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Thursday, April 28, 2011

Skywest - Tempting

· 10 yr-end reserves of 11 mmboe 2P and NPV10

.62, booking 30 net Cardium locations (23% of current inventory), from 7 gross hrz drilled/completed. Reserve engineers assigned between 225-390 mboe/well is well ahead of our type well est. of 200 mboe.

· Recall, plans for this year call for 1 Cardium hrz/month for the remainder of the year on the back of a $30.5 mm capex program. We currently model a ’11 exit rate of 2,800 boe/d (60% oil/NGL’s), from the current 1,650 boe/d (not including 900 boe/d behind pipe)

· De-risk of asset base continues as company drills acreage outside of Willesden Green, such as Carrot Creek

· Stock is trading at <3.7x our ‘11E EV/DACF and just over <$48K/boe/d....roughly half of where the peer group trades.

· And to put things into perspective, SKW has +100 drillable Cardium locations on the books across nearly 40 net sections while two close comps, Midway and Spartan hold ~46 net sections w/ +100 locations (A sand) and ~24 net sections w/ <100 drilling locations, respectively. We recognize the different nature of each companies asset/s however the heavy discount on SKW stock relative to peers we think is unwarranted

Wednesday, April 27, 2011

Jeremy Grantham Has a Plan to get Really Long Resources

http://seekingalpha.com/article/265730-2-energy-picks-for-extended-high-oil-prices

Very similar to what I've been thinking about oil exposure.  I want more, but am willing to wait for a selloff to get it.  You may want to weigh his words more heavily than mine as I think he might be a tad smarter.

Thursday, April 21, 2011

Second Wave Brings in a Boomer

http://www.newswire.ca/en/releases/archive/April2011/21/c6220.html

The Company completed the 15-36 well using multi-stage acid fracture technology on April 2, 2011 and initiated flow back from the well on April 3, 2011. During the first seven and fifteen days of testing the 15-36 well flowed at average gross rates of 2,145 boe/d (86% light oil) and 1,825 boe/d (86% light oil), respectively. Prior to being shut in for an initial pressure build-up the 15-36 well had cumulative production of 27,600 boe comprised of 23,700 bbl of 40 APIo light oil and 24 mmcf of liquids rich natural gas.


I have a little bit of SCS and a little bit more of ARN.  Was waiting for a sell off to get in with a big position.  This appears to have put the kibosh on that as they are both up big today.  Second Wave up 25% right now

Friday, April 15, 2011

I'd Like to Hear From Buffett On the Sokol Issue

Warren didn't do anything wrong and Sokol technically didn't either.  But the reality is that outside Burlington Berkshire's two big subisidiaries are Gen Re and MidAmerican.

Gen Re had top employees convicted of wrongdoing.  MidAmerican with Sokol doesn't smell so good either.  Maybe the ultra hands off approach of Berkshire plays a big part in this ?

http://seekingalpha.com/article/263809-warren-buffett-owes-shareholders-a-discussion-about-the-sokol-issue

Rodinia Oil Corp - Ultra High Risk High Reward

http://www.gurufocus.com/news/128997/care-to-roll-the-dice--check-out-rodinia-oil-corp-tsxroz

Not for me, but fun to follow.

A less optimistic take on Bankers Petroleum

http://origin.bnn.ca/Shows/Market-Call-Tonight.aspx?PicksPage=6

Israel With Major Shale Oil ?

http://oilprice.com/Energy/Crude-Oil/Israel-May-Hold-the-Worlds-Third-Largest-Reserve-of-Shale-Oil.html

Canadian Unconventional Producers

http://www.completegrowth.com/cvi/blogs/devonshire/?p=57

I wrote this for CGI.  I think they key is to be patient and wait for these to sell off with oil.  I'm going to try and get a basket of the smaller players.

Will try and start providing more detail on them.

