Post by
rolfoto on Sep 08, 2005 1:16pm
Schacter's verbatim Sept 2nd
FRIDAY Sep 02 2005
Tyler
Oilexco
Top Pick # 1 Adulis ADE-X
Sterling Resources SLG-T
Top Pick #2 Centurion Energy, CUX-T
Galleon energy GO.A-X
Top pick #3, Find Energy FE-T
True Energy TUI-T
>> Howard: Welcome to "market call tonight". Welcome back to "market call tonight".
>> Josef Schachter: My pleasure.
>> Howard: We were talking on "night cap" principally about oil. But natural gas has been a huge story the past little while. A quick word about that, if you would, before we go to the phones.
>> Josef Schachter: Yeah. Natural gas has not been rising in storage like normal. This week, I think 50 went into storage, I think a year or so, 80 or 82 went into storage. Two issues. One, demand has been greater than expected because of the warm summer conditions and the air conditioning utilization in the eastern part of Canada and the United States and, second, the industry is not able to drill sufficiently and fast enough to bring on new reserves, so that's not bringing a lot of new incremental production. Part of it has been the wet, rainy conditions we've had in the west here, where a lot of companies have not been able to drill up significantly. The rig count is not as high as it should be, pipelining crews can't get in because the moisture outside on the land. So, we're way behind in terms of where we expected to be in terms of new production. All of that has caused higher prices. In our models with our Clients, we're using about $8 for our models for '05 and '06. Year to date, we're just under that. This week's data was $11.13 in M.C.F., So it's $3 high easier than what we're using in our models because of the issues that we're seeing in the gulf of Mexico now and also because storage is not building as much as people expected it.
>> Howard: Ok. We use that as a backdrop and go to the phones now. We have Sergio in Toronto. Hi.
>> Caller: Hi, Joseph. Can you give us an update on Tyler Resources?
>> Josef Schachter: You are a regular on the program, just like I am. I talked to J.P., The president late this afternoon, and the deep rig is supposed to be getting in location in the next week. It's going to start doing step-outs deeper, about 100 to 150 metres than the 300 meters they've done today. My expectation is they use the original core rig to go lengthwise and they'll head to the south with that and they have about 1,400 metres of strike length now, couple hundred metres of width. We need to get deeper and go further up and down on the strike length. If they can get a reasonable amount of work done between now and the end of the year with the two rigs they have, I think the stock will be back to all-time highs and the key thing is, can they by the end of '06, get to the 4,000 meters of strike length, and get to how deep this is. We don't know if it is 500 metres or 1,000 meters deep. If they can get it to 400 meters, then my expectation is that $5 will come into play again. Management's had a problem in getting rigs. That's what's made the delays. It is not the issue of the property, it is just access to equipment. And that's the same problem we have in oil and gas industry is access to equipment. Mining is facing the same issue. I like the story, I own the story, and it is a patience game. But in the next few weeks, we'll see results from the deeper rig and I think that will make the stock begin to perform based on results.
>> Howard: Even with the "if's" that you mentioned?
>> Josef Schachter: That's correct. We know the north and the south because I was on the property with geologists who saw the surface and they saw 4,000 metres because we did checks all along. The depth is the wildcard and mines in the area to the north of them that are in production right now go more than 1,000 metres deep. So, these guys just have to prove that they have the size of the prize, more than 500 million tonnes in the ground and I think the investors like myself who own it will be very, very pleased at the end of the day. And this company will get taken over in late '06 if they prove it up. Again, if they prove it up.
>> Howard: All right.
Let's go to Halifax now. John is on the line. Hi, john.
>> Caller: Hi, Howard. You mentioned Oilexco in recent programs. I've been in it over a year, been to $4 twice, back to $2 and back to $4 again. Does it have something on its own merit in the original field?
I hear you talking about relation to sterling resources.
