Long Run Explor Ltd Ord WFREF

Alphastox initiates coverage of Highnorth (V.HN) mention LRE

[Tommer3]

Alphastox.com brings investors the latest news, market commentary & analysis on the junior markets. Stay informed to reach higher profits!

 

 

 

Dear Alphastox Subscribers,

I wanted to introduce another oil and gas player in Alberta that is working towards unlocking value in targeting the Nordegg, Duvernay, Exshaw and currently, the Montney. For High North Resources (HN.V), this is both a conventional and unconventional oil play with great upside potential, especially given its current management team and its close proximity to many producing wells.

The company is currently doing a $0.35 financing, raising up to $8.25 million while having already raised 3.4 million. The stock closed last Friday, September 20^th, 2013 at $0.40 and is currently sitting with a $13 million market cap. I want everyone to know that my company, Transcend Resource Group has taken a position in High North Resource at $0.35. This is my first encounter with the company, but I like its revenue potential, the management team and the area.

HN currently owns 11,500 acres and has access to a further 113,300 acres targeting high quality Montney sweet crude oil.  This has the potential for very large oil reserves especially when you Long Run Exploration (LRE), a $600 million advanced stage exploration company working right beside you. Long Run’s stock has increased over 50% since July 2013 from $3.70 to over $5.50 based on their production increase. RMP Energy is also drilling Montney wells and is drilling just to the south of High North. RMP shareholders have been extremely satisfied with its performance going from a low of $1.99 to a high of $5.66 in just one year. They have had some big wells hit 1000 bpd from their Montney horizontals and it obviously showed in their stock price having increased over 180%.

One of the things that really stood out for me before I decided to make an investment in High North was the acreage. High North has 119,680 acres. Chevron Canada recently acquired 67,900 net acres for a reported $1 Billion while Encana sold 225,000 acres for $2.2 Billion which comes out to approximately $9,800 per acre.  Chevron and Encana are about 40-50km south of High North’s wells but its shows the potential of the area.

The second thing that stood out for me was the recent Montney oil rates and the net backs HN would get. Judging from other players in the area, 30 day initial rates are about 300 to 600+ BOEPD. 90 day oil average rate is approximately 260 BOPD. The net backs are very high as well. At $70/oil, HN would get a $50 net back giving the company great revenue potential especially since they project to drill up to 16 horizontal wells in 2014.They are currently raising up to $8.25 million, (of which $3.4 million is already done), to drill two Montney horizontal development wells and one horizontal exploration well and if successful, the company plans to raise an additional $35 million in the end of 2013 or Q1 2014 to drill a 16 well Montney Program. The Montney is really heating up. According to Long Run Exploration’s July 31^st financials, given its current success on the Montney:

“2013 development capital spending on the Montney oil play is expected to be approx. $110 million”.

High North’s management team has been extremely successful in taking junior exploration companies and turning them into profitable oil producers where shareholders made substantial returns on their investment. Colin Soares, the company’s President was the Founder and President of Rocor Resources Inc. which he sold to Petrobank in 2008 for over $50 million and Arn Schoch, High North’s CEO was the Founder and CEO of Strategic Oil (SOG.V) from 2004-July 2012, taking the stock from $0.15 to well over $1. Strategic is currently trading at $0.97 and has over a $200 million market cap.

Make sure you keep High North (HN.V) on watch now and stay tuned for the company’s news flow. The company is drilling now and is awaiting results shortly so stay tuned for that.

As always, if you have any questions, please do not hesitate to get in touch with me anytime.

Alphastox.com will be covering High North Resources and will be providing corporate updates and Q&A session with management on a weekly/bi-weekly basis.

Best,

Etienne