Thursday, April 14, 2011

Petrominerales at CIBC conference

http://webcasts.welcome2theshow.com/videoconsole/player.html?playlist=cibc201105-archive.xml&speaker=Corey Ruttan, President & CEO&company=Petrominerales Ltd. (8:00 a.m. - 8:25 a.m.)&url=rtmp://m3.mediaeventservices.com/w2ts.avwtelav*cibc201105/tue/knightsbridge/petrominerals.flv&startTime=00:04:50&stopTime=00:33:54&width=950&height=600

Murray Nunns of Penn West on Tight Oil

http://www.bnn.ca/News/2010/09/28/Unlocking-tight-oil.aspx

Crescent Point Waterflood Detail

http://www.investorvillage.com/uploads/44821/files/CPGdundee.pdf

Toreador Resources

Don't know what to think about Toreador, so I guess I'll just watch.  I feel bad for shareholder and management who did a fine job finding this play. 

http://www.gurufocus.com/news/128860/key-seth-klarman-advice-again-looks-wise-with-respect-to-toreador-resources-trgl

Uranium Producers

http://www.businessweek.com/news/2011-04-13/uranium-companies-in-play-as-net-assets-exceed-shares-real-m-a.html

Wednesday, April 13, 2011

Bankers Petroleum

http://www.bankerspetroleum.com/en/components/investor/bnk-presentation-2011-april_final.pdf

Company goal is to sell itself within a year.  Likely at a much higher price.  Plan to start position tomorrow.  More details to come.

Worst Value Investing Article of the Year

http://seekingalpha.com/article/263180-coke-valuation-now-better-than-when-buffett-made-it-35-of-berkshire-s-portfolio

Goes to me !  Poster in the comment section suggests this article is the worst investing article of the year.

I have to say I agree.  I was reading a monthly commentary from an mutual fund which referred to Coke's PE of 13 which got me interested, and I wrote the article.

The PE is accurate but includes a large one-time gain.

I always enjoy looking like a moron.

Eaglewood Energy

Interesting.  Share price $0.34.  The analyst price target $1.25.  Need to find time to have a closer look.

http://www.firstenergy.com/research/documents/FACTS-C-EWD-2011-04-11.pdf

Saturday, April 9, 2011

Westfire Analyst Report

http://www.raymondjames.ca/rjl_marketing/dotca/en_CA/Equity%20Capital%20Markets/Equity%20Research/Sample%20Research/Sample%20Research%20PDFs/Junior%20EP%20011210.pdf

Sure Energy

Quality Viking property

http://www.sureenergyinc.com/upload/media_element/1/47/mar_24_2011_web.pdf

more viking info

http://supplytracking.com/Spotlightontheviking.pdf

Some info on the Viking

http://webcache.googleusercontent.com/search?q=cache:http://jutiagroup.com/20101103-luc-mageau-bullish-on-the-viking-formation/

Canadian unconventional plays

http://www.ajmpc.com/uploads/files/presentations/ajm_pstr_CSPG_2010.pdf

Ackman letter to Howard Hughes shareholders

To the Shareholders of The Howard Hughes Corporation:


DALLAS, Apr 07, 2011 (BUSINESS WIRE) –


The Howard Hughes Corporation (‘HHC’) began its existence as a public company when it was spun off from General Growth Properties Inc. (‘GGP’) when it emerged from bankruptcy on November 9th of last year. Having joined the board of GGP shortly after the company filed for bankruptcy, my first priority was to work with the other directors of GGP to stabilize the company, extend the maturity of its debts and raise sufficient capital to emerge from bankruptcy as an independent publicly traded real estate investment trust. During that process, as I learned more about the disparate assets of GGP, I considered the idea of creating a new company to own certain assets hidden within GGP whose value would not likely be realized while these properties remained at GGP.

While the REIT structure is an excellent corporate form with which to own stabilized income producing assets like GGP’s mall properties, it is less than ideal for owning development assets, master planned communities (‘MPCs’), and other assets whose current cash flows are not reflective of their long-term potential. This is due to REIT ownership limitations on assets held for sale in the ordinary course of business, the large amount of capital and time required for development assets, and the fact that investors principally value REITs based on their distributable free cash flow.

We decided to set up a new company to own these assets so we could realize their long-term potential while maximizing the value of GGP in the short term. While the short term is not usually a time period that most public company executives are willing to acknowledge that they even consider, in this case it was critical for GGP shareholders to create value in the short term so we could participate in value creation over the long term. GGP was subject to a series of takeover bids from Simon Properties that undervalued the company and had material risk of transaction failure because of antitrust issues. By creating and then committing to spin off HHC, we were able to create about $7 per share in value for GGP shareholders for a total combined value of approximately $22 per pre-bankruptcy GGP share.