>> Josef Schachter: Yeah, we just since that last time, we have introduced coverage officially to our institutional clients. We have a target price of $8.12 on that and the key for us is that in q3 of '06, the Brendan field comes on. The money to develop it is coming from loans from the bank of Scotland because they see that this is a project that's very viable. They have the second 712 rig that will go in January to do the development wells which will be horizontal wells and once that cash flow comes on, they will be producing north of 20,000 B.O.E.'S a day, which is what we're using in our models for the fourth quarter of '06. The company believes that they will be greater than 30,000. We put a hair cut on that to get cash flow numbers. The bottom line is that we end up with cash flow north of $2 a share. We think that is worth four times cash flow or that $8 target. We like the company because they can take that cash flow, starting in q3 of '06, when it comes on, and use that and the rig that they have, which they have through the end of q1 of '07, to go and farm in on other properties of north sea where people have land expiree issues, farm in and drill them up and they can create additional shareholder value. So, as the Brendan fields mature and depletes, they will have other fields that they drilled up during this next year of windows and have that incremental production come on later. We really like the story. We have officially introduced coverage. We're the first Canadian firm which provides research that's introduced coverage on Oilexco. We like the management and the team. One of my staff will probably be going at the end of September to be there when they continue drilling. We'll be doing our due diligence, but we like the story, it's on our coverage list and we recommended it to our institutional clients.
>> Howard: Aside from the research, which you just described, do you have a position in it as well?
>> Josef Schachter: We do not at this time have a position in the stock, period.
>> Howard: Stand by there and we'll take a quick break. When we come back, we'll have your first pick of the evening. Please stay with us. >> Howard: Ok. We're back with Josef Schachter standing by in Calgary tonight to take your questions on energy companies. Top pick number one is something you picked about a month ago as well. Adulis ADE-X on the venture exchange. This is a gold company, isn't it, though?
>> Josef Schachter: No, an oil company. My area of expertise right there.
>> Howard: I'm seeing gold properties on Bloomberg here. They have it wrong.
>> Josef Schachter: No, no. The problem is if it's a risk, it's in the country. They're in Colombia. But they’ve had two recent successes. This is a stock, as you can see, was up to $4.50 in January February, it backed off to just around $1. They then had two successful wells in a row. They drilled now a second well at g-2 as we're calling it. That well is a success and has been cased and is being logged and is being tested. So, we've raised our target price with our institutional clients to $3. They're also drilling a well, which is nearing completion in the next week called Puma. Puma is a target, which has potentially 60,000 barrels of recoverables. If that comes in, it could add $2 to the N.A.V.
If puma comes in and our $3 target will probably go to $5. At the meantime, they are going to drill at the end of September and I apologize to people of Spanish origin when I try to pronounce this, Guaricoreas in September, that is 175 million barrel target and another one, a 42 million barrel target, all are wells that could add significantly to the value. We like that there's nine wells being drilled over the next 12 months. Four of them are high-Impact being the first and we have been very supportive of this company. We're taking them on an institutional road trip next week to Toronto. The following week, they are going with other brokers around the U.K. The last financing they did was down at $2.75 by U.K. Investors. We think that with the G2 success and if they have success at puma, this stock will move materially in the near term and it's been one of our top recommendations for our institutional clients in the last few weeks.
>> Howard: So, the risk is the puma exploration?
>> Josef Schachter: Well, G-2 is a success. That news will come out during this road show in the next few weeks. If Puma comes in, that is not in my forecast and if it is successful, I have to raise my targets.
>> Howard: And do you have a position?
>> Josef Schachter: This is a country risk.
>> Howard: Country risk?
>> Josef Schachter: Yeah and for the last two to three years, you had a mining company on earlier, one of your colleagues interviewed them, and they - they are saying that for the last three years, the violence and terrorism is calming down. We checked this out with our contacts and the same thing has been informed to us and these guys can operate with no problems and this country has tremendous upside with the drill bit because of their size of the pools that are there and they have changed the fiscal regime to make it one of most attractive in the world. So, with the violence down, companies can operate, they can bring in rigs, they get top dollar for their netbacks and it's a base and it's under explored. So, we think it is a great story. There are risks, as we said, country risks, exploration risks. But we like the story and we've covered it on a research basis and been recommending it.
>> Howard: Do you have a position in it?
>> Josef Schachter: I personally do, yes.
>> Howard: What did you pay for it?
>> Josef Schachter: My highest price was $1.69about a week ago.
