Post by
rolfoto on Mar 08, 2006 8:35pm
JS on MC tonight March 8
JS on MC tonight March 8
>> Howard: Shares of niko resources didn't do thatch today considering there's talk of talks between the company and dane's state oil company about a takeover. Perhaps the fall in the price of crude over -- overshadowed the buzz today. Josef schachter joins us tonight from calgary. Welcome back to the program, sir. >> Joseph boyden: Good to be with you, what do you think about this scuttlebutt about niko?
>> The talk is that indian oil company is looking to acquire a number of assets. One of them is prom which is involved in africa. And also they're looking at niko as we mentioned. They're in the congo in the case of morale and also i believe they have a piece of pepper can in cuba. Also talking they're interested in assets in india which would be niko they explicitly mentioned that name. Also said they're interested in egypt. Make a company like centurion and others could be an interest for them. National oil companies are desperately looking for energy sources for their countries. We've seen china's national oil company do a number of deals including the encana ecuador assets and petrokazakhstan so this is in normal. What I would expect from a niko deal nothing happens in the near term because some of the most high impact drilling will not occur until the fourth quarter of this year when two deep rigs come into the country to drill on the deeper portion of the concessions. So a lot of the upside value is not going to be known until later on. Don't believe the president of the company or chairman of the company ed sampson would you tell want to do a deal unless he was paid for some of that upside. Of course, the drill bit is the key thing that you need to do to tell you that value. So my guess is the company today we have an $80 target on it. Before any new exploration drilling. If there is success with those rigs at the end of this year sometime in 2007 we may see a deal. If those rigs are successful, continuing the trend of the d-4 play if d-has success, my bet is that a deal happens in 2007 but north of $100. >> Howard: North of $100. Given what you've laid out there, all those ifs, is that why the stock didn't move much today? It moved up 2% yesterday. 1% today. Not much for rumour.
>> A pretty shabby day on the market for oil stocks. Cnq down couple bucks, encana one of the few that went against that downward trend. My view is that likely choice here of an offer is not in the cards because, you know, a couple of issues as i mentioned on exploration side. Plus, of course you've read in the media about the problem they have in bangladesh where they're not selling any gas and they're owed over $20 million for gas they've already produced. There's a lot of wild cards in terms of the value that not can be handled in terms of crunching them until some of these issues are more clarified. >> Howard: Just a couple minutes left here. Just back to the indian national oil company. Refresh my memory, is that the one that bought talisman sudan assets a few years ago. It seemed to take a long time. A lot of rumours, a lot of leaks before hand before anything got done?
>> I'm not positive on that. There's so many different companies just like in china there's three national oil companies that you got to keep an eye on. I don't knowexexactly which of them did do the buy. But i think that of course with the successes that sudan has had since then and of course the appreciation in the commodity price the buyer definitely is a happy camper. >> Howard: So lets talk a little bit about the price of oil here in the minute or so left. It dropped below $60 for a bit. Closed slightly above on it those inventory numbers.
>> Yeah, the inventory numbers up 6.8 for crude." Crude oil is now about 10%. Gasoline was down. Overall inventories when you take all the different grades was up 1.5 million barrels. At this time of year we should be having three to five million barrel declines. Inventories in north america are very healthy. Inventories in europe are a little bit light than you know the normal five year bang. And asian inventories are lower than normal. So in the period of time after you know the winter is over, there will be about a million barrels of production that could be in excess of demand. The united states of course wants to refill their strategic reserve. They're at $684 million.8 at the end of today so they ntnt to get t $700 million. Of course china wants to start building a strategic reserves and also inventories in asia are low. With opec keeping production flat, i don't believe that there's going to be much of a glut in america. I think they will see that inventory go into the strategic reserves. I think we'll see a price environment of mid-50s to mid-schiz then whatever mother nature does at that time we'll have more idea at that point.