Once we had selected the assets that were to be contributed to HHC and negotiated the separation arrangements with GGP, our highest priority was identifying the senior management team that would run the company. Typically, such a process involves hiring a search firm, which then attempts to recruit executives at competitors with relevant experience. In this case, there are few truly comparable companies to HHC and a less than obvious pool of candidates to select from. While there are a number of publicly traded non-REIT real estate corporations (so-called C corporations) that own development assets in some cases that are similar to HHC, their track records in creating shareholder value leave much to be desired.

While I believed that so-called real estate opportunity fund managers had the experience to oversee HHC’s assets, I had no interest in hiring an external manager on a 2% and 20% basis to run the company, particularly in light of the ongoing conflicts they would have with other investments in their portfolios. The key criteria we used to find senior management were: character, energy, intelligence, and experience profitably investing in a diverse collection of real estate assets. In addition, I wanted someone who had made money already, without having lost any of the passion and drive to succeed, and without significant outside interests and assets that would compete for his or her attention.

We found our leader in David Weinreb, a Dallas-based real estate entrepreneur, whom I had known (but not well) since high school, but only in recent years gotten to know in a business and personal context. David had contacted me a year or so ago for advice on raising a real estate opportunity fund about which we had an ongoing dialogue. He had been investing and developing real estate assets largely on his own since leaving college (just like Bill Gates but in real estate) more than 25 years ago and had sold or monetized the vast majority of his assets before the recent downturn in the markets.

While over the last 10 or so years he had largely been investing his own capital in real estate and investment securities with his partner, Grant Herlitz, and a team based in Dallas, Houston and Los Angeles, David was considering raising a larger pool of capital to participate in opportunities created by the credit crisis. It was in this context that I mentioned the assets that would become HHC, and David and Grant were intrigued. They spent the next 30 or so days inspecting the properties that would be contributed to HHC. They then worked on spec to assist Pershing Square in negotiating the best possible deal for old GGP shareholders in setting up HHC.

As we worked together on the HHC portfolio and negotiated arrangements for the company’s eventual spinoff, it became clear to us that these were the right partners to oversee the company going forward. David and Grant are moneymakers with a clear understanding of risk and reward. While there are real estate executives with more public company experience, more master planned community experience, and/or more development experience, we were principally interested in selecting a management team we trusted with relevant experience, who would think of the corporation’s capital as their own, and who were willing to invest a meaningful amount of their own money alongside shareholders.

To date, David, Grant, and our new CFO Andy Richardson have committed $19 million of their own capital to purchase long-term warrants on HHC at their fair value at the time of purchase. Under the terms of the warrants, they cannot be sold or hedged for the first six years of their seven-year life, a provision which meaningfully reduces their value compared with warrants without liquidity or hedging restrictions. In light of the long-term nature of the company’s assets, I cannot think of a better way to align the interests of and incentivize our management team to create value for shareholders. If the stock price stays flat from the time they joined the company, they will lose their entire investment in the warrants. If the stock price makes a sustained increase in value over the next seven years, management will participate to a leveraged extent in the increase in the stock price. Other than the warrants, our senior management receives relatively modest cash compensation particularly when compared with real estate private equity compensation levels.

While on the subject of compensation and alignment of incentives, I thought it worth mentioning that the funds that I manage currently own a 23.6% fully diluted economic interest in HHC including stock, total return swaps, and seven-year warrants that we received in exchange for our backstop commitment to HHC. I receive no salary for serving as your chairman, and I have waived all board compensation. As a result, you can be comfortable that my interests are aligned with yours. That is not a guarantee of success, but rather it will ensure that we will succeed or fail together. In a partnership, getting the right team in place with the right incentives puts you on good footing for future success. On this basis, we are off to a good start.

Now you might ask how one should calculate the value of HHC and judge our future progress. While these are two critical questions for any investor, in the case of HHC, the answers are not nearly as straightforward as in a more typical real estate or other public company.

With respect to the valuation of HHC, the easy answer is that you should calculate the value of our assets – cash, real estate, and tax attributes – subtract our liabilities and then divide by fully diluted shares outstanding. The difficulty is that the real estate assets owned by HHC are notoriously difficult to value. First, you should consider that their long-term value – the value that can be achieved by a long-term owner – is, in my opinion, materially higher than their liquidation value. Some, albeit not ideal, evidence of this is to compare the value of GGP just before the spinoff of HHC to the value of the combined companies today. Approximately $7 per GGP share in value has been created by the contribution of the properties to an entity that has the capability to hold these assets forever.