>> Howard: Let's go to Robert in Winnipeg. Hi, Robert.
>> Caller: Thank you for taking my call. I'd like to ask you, Sterling Resources SLG, You recommended it. How is it coming along and it went from $1 -- went down to as low as $1.30, now back to $1.50. Do you own it and do you see any potential here?
>> Josef Schachter: Yeah, we like this company. They had a dry well in Romania, that's why the stock came off the $2's and came down. They're going to be doing more seismic and figuring out what to do next in Romania between now and November, December when the seismic is all interpreted and they should start drilling again. In November of this year, they’ll drill their first high-impact well offshore, the central north sea area. Interestingly, Oilexco is the one farmed in with them to drill with their rig. We see six wells potentially being drilled between now and the end of '06. Any one of those wells comes in, normally you have a one-to-three chance, you can add dollars to the company which, of course, would be responded to in the market. I own this one. I'm a significant investor in it. We covered it officially on the research side. This week, we had them for two days on institutional road trip in Toronto. The response of investors has been very good. You may have seen a very large block trade during the week and Canadian institutional investors were the buyers of it and was a U.K. Majority shareholder there that had some problems with other things, they were the seller. So, the Canadian institutions like the story. I own it, I like it, and it is a patience business. As I've said to our institutional investors, it is a two or three-year story to unfold. If it unfolds reasonably successfully, you'll have a significant upside and we've publicly, in writing sets a $10 target for three years from now.
>> Howard: Very quickly before we go to break, you said you are a significant investor. How significant?
>> Josef Schachter: Well, I own almost a million shares. That's significant.
>> Howard: All right. Eighty million outstanding we see. We'll take a quick break. When we come back, top pick number two. Please stay with us.
>> Howard: Ok. We're back with Joseph Schachter of Schacter Asset management. He is here with top pick number two, one you've been talking about a long time, Centurion Energy, CUX-T just under $12. It's kind of been dead since last February. It peaked at $19. What is going to light it up again?
>> Josef Schachter: The company, starting in September, will have four rigs working in the field. They had a lot of successes late last year. They were booking up those volumes this summer. So, they weren't doing much new exploration. They've done a lot of seismic and that seismic now is giving them the lead. So, the market was looking for that zizzle of exploration. That is going to come back in September with a number of different plays in Egypt on the new lands. Also the Melita play being drilled by Petrocanada, offshore Tunisia was spun off in September. The exploration is going to start to happen. We met with management yesterday, for example, in terms of detail, went over the facilities, went over all the details of what is going to happen. We think that the trend that they have on the plays that are producing today, the geology is showing very good and the seismic is giving them a lot of leads. If, in the next starting September, October, they start resulting in wells that can do 20, 30 million a day with a thousand B.O.E.'S of liquids or oil which they've shown in the last number of wells, then this stock will start to lifted again. Melita is not in my numbers. I have a $12.50 price target.
>> Howard: What is your biggest worry about it?
>> Josef Schachter: The issue of drilling I don't think is that much risky because they've had a lot of success already. They haven't had a dry well yet. If they have a few, it's not important. If Melita is a dry hole, that would be disappointing. Again, that is not in my numbers. If there was any disruption of the political system in Egypt, that would be a risk. The geology and the ability to function is not a problem. I've liked this stock, as you know, since 66 cents when we recommended it originally. We were the first institutional investors to recommend it. It's been on my list ever since. Back in December of '02. I've gone through my numbers for 2006 and we have them exiting this year at 45,000. We think they can exit next year, assuming reasonable success with the drill bit north of 70,000 B.O.E.'S a day, between light oil, liquids and natural gas and we think that the stock potentially could be at more than a double from here because we're thinking in our models and, again, we do 12-month targets, not 18-month targets. But if they can bring the kind of numbers on by December of '06, our target will move over this year to $30. We like it. We have a $20.50 target for 12 months right now but if they progress reasonably well -- I do not own this one right now. I've been waiting for a window to buy it on this correction here - in quiet times. But we have provided research to the institutional market and in two weeks' time from now, we will be taking them on a road show to institutions in eastern Canada.
>> Howard: Let's go back to the phones. Bob in Calgary. Hi, bob.
