debt of consideration.
The stock price closed today (16 Sep 05) at just under three cents. Authentic investors will have to do their own due diligence and decide if this is an appropriate investment. I’ve read the comprehensive reports of Greeneyedhawk, Drillbit, and others on this board. I now own over 2.5 million shares of AMEP. If you are a basher, don’t even respond to this posting until September 2006, when I will first begin to consider taking a few profits. I’m a long-term investor, not a day-flipper or basher. Those who share my investment interests in this stock and elect to purchase some shares will be well rewarded. Few investments offer such high potential returns at such a low, essentially absent, risk. Of course, do your own due diligence, and invest only what you can afford to lose. This is still a penny stock, both a great opportunity and also a requirement for exhaustive research and diligence. I hope this helps investors make a wise investment decision.
It’s pretty clear that just the company’s Barnett Shale lease rights far exceed the present share price. With the exception of two or three day’s involvement of stock flipping momentum players, the AMEP share price has been moving up nicely in the last months. But how will the market react should the company hire an outside consultant to professionally assess the value of its leaseholdings? Likewise, how will the market react in a few weeks or months when the first horizontal bores are completed and copious amounts of gas come pouring out? Fourth grade arithmetic will then show the potential of new wells over 7000 acres.
Right now, those of us in the know are buying as many shares as we can, knowing that we shall reap the greatest gains when others finally begin to accumulate shares based upon actual well yields, not the anticipated ones I’m working with. Some of us are in very early, with giant share counts. In the last two years, I’ve had a significant 3-bagger and a stunning 10-bagger, with the returns of each going into AMEP. I can see it at anywhere from $2 to $5 or more in five years. While the traders and bashers do their daily machinations, I’m just sitting back and smiling. In the last year, I’ve already got a 2-bagger with AMEP. Check back with me in a year or so. Let’s see who made the right decisions.
My best to all.