>> Howard: Okay, josef we're out of time for nightcap. Josef schachter in calgary. That is the business news for this evening. Stay tuned though for "market call tonight". Our guest will be josef schachter. He will be taking your calls and e-mails on energy stocks. Meanwhile you can catch "the business news" every night at 7:00 P.M. And 11:00 P.M. Eastern. I'm howard green. Thanks for watching. Have a great evening. Look forward to seeing you back here with me tomorrow night. Stay tuned for "market call tonight". >> Howard: Welcome to "market call tonight", I'm howard green. My guest from calgary this evening is josef schachter from schachter asset management. He's here to take your questions on energy stocks. If you want your questions answered give us a holler tollfree: Welcome back to "market call tonight", josef.
>> Josef schachter: My pleasure.
>> Howard: In nightcap we were talking about oil. You gave us your note on where you think oil is going. Give us the, the short and skinny on natural gas? >> Josef schachter: Natural gas inventories are higher than normally at this time of the year because we had cold weather in december very warm weather in january which is normally when you have the biggest drawdowns in february the drawdowns are lie -- higher than a year ago. We're still in a very plentiful position. The U.S. Is production numbers are down materially. They were producing about 58 bcf in the first quarter of '04. About -- they're about 54 bcf the first quarter of this year. So they're continuing to have a declines. If it wasn't for mother nature being generous with warm weather in january, i think we swould would you tell have had tougher environment in terms of supply. Until we get to the hurricane season price also stay sloppy because of the inventory picture. We are in a $6.50 to $6 range. I think prices will firm up in the hurricane season. I think people will realize how tight the supply situation is in. Lng is not an answer. If you look at the long-term into the five six year futures market you will see that prices are not in this $6.80 level wherever we are today. Or $6.60 something like that today. But they're more like $8 plus. So my view is price also firm up once we get into hurricane season. Which is of course june july.
>> Howard: All right. Let's go to the phones. We've got robber in the winnipeg first. Hi, robert.
>> Hi, thank you for taking my call. Great show. Mr. Scheck ter, i call about ral. I own it and could you tell me are they going to be doing more drilling? I would you tell greatly appreciate it. >> Josef schachter: Rally is a name that's been on our watch list we've met with the company a number of times. Waiting for them to get concern developments before we consider officially covering it. What we like about the company they have heavy oil production in egypt. They have natural gas in pakistan. They've also been working on building up you know additional assets. The key thing for them is they brought in from north america very high impact semisubmersible oil pumpts pumps. They're going to install them on these wells they have in heavy oil if they work and they can get the glitches out of sand and other issues so that production goes up materially. Then they could increase production two three, four, five-fold over the next couple of years from that field that they have. That's the wild card. We're waiting for the people who are involved in installing them in egypt to come back and walk us through the technical specks and how it worked. Fits successful, then that would make rally stock very attractive one. So we're still in the watch camp and doing our homework. But at some point it's possible, if you own it the stock has done quite well over the last couple of months. They also had a very good reserve report going back a couple weeks ago. The company is headed in the right direction.
>> Howard: Do you have a position in it?
>> Josef schachter: We do not do not cover it or have a position.
>> Howard: Josef. We'll take a short break. When we come back we'll have your first pick of the evening. Please stand by. A. >>> Okay, we are back on "market call tonight" with josef schachter standing by to take your call and e-mails. Top pick number one is find energy. Josef this is huge for you an $8 stock, $275 million market cap that's practically a supermajor? Aover
[ Laughter ]
>> Howard: For what you usuallyic about. We picked this one at 2.50, we picked it at 5. We're picking it at 8 and we think it's going to 12. The company is 60% gas weighted. They've just added a new facility which had three 10 million a day gas plants kind of a tandem operation. So they're now around 6,000 B.O.E.S a day the company has 65 barrels per million of conden say the. Also they have a frak oil facility which again gives them high cash flow increase. They also have keeper potential in the pembina area where they have been doing up the 3-d seismic. We think the company will do about $2.20 cash flow in this year. They have a six year rli that should give us about $12 target. The wild card is the pembina play there's names like west and high pine, and vicario in the past that we've recommend that have done well in that area. We think that the company has got exploration upside. Good cash flow right now from this new facility which could be expanded. Most importantly, we think that sometime this year there might be a shareholder maximizeation process so we think it's great story. We recommended it a number times in the past and remg it again now.