>> Caller: Hi. I'd like your outlook for GO.A-X Galleon energy, given they will be trading on TSX. on Tuesday, I believe. And their recent farm in on the Penn-West land.
>> Josef Schachter: Yeah. We like Galleon and started recommending it in may of '04 at $7.75. Steve Sugianto and his team have done a fabulous job The stock was at $17.30 at close today we had a target going back 4 months ago of $ 17.50, the stock has run $3 in the last few weeks. This Penn west land acquisition is very important to them. It gives them further dominance in their core area of Calais and Dawson. They've had very good success with the drill bit for oil and if they can trend that into the lands from Penn West, that would be very favorable.
>> Howard: You still recommend it?
>> Josef Schachter: We are still recommending it. It is on our recommended list, but we have not raised our $20.50 target. I will sit down with management after their q3 results come out some time in November and if they have more announcements on success with the drill bit on these oil opportunity lands, then we will -- we like these progressive targets that we raise as companies breach our numbers and, you know, we've done that a number of times with Galleon. My expectation is in the next two to three months, we'll raise it again.
>> Howard: Position?
>> Josef Schachter: I don't. And we did in the past. We provide research on it. And we cover it on a research basis and Maison Placement have done underwritings -- involved in underwritings lead by others in the last year or so.
>> Howard: Another break. When we come back, top pick number three from Joseph Schachter. Please standby.
>> Howard: All right. We're back. A few more minutes left with Joseph Schacter standing by in Calgary talk about energy stocks tonight. Top pick number three, Find Energy, up 80% year to date. 145% over the past 52 weeks. Why do you like this one?
>> Josef Schachter: We started recommending, if you remember, Find Energy about a year ago, late last year, q4 when the stock was in the $3.50, $4 range with a $5 target. And then they had a stumble, which was disappointing because of some issues that they had with fields in Saskatchewan. The company focused on them, cleaned that up and the big thing for them is they've had a lot of success in the Pembina Area. Since the first quarter, they've sold during q2 the assets in Saskatchewan at a very high price. The balance sheet is pristine now. There's almost no debt on the balance sheet and the Pembina fields is what they've been working on hooking up. They were doing about 3,000 barrels a day at the end of -- after the asset sale. They have about 2,000 B.O.E.'S behind pipe that will come on in November when the new facility comes on. We expect that they will be in the end of this year, early next year, about 5,000 B.O.E.'S a day, which should justify a target as we have about $10.34, which is about a 40% upside and we also think that once they have stability to the production of this new production through these new facilities, that they will entertain an offer maybe to be taken out by a trust, you know, by one of trusts. So, my view is that this stock has done a very good job. It stumbled for a minute. They've recovered from that stumble. They’ve done a great job operationally the Pembina area is their dominant core area. It will be the biggest asset they have and I believe that this company, if you remember the previous -- this management was previously at a company called Search Energy. Now they're at Find Energy. I wonder what exploreco's name will be next.
>> Howard: Running out of names there. If somebody's had 145% over 52 weeks, or picked it up when you first recommended it, why not take the money and run? Despite what you say?
>> Josef Schachter: You know, if you have a better idea, that's always, you know, capital allocation. But for my institutional clients that bought it, they like to hold on to core positions if they have them. Why sell and, you know, in case -- from the point of view a tax issue, if it's a tax account and also the institutions to replace positions are not easy. So, they want to stay until the exit strategy. If it's a retail investor and they have a better idea, that's the difference. Sit down with your investment adviser and make that determination. But my institutional clients really like to stay with good names and good people and then go to their next venture with them, whatever it is, you know, Search, Find, I don't know, you come up with the name. They'll probably pay you a finder's pay for finding the next corporate name.
>> Howard: A searcher's fee.
>> Josef Schachter: I would stay with it. My expectation is in second quarter of '06, the company will accept one of those arm twist me and give me the bid and if they get the right one, they may take it.
>> Howard: Ok. And you provide research on this one?
>> Josef Schachter: We do. I don't have a position currently. I have had one in the past. And on weakness, I'd definitely like to have another one.
>> Howard: A couple minutes left. Jim in North Bay.
