Replies to post #141 on Oil Stock Report

[reaper247]

OSR,

On Norse Energy, its definitely a wait and see stock. They have 2 major lease areas. One is a 50,000 acre area in southwest NY State.

I apologize for the length, but this is an interesting scenario.

The interesting thing about this is that Norse has already sold its main pipeline earlier in the year that would’ve serviced those leases, to a company owned by Norse’s former CEO.

That 50,000 acre lease area is what I think Norse could be considering to be a non-core asset which could be used to monetize their debt, leaving the company with larger 130,000 lease area to the east, which is where the Chesapeake / Statoil leases are.

Since these leases are carrying “risked” asset values right now because of New York’s frac ban, they are having a harder time getting loans based on asset valuation.

But if Norse can sell the 50,000 acre lease area, even if it is at “fire sale” prices, they could have enough cash to survive into 2012. Norse was actually anticipating Its first shale permit approval after the frost restrictions in the spring of 2012. Cuomo is pushing for drilling in New York as early as 2012.

If Norse can survive till that time, it could be a winner.

My main point is this, if Norse cant survive, and has to sell the larger lease area to cover its liabilities to a company who can hold off long enough to prove the wells are viable, it could be a game changer to whoever purchases those leases from Norse.

Once those lease areas become “unrisked” they would become worth anywhere from $4,000 to $8,000 per acre. Some leases have gone for as high as $12,000 per acre, but some analysts have downgraded those values a bit lately.

If you assume an “unrisked” asset value @ $6,000 per acre with a 130,000 acres, you get an asset that would be worth almost $800 million.

So one of two things are going to happen here.

Either Norse survives and ends up with the leases to develop that could be worth $800,000,000, at a time when power plants are switching from coal to gas, or Norse sells it all and someone will get the Norse energy lease rights at a deep discount and will have their 10Qs significantly bolstered once the wells are proven, which could be as early as 2012.

Norse ADR closed at .54 today. 10:1 common, so that puts Norse at .054 per common share. Not bad for a penny stock holding potentially an $800 million dollar asset once proven if they survive.

Given the progress on the NYGEIS as of late, and the location of the leases, I would consider Chesapeake and/or Statoil as interested parties on the 130,000 acres held by Norse.

Whoever ends up holding that 130,000 acre lease area in New York, is a company that I am gonna put a substantial amount of money into.

I just don’t know yet if it is gonna be a stinky pinky, or a NYSE stock.

All IMO and FWIW.