Angle Energy Inc ANGZF

RE: RE: Angle Q4 Results

[Baxter4]

I read it on the Trusts board at investor village. Here is a post by Comex on that board:

What the market appears to be doing is (temporarily?) repricing the gas weighted Jrs with Cardium assets that were bid up last winter. I see this as related to the seasonal NG price declines. It also has to do with short term trading and traders trying to redeploy money into something that is moving up 'right now', often with a thought to coming back to this area when it is moving again. There are a lot of investors out there who strictly trade momentum and don't even look at the fundamentals of a company. They can easily move these illiquid Jr stocks.

If I go back to longer term thinking I understand that these companies were already under priced because of their gas weighting. Being that their production percentages are so biased toward gas, which generally has a faster decline rate, any focus on increased oil production will fairly rapidly increase the proportions of oil to gas. IE: going from 10% to 20% oil doubles the oil production. Also that new (high profit margin) oil production is going to grow the cash flow a lot faster than than the (low profit margin) gas decline is going in the opposite direction. Consequently a few quarters down the road we see rapid increases in cash flow, if all goes as planned. Not to mention, NG is at historic lows and any price increases on the remaining production will give a good percentage boost to cash flows above what is anticipated now. These gas weighted Jrs., by focusing on increasing low cost predictable light oil production, are taking the best route available to rapid profit growth but it's not going to happen next week or next month. It's a new opportunity brought about by emerging technology so the potential is speculative and the areas that it will work best will surprise.

It goes back to that old argument whether too own high cost producers or low cost producers. The fact is: high cost producers will make you more money, when the commodity price goes, up because their margins will grow faster. This switch from gas to light oil development offers similar metrics by adjusting the other side of the equation but the math is a bit complex and the market usually reacts short term to the simplest story.

It's all speculative and the future may change this prospect, who knows?, but based on the math and the prospects, as they exist today, these plays make sense and should be bought on weakness. If one is over invested in Jrs. this volatility may not be much fun.

The idea here is to anticipate the changes. The market is inclined to do that very short term but tends to price in present value more predominantly. That is good if we want to make a gain because we aren't going to make anything if the market prices in all the future production gains, right now.