>> What's the achilles heel of this one? >> It's low natural gas prices right now. So the trust funds may say do we use $60 cent economics in our buy price or do we use $or $9 economics. I think that's what's really holding maybe a deal back. The reserve report came out today and the stock is trading around net asset value based on the land and the reserve numbers they came out. With so we think that the question is what do you pay for upside. That's going to be something that may hold it back. We need to probably see a slightly higher commodity prices. >> You have a position in it?
>> I have a position. I've had one for a while.
>> Howard: Let's go to john now in toronto. Hi, john.
>> Many thanks, howard. Two questions for you josef about tyler. I know there's a lot of drilling to be done on the properties so would you say that over time that will turn out positive for the stock? It's been lagging. And secondly, if you can answer this question first, do you still own the 1.6 million shares you disclosed to howard on a previous show. Thanks very much? >> Josef schachter: The answer is yes it's highern that now. I've been buying in the last few weeks so so I've added to my position. Second, on the tyler i talked to jp after the press release today. And they had in the past been the key thing is they haven't had the rigs in place to do the job. That's been very frustrating. They're about two or three-quarters behind where they're supposed to be. They now have three core rigs working. The rc rig supposed to be up and working in the next few days. Once those four rigs are working they were able to do 2700 meters in the month of february. The rigs are doing the job so it's a question of getting equipment. They've also taken it from $1200 metres and $1200 meters in length they're now at 1700 meters in length. We were using about 100 metres wide in terms of the numbers. Neither now doing about 300 meters in width. So the results from in terms of the grades have been good. Molly numbers have been good. Silver credits have been good. It's of execution. The rigs haven't been there which was the frustrating thing. They're now there. It's just a question of getting the data in drilling it up sending it to labs. Getting over a .6 grade much we think this stock will go materially higher. With the fact that the fourth rig was on the way I added to my position knowing that that rig was coming.
>> Howard: So how many do you have now?
>> Josef schachter: 1.8.
>> Howard: Let's go to charlie in moncton.
>> My question is on endev. I'm wondering if it's a good time to add to my position. Thank you. >> Josef schachter: Endev is in southeast alberta. My concern has been that they haven't had the increases in production because decline rates have been pretty high. Spending quite a bit of money to almost do a treadmill situation. The upside was the deeper -- they haven't had the kind of zheas we were hoping for. So at this point, we're still covering it officially on a research basis. I don't own any shares. I'm waiting to see the results from the end of the year. They should be out over the next few weeks. Most companies will report over the next two weeks of the junior size. If they have growth in their volumes, we meet with management and like what we see, we'll be more constructive. But at this point i would say I'm not very convinced that the company has executed the way they need to. >> Howard: Alan in winnipeg beach, manitoba.
>> Excellent show, excellent host. Josef, i would appreciate your opinions and outlook on solano resources -- solana resources.
>> Josef schachter: They a conference call on monday I was in victoria and they had a conference call which was able to listen up on. They updated everybody on the well,. They had success there this two zones one called the mcgrusa where they can see a very big development program. On these wells could do between 400 and 600 barrels per day which is quite good to to do it for their drilling costs. They a deeper la paz that's why the program was delayed in terms of the information while they went into that deeper zone. The la paz in the area has wells that can do over a thousand barrels a day. If you find it that's very exciting. However, the permability the ability for the molecules -- molecules of oil to move through the rock was very low. They want to get some more understanding of it. They may drill another well that goes down to the la paz as one of these development wells so that they can get the core then analyze that core and decide if they can frac it. There's still a lot of information that still needs to be determined. However, we know that the they were a success. The operator echo petrol is planning at least two more development wells and possibly one of the wells will be a multikilometre distance from this one. So that could set up quite a lot of development the wells in between them. >> Howard: If you own it you would still hold it?
>> Josef schachter: Stay with it. We like the story. I own shares in the position. We do cover it officially on a research basis. We like the company because they have a very large portfolio of drilling over the next 18 months and if they even have moderate success there's material upside in the stock.
>> Howard: Another break. When we come back top pick number two. Please stay with us.