For our MPC assets, one can make assumptions about the timing and number of future lot sales and then discount back these cash flows over the 30-or-so-year life of the project at a discount rate you deem appropriate. The problem with such an approach is that small changes in assumptions on discount rates, lot pricing and selling velocity, inflation, etc. can have an enormous impact on fair value.

For our development assets, one needs to make assumptions about what will be built, when it will it be built, to whom it will be leased, what rents it will achieve, what expenses it will incur, and what multiple an investor will place on these cash flows. Again, even highly sophisticated real estate investors will assign substantially divergent values to the same assets when using their own assumptions.

Some investors look at book value, but book values, particularly for HHC are in most cases largely unreliable measures of value. For example, South Street Seaport, one of our more valuable assets, is carried on the books of HHC at $3.1 million. Last year, it generated more than $5 million in cash net operating income, and this number meaningfully understates the potential future cash generating potential of this property as GGP generally discontinued granting long-term leases to tenants as it prepared the property for a major redevelopment. Even using the $5 million NOI number, one can get to values approaching $100 million using cap rates appropriate for New York City retail assets, and we would likely leave a lot of money on the table if we sold it for this price.

We could attempt to calculate net asset value and publish a number as some public real estate companies have done. I am not a huge fan of this approach because of the widely diverging estimate of values that even the most informed, best-intentioned evaluators will generate. So therefore, the best we can do is to give you as much information as we can provide (bearing in mind that there is some information that we will elect to withhold for competitive reasons) so that you can form your own conclusion. While we have just begun the public reporting process and we are still learning that art, you can expect over time that we will release more information to assist you in forming your own assessment.

With respect to judging our business progress going forward, the usual metrics like net income, operating cash flow, EBITDA, AFFO, earnings per share, etc. are not going to offer much help. (By the way, when you read this sentence in the annual letter of a typical company, you should usually take your money elsewhere.) Our reported net income and cash flows will largely depend on gains and losses from sales of assets and the book value of those assets on our balance sheet. We could generate large amounts of income for example by selling South Street Seaport and other assets for which book value is less than market value. While this would generate material accounting gains and require us to pay large amounts of taxes, we might be destroying long-term shareholder value by doing so, particularly if we believe materially more value can be created through redeveloping and releasing these assets over time. We will also generate larger profits from our Summerlin MPC as a result of the more than $300 million write down the company recognized at year end, but this should not make you feel richer as a result.

Simply put, I will judge our progress based on our management’s ability to move each of our assets closer to the point at which it can generate its maximum potential cash as an operating asset, and to manage our MPCs to once again begin to generate material amounts of cash from sales of lots to builders and the development or sale of their commercial parcels.

Because of (1) the large number of assets we own, (2) the large amounts of capital required to redevelop these properties to enable them to achieve their full potential, (3) our relatively limited cash resources, (4) our aversion to the use of large amounts of recourse leverage, (5) our high return requirements for our own capital, and (6) the availability of large amounts of lower-cost real estate equity capital for developments like the ones owned by HHC, you should expect that we will raise outside capital and/or joint venture many of our properties with other investors, operators, and/or developers. This approach should enable us to manage risk and increase our return on invested capital.

We will do our best to keep you informed as to our progress with each asset in the portfolio as we obtain necessary approvals, design and build projects, lease space, and generate cash flows. Over time, our goal will be to turn each of our non- or modestly income-producing assets into an income-generating property, while selectively monetizing assets when we believe a sale will generate more value for HHC on a present value basis than holding the asset for the long term.

In light of the complexity of our asset base and the inadequacy of GAAP accounting to track our progress, you should now understand how important it is to get the right management team in place with the right incentives. Furthermore, while most public company boards are comprised of experienced executives with typically minimal expertise in the business of the company on whose board they sit, HHC’s board is largely comprised of real estate experts with broad expertise in MPC and retail development, residential and office ownership and development, institutional investment in real estate, and other real estate disciplines relevant to HHC.

Importantly, our directors do not need their director fees to pay their rent, and have chosen to participate for the experience, reputational benefits, and camaraderie from working to create value for our shareholders. We will act in your best interests to the best of our ability and look forward to the opportunity to impress you with HHC’s success over the coming years.

