Pescod on WIXFebruary 22, 2011
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We’ve written up the Winstar story quite a bit over the
last while because Warren Verbonac had it on his top three
list.
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Today’s news from Winstar is a little bit confusing,
but the bottom line is that there’s not quite as much oil
as people had been hoping for and there’s lot of gas,
which is good considering the high price of gas in Tunisia—
almost $12.00 an mcf, but bad considering it will be
2014 before big pipelines are in the neighborhood.
Greg Chornoboy at Jennings Capital writes on the
Winstar results, “This meets our expectations for a gas/
condensate well. The high pressures from the lower
Tannezuft are a nice bonus—they imply that the formation
is capable of producing at a higher rate, or that there
will be a minimal “flush” production effect where sustained
production is significantly lower than the test
rate…”
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Chornoboy continues, “Winstar will now perform extended
flow tests on each of the zones to determine their
long-term productive capacity.”
Despite what the market said today, Chornoboy
writes, “This is a positive development for Winstar—this
well validates both the Silurian and Tannezuft formations
on their lands and increases the chance of success on
two or three more locations.”
Obviously, the market didn’t think that way today, but
mind you, most things were getting battered. Chornoboy
calls Winstar a “Speculative Buy”.
Verbonac apparently still likes the story, despite all
the gas found when one had hoped for a little more oil
and maintains his target price.
For a copy of either Chornoboy or Verbonac’s report
on Winstar, e-mail Debbie at debbie.
lewis@canaccord.com. <PESCOD clients only>
He writes, “The success of this well opens up a new
play for the Company, with another ten analogous structures
to drill. Management intends to drill several more
structures this year. The nearest producing oil well is
approximately 30 km away, providing extensive oil bearing
sands on Winstar’s acreage.”
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He continues, “Weakness in today’s stock price may
reflect a disappointment in the Silurian test, and a “sell
on news” mentality by the market.”
This was a great little story and an incredibly tight
structure as the company only had 35 million shares outstanding
and no debt. So it was one of the most leveraged
plays a speculator could hope for.
Interpreting the data coming out though, is not as
straight-forward as some would have hoped, particularly
given the environment of the market today.
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Meanwhile, another bullish observer of the play who
had very high hopes suggested that maybe his hoped-for
retirement on this well and this company will be delayed.