>> Closed captioning of this program is brought to you in part by lunch money with michael hainsworth. >> Howard: Okay, we're back on "market call tonight" with josef schachter who is standing by in calgary to take your calls on energy stocks tonight. Top pick number two one you picked back in november, november 22nd josef. Oil ex-co. Kind of spinning its wheels since then. Why how come?
>> Josef schachter: This one has held its own pretty well. Closed today at $4.16. The company has got what will be coming on in the fall the brenda nickel field which could be producing in excess of 30,000 B.O.E.S a day. They have minimal production right now. So it's the development phase that we're waiting for. In the meantime, though they have a second rig that's called the dog fin. That's drilling -- dolphin that's drilling three high impact wells. The first one is called joy. In our numbers and models for our institution clients we're using 20,000 B.O.E.S a day for the fourth quarter of '06 then growing a little bit in '07. The big question mark is how do they replace the die clines on this new production. So this new rig the rig that's coming in the dolphin is drilling this joy play which is an extensionets of nickel field. If that comes on and it's successful they're starting to rig up and drill it in next few days in the next 30 days we'll know. If that well comes in at 7,000 to 10,000 barrels of potential production that would offset the concerns about the declines. We're using in our numbers about $2 annualized cash flow so it trades very cheaply at two times cash flow. But if the reserve life index is very short that's the risk. If they start having success with this second rig, the dolphin they're going drill a well first called joy then they'll drill a second one called israeli each of these could have 10,000 barrel a day positive impact oil if they're successful. They've had a number of successes with their rig. They've also had some dna wells it's a patience game. We think the stock we have a $6.44 target. But we think that the fact that you're going to have production coming on in the fourth quarter you've got another rig working to drill up potential backups for production later on. Internally the company's numbers are they will be producing in the fourth quarter in excess of 30,000. So if they're right their cash flow numbers will be more like $3 annualized with the stock at $4.16 we think that's very cheap.
>> Howard: What did you pay poor it?
>> Josef schachter: $4..03.
>> Howard: Let's go to dave.
>> Good evening josef i know patience are a virtue but will we ever hear any drilling news from centurion. Also, how many rigs are working and do you still like this stock. Thank you. >> Josef schachter: Definitely we like the stock. I'm going to be meeting this friday with the ceo there on a working lunch about. You the stock today i think it closed somewhere around $12 I'm not sure.
>> Howard: $12.10.
>> Josef schachter: The key thing for them they're drilling a number of wells much they have three rigs working. For the last nine months they've been spending their focus on facilities. That's why the stock has languished. They're now back to a drilling program phase. At the same time, they're working continuing the last phase of the facilities which will be on at the end of this year. Facilities in this industry equipment for drilling, all three of is in short supply so there's a lot of lag effect in there. You know, a lot of our companies are not able to get equipment when they want them. That's part of the constraints of doing our homework on them to see if they are able to get any of these key limitation issues. But we think that the well is first of those high impact wells it's an anomaly to the west of the west play. They should be down a total depth shortly and in the next two to three weeks we should get some testing results. They also got the other rigs working. So to me, the exploration focus is in front of us. The other thing is sometime later this year they're going to drill up the big block just north of sudan. If that block is successful, that would add materially to the upside. So we like the stock at $12. We have a $20.50 target. I own the stock and we like it we've been covering it on a research basis since 66 cents. The stock languished from january when it was $19 we got quiet at that point but now that the stock is $10 or $12 we think it's very cheap. >> Howard: A grae break again. We'll come back for top pick number three after this.
>> Howard: Okay a few minutes left with josef schachter. Top pick number three sterling resources. You picked this before. Remind us very briefly why you like it and give us the risk and then we'll move on to some more calls.
>> Josef schachter: We have liked sterling for a long time since 80 cents we recommended it in december '04. Bob welty the ceo has great experience. He was involved in the indonesia area. Bow valley the first one now part of talisman. He's got a company which is involve in the uk north sea and also on shore romania. In the uk north sea the fist well of the offshore program with high impact is going to be the well with oil ex-co which will probably spud in mid-april. Then three to four wells drilled to their account in the uk north sea this year. Offshore then five wells on show in romania. Each different one offshore and on shore we think is worth at least $2 to $4 upon success. With nine wells being drilled one or two should come in which should give you lots of upside. With a number of successes two for gas one for oil those are being tested right now. We have a $3 target. We've been big fans of this company for a long time. We think for business risk oriented account it definitely should be part of a portfolio.