>> Caller: Good evening, gentlemen. I'd like to talk about a lifetime recommendation of yours, True Energy. They tested recently as you know, and they're spinning off the smaller exploration company called exploreco. Would you hold the exploreco when they spin it off and hold true continuing forward?
Thank you very much.
>> Josef Schachter: Ok. We own some True and we have been big fans of this company for a long time. We started recommending them at .80 cents in march of '03. Paul Bay and his team have done a fabulous job. The company is doing a thing with TKE Trust and they have about 3,400BOE. The total merged company will have 14,000 B.O.E.'S a day. Paul will be chairman of that. My expectation is that some time in the next six to nine months, this company - the trust could get taken out by a larger trust. He is also going to be chairman of the exploreco and, again, he is looking for a name for the new one. It will have 600 B.O.E.'S a day, it will have two core properties, Whitecourt and I believe Racinas and they believe the upside of this between now and q1, the end of winter '05, '06, they can get it up to 2,000 B.O.E.'S a day. Yes, I would want to keep the exploreco - the royalty trust, sit down with your investment adviser. I'm not a trust kind of person. I like the exploration side. But you decide what's appropriate for yourself. These guys have delivered in the past. I believe they'll deliver in the future. You’ll want to be with the exploreco.
>> Howard: About 40 seconds left. You raise an interesting point, they may be taken out by a different trust. Do you think that's what we'll see more and more of? Just 30 seconds here.
>> Josef Schachter: Yeah. Because the big trusts need to find large enough assets to buy. The big boys aren't selling anymore. It is very hard to find individual properties. So, taking out other trusts and removing the G&A and having contiguous land is an accreative situation. And I think Paul Bay wants to go back to the exploration game. As I joked with him when I saw them a couple of weeks ago, I said you are going to be neutered not drilling exploration wells and I think he is going to come back to the patch.
>> Howard: Have to go. Thank you for joining us. Have a good weekend.
>> Josef Schachter: Same to you. My pleasure.
>> Howard: That is it for tonight. But Gavin Graham will be with us next Tuesday night on north American large-caps and some global equities. Get a head start by e-mailing us at marketcall@robtv.Com. Have a great week en. See you Tuesday night.
SUBJECT: Schachter full comments Posted By: markemark
Posted Time: 9/5/2005 15:50 EST
« Previous Message Next Message »
Josef Schachter, president, Schachter Asset Management
Sep 2
General Comments -
- natural gas has not been rising in storage like normal, this week 15 BCF went into storage compared to a year ago when 82 BVF went into storage
- 2 issues
- 1 - demand is greater than expected from warm summer conditions
- 2 - industry hasn’t been able to drill fast enough to bring on new reserves, partly due to wet spring and summer
- in their modles using 8 dollars for ACO for 05/06, YTD just under that but this week it up at 11
- thinks we will see more and more larger trust will buy up smaller trusts
Specific Comments -
TYS
- talk to president last this afternoon, and the deep rig is going to be in location next week, will be doing step outs deeper, about of 100-150 meters from the 300 meter they have done to date
- my expectation is they will use the original core rig to go lengthwise to the south with that, they have about 1400 meters of strike length now, couple hundred meters of width, they have to go deeper
- - if they can get a reasonable amount of work done he thinks by year end the stock will be at new all time highs if successful,
- KEY THING - can then, by the end of 06, get to the 4000 meters of strike length ad get to how deep it is, 500 meters or 1000 deep????
- If they can get it to 4000 meters in length and more than 500 meter in depth then his expectation for the 5+ will come to fruttation.