Lastly, in a world where investors are concerned about the future value of paper money and inflation that have caused many investors to turn to gold to hedge that risk, I am quite comforted by the assets of HHC. We own the gold and blue white diamonds of the real estate business, assets that have traditionally performed well in inflationary environments.

Welcome aboard.

Sincerely,

William A. Ackman

Chairman

Ritholtz fires Berkowitz

http://www.ritholtz.com/blog/2011/04/when-do-you-fire-a-manager/

Alberta to Obama - Sign the bloody order on the pipeline

Send it to China I say.

http://www.financialpost.com/Alberta+urges+Obama+sign+bloody+order+pipeline/4577282/story.html

West Coast Asset Management Monthly Article

http://www.gurufocus.com/news.php?id=128440

Thursday, April 7, 2011

Article on Petrobank

Not even written by me !  You should head over to http://www.completegrowth.com/ as they now have a non-subscription model with some excellent writers (if you exclude me).

http://www.completegrowth.com/cvi/blogs/ryanmorris/

Alice Schroeder On Bloomberg

Talking....you guessed it Buffett.    She just can't not.

http://www.gurufocus.com/news.php?id=128336

Article on Covered Calls

Might be a sensible strategy after a two year stock market run and high cap quality not terribly expensive.

http://www.gurufocus.com/news.php?id=128345

Obama Should Consider That Canadian Oil Can Be Used By Chinese Too

Being Canadian I have to say I'm not terribly fussed which country uses the stuff.

http://www.gurufocus.com/news.php?id=128338
The spring 2011 version is on May 3rd & 4th in Pasadena, California. Here's the full list of speakers:



- Steven Romick (First Pacific Advisors)

- Jeffrey Ubben (ValueAct Capital)

- David Nierenberg (D3 Family Funds)

- Rahul Saraogi (Atyant Capital India)

- Michael Kao (Akanthos Capital Management)

- Ori Eyal (Emerging Value Management)

- KKian Ghazi (Hawkshaw Capital Management)

- Whitney Tilson & Glenn Tongue (T2 Partners)

If you would like a discount to attend this event please click on the following link:

GET YOUR VIC DISCOUNT HERE

Unconventional Canadian Watchlist

Here are 8 Canadian companies that I've got on my list to continue to study and be ready to act on should we get a decent sell off.

http://seekingalpha.com/article/262251-8-stock-ideas-for-canada-s-4-big-tight-oil-plays

Wednesday, April 6, 2011

Don't be Fooled By FD&A costs influenced by leasehold acqusitions

Comstock Resources (NYSE:CRK) released its 2010 proved reserves report in January 2011, and reported an increase of 45% over last year. The company spent $536.7 million in capital in 2010, and added 430.5 Bcfe of proved reserves during the year through "extensions and discoveries". the company also reported two different finding and development costs for 2010. It reported all in finding costs of $1.26 per Mcfe, based on the full capital expenditures total of $536.7 million.


Comstock Resources spent $135 million, or 25% of its budget in 2010 to acquire future leasehold to explore. The company feels a better way to present the cost of finding and developing oil and gas would be to exclude this amount. If this lease acquisition costs are excluded, then finding and development costs drop to 94 cents per Mcfe.

One might conclude that if finding and development costs are overstated in 2010 at Comstock Resources due to the inclusion of the acquisition costs, then it follows logically that the finding and development costs would be understated the following year when the company adds proved reserves from this acquired acreage. This is why many analysts look at three- or five-year periods when looking at this metric.

The bulk of the cost can relate to leasehold with no wells, thus no reserves.  So big FD&A and no booked reserves distorts the number. 

Arcan Resources

From message board, I'm ready on this one if I get a selloff.  Had an order in earlier in the week but it has jumped.  Must remember THERE IS ALWAYS A BETTER ENTRY POINT COMING.

