agressive analysis appears.Some aggressive analysis I found over on silicon investor. This one is saying that if the reserve is 100 million bbls SOG shares should be worth $2.64..... therefore is there turns out to be 800 million bbls, they should be worth $21.12 !! great eh? I have now sold a small quantity to cover my original investment, and wait rubbing my hands with anticipation on when to unload some more.....
PACIFIC
INTERNATIONAL
SECURITIES
INC. PI Daily Journal by Research Department
December 2, 1998
Natural Gas Blowout—East Lost Hills Bellevue #1 Well, California
Participants in this exploration well near Bakersfield, California, include eight Canadian
companies; including sev- eral junior companies, with varying minor interests. On
November 23 rd , a high pressure gas and condensate zone was encountered at
approximately 17,600 feet, and the well blew out and ignited. A well control team from
Boots & Coots of Houston, Texas, is currently on site. The well was still burning at last
report. The continuing fire and blow-out suggest that an extensive high pressure
reservoir has been encountered; however, evaluation of the reservoir will not be
possible until after the well is under control. It is ver y likely that extensive damage to the
existing well will require that a second well be drilled in order to access the reservoir
and this will be a costly, time consuming procedure considering the depth of the well. In
view of the considerable market interest and trading activity in the companies involved in
this well, we have completed a preliminary evaluation in order to illustrate the var ying
leverage to the play for each of the companies involved. Assumptions made for the
purpose of the evaluation are a recoverable reserve of 100 million bbls of cr ude oil
(approximately equivalent to one trillion cubic feet of gas), value of US$4.50/bbl and
exchange rate of $0.65. The purpose of this evaluation is to illustrate the leverage
potential for the various companies and does not imply actual value since there is
presently insufficient information regarding the pay zone and reservoir. (However the
prospect was initially estimated to have potential reserves in excess of 1 billion barrels of
recoverable oil; therefore 100 million bbls or more is not outside the realm of
possibility).
East Lost Hills Bellevue #1 Well
Company Symbol W.Int. Net Int. Shares Incremental Curr. % of O/S Value/ Price
Curr. (mm) Share Mkt. Price
Berkley Pete T- BKP 20% 15% 73.8 C$1.40 $10.15 14%
Elk Point Resources T- ELK 10% 7.50% 21.9 $2.37 $3.90 61%
Paramount Res. T- POU 10% 7.50% 56.9 $0.91 $14.85 6%
Westminster Res. T- WML 10% 7.50% 19.7 $2.64 $5.65 47%
Richland Pete T- RPL 5.00% 3.75% 12.6 $2.06 $2.65 78%
Kookabara Res. T- KOB 6.56% 4.92% 17.2 $1.98 $1.20 165%
Hilton Pete V- HTP 6.56% 4.92% 7.4 $4.60 $3.54 130%
Stanford O & G V- SOG 6.56% 4.92% 12.9 $2.64 $1.60 165%
Pyr Energy PYRX 10.50% 7.88% 9.2 US$3.85 US$2.25 171%
Assumptions: Reserves of 100 million bbls. Valued at US$ 4.50/bbl Exchange Rate at
$0.65 Share prices as of market close on December 1, 1998 As can be seen from the
above table, the most highly leveraged companies are the juniors with relatively small
market capitalization; including: Kookaburra, Stanford, Hilton and Pyr Energy, which is
a US OTC Bulletin Board stock. Others with good leverage are Richland, Elk Point and
Westminster; each of which have fairly significant additional oil and gas assets and value.
There is likely to be considerable ongoing speculation as to the potential value of the
East Lost Hills well and there is also likely to be some considerable time (and costs)
expended before a reliable evaluation of the reservoir is ob- tained. In the meantime, the
speculative trading will likely continue, but in the absence of many reliable facts.