- Management has had a problem getting rigs which has caused all the delays, not an issue of the property,
- likes the story, OSW THE STORY,
- hopefully results for deeper right will make the stock perform
- Depth is the wild card
- Mines in the area to the north go more than a 1000 meter deep, if they have more that 500 million tons, then this will be taken over, in late 06
OIL
- just started covering for institutional clients
- target price of 8.12
- key for us is in Q3/06, Brenda field comes on
- money for development is coming from loans from the bank of Scotland, b/c they see that this is a project that is very viable
- the have a Sethco 712 rig that will go in January to do the development horizontal wells, and once the cash flow comes on they will be production more that 21000 BOE per day in Q4/06
- company believes 30000+ by then
- bottom line, end up with cash flow of over 2 dollars per share
- can take that cash flow in Q3 of 06 and can take the rig that they will have until Q1 07 and go on farm-ins on projects that are land expiree issues and create additional value,
- DO not have a POSITION AT THIS TIME
ADE
- FIRST PICK
- In Columbia, have had to 2 recent successes after falling back from 4
- G2 was a success which is cased and being tested, giacoman feild
- This puts target at 3 dollars,
- Also drilling Puma which will finish drilling next week, has a target of 60 million barrels recoverable, have about 17.25 % interest, which if successful will add 2 to NAV
- Also drill at end of sept, quaricorisi, spud in late September, 175 million barrel target
- Baricoureis - spud in end of end of sept, 42 million barrel target,
- 9 wells in the next 12 months, 4 are high impact including puma and Zus
- going on a institutional road trip next week with Schacter and going on another one with a second group
- last financing at 2.75
- with recent success and if they have success at puma they will move materially in the near term
- risk is puma exploration, country risk is the biggest thing in Columbia.
- Violence down and have changes fiscal regime that makes it one of most attractive in the world b/c its underexplored.
- JOSEPH bought into it, high price was 1.69 a week ago
SLG
- we like the company, had a dry will in Romania, that’s why they came off the 2s and came down, are going to be doing some more seismic b/w now and nov-dec and then will start drilling again, have to figure out what to do there.
- Nov will drill first high impact in the well in North sea with OIL,
- will drill 6 high impact wells b/w now and end of 06, any one of those wells comes in, and normally have 1/3 chance, you could have a 3 dollar NAV added to company
- OWN SIGNIFICNT, 1000000 shares, was on road trip,
- Large block bought last week, Canadian institutional investors were the buyers of it, and a UK majority shareholder that was a seller who has some issues,
- 2-3 story to unfold, if have moderate success will have great upside
- 10 dollar target in 2-3 years in writing
CUX -
PICK 2
- the company starting in Sept will have 4 rigs working in the field
- have been doing seismic and production facilities construction, market was looking for that sizzle of exploration,
- Meleta play with Petrocanada that is offshore Tunizia will spud in OCT,
- met Mang. Yesterday, geology is very good, seismic givvg them a lot of leads
- if they can get wells going 20-30 million a day with a 1000 BOEs of liquids in SEPT oct, then stock will start to lift again
- Meleta is not in his numbers, has 20 dollar target,
- Risk - not so much drilling, haven’t had one dry hole yet so if have a few dry hole not too important, if Meleta is a dry hole that would be disappointing but that is not in his numbers, disruption of political system in Egypt is a risk.
- Exist at 45000BOE
- Exist 06 70000BOE
- Potentially going be a double from here,
- doesn’t not own it, waiting for window to buy it, two weeks time from now will be taken on a road trip with institution Canada
GO.A
- had target of 20.5 4 months ago, penn west land acquisition, very important, further dominant.
- Still recommend it. But have not raised target.
- Expect to raise in-3 months doesn’t not have position, had one in past
FE
- TOP PICK 3
- Had a stumble, company cleaned that up, sold the assets,
- Have had a lot of success in Pembina area,
- Most not debt now
- 3000BOE per day after asset sale, have 2000 BOE behind pipe,
- Target of 10.45, once they have these facilities set up, will be taken out perhaps,
- Pembina core area,
- I would stay with it, expects Q2/Q3 - 06 will get a bid and may take it,
- Do not have a position, has had one on the past, one WEAKNESS WOULD LIKE TO HAVE ANOTHER ONE
TUI
- They own some TUI
- Company Trusted and have a new explore co
- Big fans for long time
- Totally merged company will have 14000 BOE per day
- Sometime in next 6-9 months trust may be taken out by larger trust,
- Paul Bay will be CEO of both merged trust and explorco
- It’ll have 600 BOE per day, will have whitecourt and recinis
- Believe upside b/w now and Q1 of winter 05/06 could get it up to 2000 BOE
- Royalty trust - he not a trust kinda guy
- have delivered in the past and will likely deliver in the future, you want to be with the explorico