IAE - Back Up the TruckThere is only one way to describe IAE at thes price levels - and that is COMPELLING. This is probably the last chance to get into IAE at or around $.50 - if you have been waiting to start a position or add I would jump at this opportunity. It may come off a little more with the market and or oil price correction but at these levels the risk reward over the next 6 - 12 months completely favors the upside - maybe another $0.10 down in the short term (on oil plunging below $50 or the S&P cratering below 800 or both) in which case you add more and $0.5 to $1.5 of upside over the next year as oil prices mover higher, the global economy begins its tepid recovery, and management executes on its development plan with Dyas and adds production and in all likelihood reserves
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Lets review:
- Strong management and technical team
- Approx 5,000 b/d of unhedge low cost oil production (Beatrice/Bravo/Jacky) through the end of the year post-Dyas transaction, cash flowing $6m - $7m per month
- $60m in the bank
- Debt free BS
- A very financial strong partner in Dyas that will not only to fund their share of capx but also to alas supplier fears of dealing with Ithaca - and don't kid yourself alot of suppliers got burnt badly with Oilexco blowup/bankruptcy and are leary of extending credit to juniors operating in the NS - not alot has been written about this but it is a big problem for small companies trying to get projects off the ground, even ones with decent balance sheets. With Dyas behind them we will see production growth in 2010 and 2011. Octagon thinks that Athena gets developed next year due to the recent deal with Dyas and will be producing 2H 2010 since they now own 47.5% of the project and will be funding the largest piece of the Capx. Octagon is forecasting average daily production for IAE in 2010 of 7,500 B/D - all oil.
- 18m in 2P reserves plus
- High probability that significant reserves will be added (in the order of 5m - 10m BOE) when the compete the appraisal drilling on Stella (all indication are that the 300ft gas/oil column in the structure extends by as much as 800 more feet)
- High probability that significant reseves will be added in Beatrice area as they workover existing assests and drill new prospects
- When the emerging economies (ie BRIC countries) begin to turn in earnest late in 2009 or early in 2010 (which will be ahead of NA and Europe) the institutions will be chasing investments stories like IAE for energy exposure - you can bank on it
Back up the truck.....
BT