>> Howard: But drilling risk there obviously.
>> Josef schachter: Obviously. What they do is they promote other people to come in because they like the plays in the case of the first well, oil ex-co paying 95% of the well to earn 65% to the casing point and from the casing point on sterling will pay 35% of the well. So if it's successful you don't mind writing the cheque after that. >> Howard: What did you pay?
>> Josef schachter: Was $1.5 4. Your viewers may have seen a big block done last week friday. It was crossed between institutional clients. It was way over subscribed. Some people have called me and said josef did you buy any? The rules are clients come first.
>> Howard: As we say every night at this time do your own research and check with your own financial adviser before making any investment decisions. Let's go to bob in calgary. Hi, bob. >> Hi. Hi, josef. I would like your outlook for gallon energy given their galleyon energy given their numerous drilling locations. Do you see it as a possible takeover candidate in the future?
>> Josef schachter: Galleon has been a top pick for a long time we started recommending it on may '04. I do like high priced stocks we've talked about real, galleon before. Some are more than 10, some are more than 20. But it's the lower price one ones which are early starters where you make the most money that's why we try to bring them to the client's attention. They're over about 9,000 B.O.E.S a day i think the last press release was 9100. We think the company is going to be doing probably i think it's 14,000 boesks -- B.O.E.S a day this year. They're gassy weighted and right now gas is low price. I would you tell definitely stay with it. They have a very strong dominant core area in cali, dawson. So I would you tell definitely stick with this one. I think it's very cheap here at $21. It's on my radar list to be a buyer of. I don't own it currently. But I've owned it in the past and probably will own it in the future.
>> Howard: Okay, let's go to kathy in toronto.
>> My question is on uts energy. Do you have a target price, and what price would you buy it?
>> Josef schachter: I do not own uts. We were involved in planning a research report on it. Rules are if we're planning a research report for 30 days before the clients see the report for 10 days after we can't touch it. The stock was down around $4.20 we thought it was very cheap. The stock is $6.70 it's done fabulously well great idea poor execution. If you own it i would stay with it. Tar sands projects are going to be in die me hand -- in high demand. The added more well in recent purchases. I would you tell definitely stay with it. It's great long-term situation? >> Howard: Target price?
>> Josef schachter: At the time it was $4.20 we thought $7. Since then they've added more land. The question is what's the long-term commodity price you use for it? My guess at some point in the next year or two this will be a double digit price. How high i just don't know but north of $10 would be my guess.
>> Howard: Sergio in toronto, hi.
>> First calgary petroleum, josef what's your thoughts and do you have a target price.
>> Josef schachter: We've done work on this one and met with management. We don't have official research coverage on it. They're drilling wells i believe they have three rigs working in algeria. And the problem was this stock as you know got up to $20 or higher when everybody was excited by their wells. But they didn't have the definition under proven it was under possible which we defined as three B. P, one is probable, and then three is possible. They need to move that from p-3 to p-1, p-2. As he do that will company will see higher stock price. The stock $9.29 it's from up $6. I'm watching the results waiting to see how they do. And then depending upon that I'll make a decision about research coverage. But if you own it i would stick it with. The news flow of the exploration will be in the next few months. If it's successful it could take the stock materially higher.
>> Howard: Very few seconds for neil in toronto.
>> Hi josef. Do you have a target price on canadian natural what price would you enter it at. Thanks. >> Josef schachter: Canadian natural has come down to $63. I own this one. So howard, i do own large-cap stocks. I bought it at $62.50 for full disclosure. About two weeks ago. I think we know the stock was $73. You know the horizon project. Their results from the fourth quarter were very, very good.
>> Howard: 15 seconds left.
>> Josef schachter: Stock price of $75 to $80 is reasonable.
>> Howard: Okay, that was only five seconds. We'll let you off the hooct. Josef pleasure as always. Thanks for joining us. That's josef schachter of schachter asset management in calgary. That's it from for "market call tonight". Tomorrow night we'll