"Arcan is spearheading the development of the Swan Hills Beaverhill Lake reservoir. With recent well results and re-entries, Arcan has internally calculated a resource of DPIIP of over 600 MMBOE net to Arcan. DPIIP only includes discovered petroleum even though there is no certainty that it will be commercially viable to produce any portion of those resources, unlike other industry terms like Total Petroleum Initially-In-Place (TPIIP) which includes discovered and undiscovered reserves that may never be discovered and is being utilized by the industry to characterise many resource plays. In determining DPIIP, Arcan used a rigorous petrophysical evaluation of over 100 data points to identify all pay intervals within the Swan Hill complex and their resulting porosity and net thickness values and advanced modeling software was used to determine the vertical and lateral heterogeneities and extent of the reservoir bodies across the fairway. In-place volumes were calculated using a discrete set of Phi-h contours that were generated with a three percent porosity cut off. Based on waterflood recoveries of up to 40 percent in offsetting areas of the reef, Arcan is of the view that this has the potential to translate into recoveries over 200 MMBOE (95 percent light oil), with Arcan having recorded under ten percent of those recoverable reserves at 18.7 MMBOE of its total 21.1 MMBOE in the $5.56 per share NAV. "

Share price $4.73

Globe and Mail Article On WaterFlooding and EOR

So close to what I've been blathering about for a few months that I'd swear I wrote the article myself:

http://m.theglobeandmail.com/globe-investor/water-injection-tabbed-to-boost-oil-patch-production/article1972164/?service=mobile

People told Neil Smith he was crazy.


For years, Crescent Point Energy Corp. had been testing a new technology that involved injecting water to free up “tight oil.” It was an innovation that held the promise of squeezing out billions of extra barrels – but many in the oil patch were skeptical.

Mr. Smith, the company’s vice-president of engineering and business development, remembers one industry veteran in particular.


“He had been almost 50 years with a large major international company and said, ‘I predict that injecting water into tight will not work,’” Mr. Smith said. “And that was old school. It didn’t work.”

But after several years of testing, analysts now believe that the technique not only appears to work – it could radically boost the quantity of oil that companies can pull from Alberta and Saskatchewan, where a rush to develop new reservoirs has already nearly reversed long-standing declines in non-oil sands crude output.

“The ramifications are immense,” Mr. Smith said.

The idea behind injecting water to help recover crude is not new – in fact, it’s nearly a century old. When companies first drill into a reservoir, underground pressure brings oil to the surface, a bit like pop fizzing out of a shaken bottle. After a while, though, the pressure fades, and oil flow slows. But add water and the pressure builds again, pushing more oil to the surface.

That works well in traditional reservoirs, where the underground rock is relatively porous – think of how water passes through sand. Skeptics, however, have long doubted it would work in so-called “tight oil” plays, where the rock is more impenetrable, more like brick than sand.

The first tests indicated it wouldn’t work in tight oil. “It was so tight they couldn’t push the water into the ground,” Mr. Smith said.

Yet in the past year, a series of new tests has begun to prove that, when technology is used to first fracture rock, water can “sweep” out the oil so effectively that it can bring dramatically greater volumes to surface.

In a research report published Tuesday, Dundee Securities analyst Travis Wood examined the results from a series of Crescent Point wells and concluded that early results bear out that water does work. While it remains in the “proving phase” – and some wells have experienced operational issues, such as a lightning strike, that have hurt production – early numbers look promising.

“We’re fans of the water-flood so far. We think it’s going to add a lot of value,” Mr. Wood said.

Before the water-flooding, Crescent Point believed it could extract 19 per cent of the oil in place in the Bakken, a major new play that contains an estimated 4.6 billion barrels. With water, it expects to boost that to 31 per cent. That’s a potential gain of roughly 500 million barrels in the Bakken alone – and water-flooding also has the advantage of bringing oil to surface much faster.

“In six years, we’re getting out the oil that we would have got out in 50 years,” Mr. Smith said. Crescent Point ended 2010 with 11 water injection wells. It plans to increase that number to 36 in 2011, although that remains far from the 700 it has drilled in the Bakken.

But the true impact of the technology lies in its reach. The Bakken is only one of a series of prolific tight oil plays where it could work, including the Lower Shaunovan, which contains 4.3 billion barrels; the Viking, which holds six billion; the Swan Hills trend, which has roughly seven billion; and the Cardium, which contains 10 billion barrels.

Others are testing the technology, too, including Legacy Oil + Gas Inc., which has one pilot under way and another coming this year. Privately held Manitoba company Tundra Oil & Gas Ltd. has also piloted water-floods in a Bakken-like play in 2007; it has seen recovery factors leap forward much like Crescent Point.

“We’re reasonably confident that it’s working,” said Tundra chief executive officer Dan MacLean, who noted that water-flooded barrels are also cheaper to extract.

And water could be just the beginning. Some companies warn that some reservoirs are just too tight for water – and are now looking at other ways to obtain gains. Tundra is experimenting with carbon dioxide floods, while PetroBakken Energy Ltd. began injecting natural gas into an initial tight oil pilot well in mid-March; it plans to start four more pilots by year’s end.

