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Russell T. Dratwa, CFP

Investment Advisor

Russ is the "Voice of Edmonton Business" on
TEAM 1260 AM Radio
Monday-Friday 6, 7, 8, and 9 am


 click here to listen to an interview with Russ and learn more about his business

If you are a CEO, CFO, President or Director of a successful Alberta or Western Canadian company contact Russ today to discuss promoting your company on his radio features on Team 1260.

Phone: 780-408-1516

 Russell Dratwa
 

 
 Weekly Business Feature
Weekly business feature
 
The following is an excerpt from February 2, 2010 courtesy of one of the most respected names in the junior sector, fellow Canaccord Investment Advisor and editor of the “Stocktalk - Late Edition” newsletter, David Pescod.
If you would like to subscribe to this highly regarded, daily newsletter, Dave has been kind enough to extend an invite to do so by simply emailing me to add you to our distribution list.

The chart shows just how beaten up Ithaca Energy, along with many of the other North Sea oil and gas players got hit when it looked like the world was ending in the financial crisis in the last year. Most of the North Sea players survived, but some like Oilexco went into bankruptcy as we all remember.
 
 
ITHACA ENERGY (V-IAE) $1.48 +0.04

 
Ithaca didn’t go without getting absolutely clobbered though as it hit almost ten cents on the dollar from where it had previously been. Now that the world seems to be going back to more normal times, Ithaca, like many of the other players in the North Sea seem to be enjoying much better times.
Yesterday, Ithaca announced some new resource/reserve numbers and suddenly the analysts are responding with higher target prices. One of the most bullish on the story is Octagon’s Warren Verbonac. He writes, “Proved reserves have more than doubled since the Dyas transaction, and Probable reserves are up 2.7 xs. On a year-over-year basis, Proved reserves are up 10% to 16 million barrels equivalent, Probable reserves increased 49% to 21 million barrels equivalent, and Possible reserves are up by 60% to 42 million barrels equivalent.”
Sometimes when you write Possible reserves, that’s the equivalent of “hoped for” and “dreamed of”. But still you have significant agencies doing this kind of work.
Verbonac continues, “The present value of the 37.2 million barrels equivalent of the Proven and Probable reserves, discounted at 10%, is US$768.4 million or $5.00 per share; we estimate that cash in the Company could be worth another $0.30 per share, for an approximate asset value of $5.30 per share.”
Verbonac continues to get excited, writing, “Adding in Possible reserves brings total reserves to 79.2 million barrels, with a present value of US$1.8 billion or $11.45 per share; $11.75 after including an estimate for cash.”
Is one getting carried away here?
There are other analysts following this story; Fraser Mackenzie with a target of $2.50, but I suspect others are going to start taking a look at this story and if these numbers are anywhere correct, we just wonder if Ithaca doesn’t become an obvious takeover candidate.
When we talked to Verbonac the other day, he reminds us that this is not a third world country we are talking about and they are located in one of the best places of the world to be.
He echoes our thoughts that it might become a very attractive takeover target.
 
 
Bottom line, Verbonac in his report for Octagon writes, “Clearly, this is one of the most undervalued stocks in the sector. Experience has shown, that over time, stocks will trade to their Proven and Probable asset value – the “hardest” valuation metric.”
Currently Verbonac ups his target from $2.00 to $3.00.
 
 
 

 

 Weekly Top Pick
Weekly Top Pick
   
Until oil finds a base, have some cash & “cherry pick” the price you want in the stock/company(s) you like in what could be a choppy period.
 
February 5, 2010: TAG OIL (V-TAO)
 

It’s probably the scariest story we can find out there…we’re scared to be in it and we’re scared to be outside missing it. We hate the time frame. Their unconventional oil play in New Zealand won’t be drilled until this coming fall which is eons away, but what a set-up for the company at this time with unbelievable leverage…only 30 million shares out with management owning 11 million and ten million dollars in the bank. Should this play work…
 
TAG OIL (V-TAO) $3.20 +0.10
 
The best description on this play so far was put out by Keith Schaefer of The Oil and Gas Investments Bulletin. But sometime next week we hope to have an interview with the fellow who got us into Ultra Petroleum, seven or eight years ago, when it’s unconventional gas play in Wyoming started becoming one of the stories of the day. Who would have ever thought it was a 100-bagger. Hopefully it will run next Wednesday or Thursday.
 
 
 
       Investing in these companies may not be suitable for all investors as there are always unique characteristics & risks for each company that can include illiquidity, entry level price, insider buying/selling and commodity prices.   Call me at 780-408-1516 or at 1-877-313-3035 ext 1516.
 
 

 

 
 

 

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