Frontera Energy Corp T.FEC

Pescod News Letter

[tony0911]

It is our last day in Miami at the Global Energy Conferenceand there is one story that stands out here as a success storyamongst success stories...and we are talking about PacificRubiales Energy, the Colombian heavy-based oil and gas com-pany.
The company has gone from almost nothing over the pastfew years to production of almost a quarter of a billion barrelsand a CAPEX of $1 billion plus. They have about 18.4 millionacres of land holdings or 12.7 million net—basically the sizeof a small country. Compare that to all the land holdings ofso many players in North America...suddenly they seem a tadsmall.
The four-year chart shows just how well Pacific Rubialeshas fared over the last few years...of course up until the lastwhile when the markets crashed and oil prices dropped. Itcertainly has provided a huge return.
Meanwhile analyst Fred Kozak and Nick Coutoulakis justput out a quarterly report on Colombia where Pacific Rubia-les, the star performer and while noting the ugly market, theystill like Colombia. Kozak writes, “we continue to argue that“the next Colombia” is still Colombia.”
Kozak does note however, “despite all of the success (inColombia) over the past nine years, it is seen as much morerisky than two years ago.” Kozak suggests, “much of this isheadline risk” and points to the union actions that have af-fected some of the oil and gas companies.
For a look/see at Kozak’s 90-page Colombian Quarterlyreport on 35-odd companies that have interests in Colombia,e-mail Debbie at [e-mail].
But here at the conference, we notice a comparison be-tween a company such as Pacific Rubiales, the successstory...and Petrodorado Energy. Huge production at PacificRubiales, huge land holdings, big future and only 270 millionshares outstanding and then you have Petrodorado. Petrodo-rado is a company that has the South American Dis-ease...they print shareholder certificates like Zimbabwe printscurrency. You want leverage to get ahead in the investinggame, so the fewer shares outstanding, the better. That ideanever seemed to have taken root at PDQ. They have 480 mil-lion shares outstanding! Got that?! Almost half a billionshares! And there’s more...adding in the gazillions of out-standing warrants and options and the number climbs to apotential 693 million shares outstanding.

Forget about 10-for-1 roll-backs, this company shouldconsider a 100-for-1 roll back. I don’t think we will see thatmuch bigger number though as PDQ warrants and optionsare so far out of the money that they will probably have amere 1/2 billion shares outstanding going forward.
Unless of course they find a way to turn on the printingpress yet again. And what do you get for that? Seventy-seven barrels a day of production! Yes, you heard thatright, a whopping 77 barrels a day...and I assume that mightbe on a good day.
So does PDQ have anything of interest, you astutelyask? Why yes—but much of the high risk/high reward vari-ety. Over the next 6-8 months, expect somewhere between5 and 11 (those are our numbers) big high risk wells to bedrilled in Colombia, Peru and Paraguay. Some of the wellsare the type that could single handedly come up with re-source numbers of 20 million barrels if successful. Mindyou they still have permits to get and are counting on helpfrom the President of Paraguay and an ex-President of Co-lombia to help get those permits so work can proceed.
For those who have watched PDQ develop and watch itsshare drop like lead (mind you, like so many other oil andgas companies over the last while) the next six months willsuddenly be of interest. Why? Why be hopeful on thecheap 18 cent stock? Well they do have 3.3 million netacres and Pacific Rubiales, the success story, is the opera-tor on many of their joint ventures.
We spend some of our gambling money on PDQ...sillyus! But for a good look/see on the company, go to theirwebsite at www.petrodorado.com.
We certainly enjoyed the conference here and it was agreat opportunity to compare more than 60 companies fromaround the world. From Cardium plays in Canada, to Bak-ken plays in the United States, to the many opportunities inColombia and Argentina, to the interesting stories develop-ing in Egypt and Albania. What an amazing chance to seeso many stories to get together at one time!
Meanwhile the mood of the conference is still thatthere’s an awful lot of concern about Europe and what nextfor resolution of the economic mess there. Most of the oilexecutives we talked to are budgeting on $80—$85 oil, butthere is certainly not a lot of confidence going forward.Many were surprised that during the crash we didn’t seeeven lower numbers.
Here’s hoping however, that the world can get its acttogether and despite a weakened American economy andwho-knows-what in Europe, the world can average 3-4%growth, thanks to American growth and stories like IthacaEnergy (IAE) in the North Sea; Bankers Petroleum (BNK) inAlbania, Bellatrix Exploration (BXE) and Pinecrest Energy(PRY) in Alberta, we find awfully appealing—even more soafter the conference.
Again, congratulations for putting on this amazing effortin Miami!