Without trying these new techniques, “we’re just touching the surface in most cases,” said Rene LaPrade, PetroBakken’s senior vice-president of operations. “There’s a lot of oil still be left to be taken out of the ground.”

Alberta to take back some oilsands properties

Very glad to not see Petrobank on the list of companies impacted (at the end of the article)

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/alberta-conservation-plan-stuns-oil-patch/article1971930/page1/

Notes to an evening with Michael Burry

Well, I don't know if it actually was an evening.  But that sounds better.

I'd love to talk to Burry.  Although he might very well find me a little slow.

http://www.distressed-debt-investing.com/2011/04/michael-burry-notes-from-vanderbilt.html

Tuesday, April 5, 2011

TAG Oil - Sitting on the next Bakken ?

Then why are insiders selling non-stop ?

http://seekingalpha.com/article/261986-tag-oil-may-sit-on-14-billion-barrels-of-oil-but-i-m-watching-insiders

New York Times on Sokol

http://www.gurufocus.com/news.php?id=128101

QuickFRAC reduces cost 10% Increases Recovery 30% to 40% ?

The recovery factor increase seems a little hard to believe as that would be kinda huge.

From Schaeffer to non-subscribers.  Here is his website if interested.

http://oilandgas-investments.com/




A new development in “fracking” will mean lower costs and higher oil and gas recoveries, says Dan Themig, President of Packers Plus, a privately owned completions (fracking) company based in Calgary, Alberta. This would mean higher profits for energy producers.

Themig’s new product – QuickFRAC® – is part of a new trend in fracking that is moving away from using more horsepower and taking a smarter approach to increasing the amount of oil and gas recovered from a well, i.e. the Recovery Factor (RF). Most wells only recover 5%-20% of the Original Oil in Place (OOIP).

“We don’t believe the sledgehammer approach to fracturing is the way of the future,” says Themig.

“Fracking,” or hydraulic fracturing, involves pumping a mix of sand (proppant) and fluid (water) down a well and into the reservoir at ultra-high pressure to create fractures in tightly packed sand formations, or shale rock formations, to free up the oil and gas to flow up the well.

Fracking has allowed billions of barrels of oil previously thought to be uneconomic to become not only produce-able, but highly profitable. It has become a global game changer in the oilpatch, and has created hundreds of billions of dollars in capital gains for investors. (And we’re still in the early stages of this growing industry!)

The size of individual fracking operations has increased 10 times in the last decade, as the industry has grown and learned how to more effectively apply the technology.

Themig says the “sledgehammer approach” of more horsepower (in the form of pumping trucks at surface), more fluid and more proppant has been the industry norm for the last five years, but now the industry is getting smarter in order to increase production from wells.

“We want to reduce the amount of fluid used and maybe the amount of proppant. We can reduce the time and number of stages and get a more effective Recovery Factor.”

In the new, ever-longer horizontal wells being drilled, fracking is done in multiple stages – often every 100 metres. Each stage of fracking takes a certain amount of time, from roughly 30 minutes to four hours, depending on how hard the surrounding rock is (the harder the rock or tighter the sand, the more time it takes).


Themig says the new “QuickFRAC” technology is able to frack two to eight of those 100 metre stages at the same time, using the same amount of fluid and proppant.


“We can evenly distribute the fluid and divide it by the number of stages set to open,” he says.

Themig says that completing several fracking stages at once saves so much time, QuickFRAC can save 10% on overall well costs for a producer – often a $500,000 saving per well.


Having several fracks go into the formation at the same time also increases the amount of oil recovered from the well, Themig says. That’s because the rock holding the oil is being hit by huge pressures and vibrations on different sides at the same time, which creates more fractures in the rock.


“We drilled a $5 million well and decreased costs 10% by doing 24 stages in 10 hours,” Themig says. “Previously that would have taken 4-5 days using cement liners in the wellbore, and two days with our regular StackFRAC® technology.”

“And we increased the Recovery Factor by 30%-40%.”

Rene Laprade is Senior Vice President Operations of Petrobakken Ltd. (PBN-TSX), and they have used QuickFrac in the Horn River gas play and Montney gas play, both in western Canada.

“We save at least two days over a conventional stack frac system and up to 5 days over a plug and perf system,” he told me in an interview. “This results in a costs saving to PetroBakken of up to 30% over other fracture stimulation methods.”

Themig says they are able to do all this with only a minor increase in horsepower, but also use up to 30% less water per well.

Themig says The Future is using longer horizontal wells, and doing more frack stages per well, and QuickFRAC is positioned to help the industry make the evolution easy and profitable.

“The number of fracks are now far more than we ever thought it was going to be. In 2001 we thought 5-6 fracks be enough to frack a well. Then the industry moved to 12-15 per well now to over 30. Some customers want 40-60 fracks – consider how long it would take to do 60 fracks that are 4 hours each. The future looks like 60-100 stages in a lot of wells, depending on geologic needs.”

The goal, he says, is to increase the Recovery Factor – get more oil or gas out of the ground per well. “You look at the Haynesville (shale gas formation in Louisiana) and they have big initial production (IP) rates but high declines, sometimes a 90% reduction in production in the first year. We think we can significantly improve on those numbers using QuickFRAC.”

A side benefit of QuickFRAC is that the frack companies like TriCan, Calfrac etc. will be able to do a job in shorter time, so they will be able to do more jobs in a year than previously. Producers save time and money while increasing cash flow from more oil, and frack companies have less downtime and more revenue days per rig. It makes the whole industry more efficient.

TAG Oil

Let's have a look.

http://www.scribd.com/doc/45706445/Wellington-West-TAG-Oil-update

http://www.tagoil.com/pdf/TAG_Corporate_Presentation.pdf

http://www.firstenercastfinancial.com/commentary/story/100357-how-much-oil-there-newly-economic-shale-oil-deposits-around-world-

http://www.docstoc.com/docs/26434129/Tag-Oil-Stock-talk

http://www.cgxenergy.ca/documents/JenningsCapital-Oct20-10.pdf

http://money.msn.com/business-news/article.aspx?feed=PR&Date=20110314&ID=13135776&industry=IND_ENERGY&isub=

American Gasoline Demand Less Price Sensitive Than You Might Think

http://seekingalpha.com/article/261871-high-prices-won-t-curb-america-s-thirst-for-gasoline

Sunday, April 3, 2011

Jim Grant Sees Inflation and Rising Interest Rates

http://www.gurufocus.com/news.php?id=127927

Skywest Energy - Pure Play On the Cardium

Likely acquisition candidate.

Strong Reserve Metrics for 2010

Event: SkyWest reported a summary of its 2010 reserve report. Impact Positive: The 2010 reserve report includes only a small fraction of the providing substantial upside potential at the current trading price.

Forecasts Our forecast remains unchanged with 2011 average forecast production of 2,172 boe/d and cash flow of .10/share.

Target Price, Ratings We are maintaining our investment recommendation of SECTOR OUTPERFORM and 12-month target price of $1.00/share. Issues:


Reserves increase to 10.96 MMboe in 2010. SkyWest reported P+P reserves of 11.0 MMboe, evaluatedby Sproule Associates Limited as of December 31, 2010. Total proven reserves accounted for 44% and oil and liquids made up 52% of total P+P reserves. As the Company just went public in 2010 the reserves are a function of acquisitions and drilling success since inception. We anticipate solid reserve growth in 2011 as the Company ramps up its drilling program.

F&A costs of $16.61/boe on a P+P basis. FD&A costs, including the change in future development capital of $96.3MM, were reported as $16.61/boe on a P+P basis and $23.32/boe on a proven basis. These results are solid considering it was , which included substantial spending on acquisitions. Netbacks for 2010 are not represent base, however we estimate 2011 netbacks to be approximately $31.51/boe, which would generate a recycle ratio of 1.9x.

NAV/share supports current share price leaving 100 locations of upside not priced in. SkyWest NAV of

.66/share based on reported P+P reserves is in line with current trading prices. Importantly, management has compiled an inventory of 100 net Cardium oil locations representing unbooked upside. Based on our Cardium type well NPV of $2.8MM we calculate $1.37/share of risked upside potential. Valuation: Our target price of $1.00 is a 37% premium to the last closing price and is based on a 2012 EV/DACF multiple of 6.0x. Our 2012 EV/CF calculation of 6.0x is slightly below the peer group consensus average of 6.8x. Catalysts: Test results from upcoming Cardium horizontal multi-frac oil wells.