Trading Alert: Eden Energy Corp (EDNE)
April 27, 2005
Let's get a raise of hands of those who feel like they are paying too much for gas at the pump. According to a poll taken April 18-20 by the Associated Press-AOL, 51% of those surveyed say that if fuel prices remain high for the next six months it will cause a financial hardship for them. Oh there's more...the survey found that 58% of respondents have reduced their driving, 57% have cut back on other expenses and 41% have changed vacation plans to stay closer to home.
It makes sense that with the ridiculous price of oil hybrid car sales have been increasing. However, we were surprised that the hybrid market has grown by 960% since 2000. New hybrid vehicle registrations totaled 83,153 in 2004, an 81% increase over the year before, according to data released Monday by R.L. Polk & Co., a Southfield, Mich., company that collects and interprets automotive data. Despite the growth of hybrids they represented just 1% of the 17 million new vehicles sold in 2004. Major auto makers are planning to introduce about a dozen new hybrids during the next three years but will it really make a difference?
The world currently produces 83-84 million barrels of oil per day. Of that supply China consumes just 7 million barrels per day while and Asia's gigantic population of three billion people consume 20 million barrels. In comparison, the United States, with just 1/10th of Asia's population consumes 22 million barrels of oil per day. America's thirst for oil is propelled in part by the 250 million cars we have in this country. Even if hybrid cars do begin to catch mainstream attention we doubt the effect will be material if one considers that the number of cars in China is expected to grow from 24 million to approximately 100 million by 2020. (Interesting note: gas in Beijing was around $1.60 per gallon because the taxes levied are much lower than that of the U.S.)
The world's thirst for oil is not going to subside anytime soon and unfortunately we don't see the price of oil dropping very much if at all in the foreseeable future. This is a major problem with no solutions because oil, contrary to the way our country consumes it, is a finite commodity. Scary to say but the world's oil production seems to be tapped out. To make matters worse, no matter how much the price of oil increases to there is no way to "just produce more oil" in a short period of time.
Production requires the discovery of new oil and the world is extremely short on new places to find vast quantities of the precious black gold. Since the inception of the SmallCap MarketWatch we have seen our share of oil and gas ideas. The majority of them offered too little upside because we were just not interested in some company producing a few hundred or even a few thousand barrels per day. The rest were pipe dreams that had about as much chance of finding oil as you and I have of hitting a gusher in the back yard.
Our reluctance to embrace the industry meant missing out on some impressive gains. The Amex Oil Index (XOI) has more than doubled in the past three years along with almost all of the major oil and gas companies. While the most of the world was recovering from the tech bubble, energy investors were printing money hand over fist. This frenzy has increased investor awareness of the sector but the downside has been an increase in the number of shoddy new companies that have sprung up to take advantage of "hot money". We've been searching and waiting for the right opportunity... now we've found it.
Eden Energy Corp. (EDNE), the subject of today's trading alert presents one of the most fascinating opportunities we have ever seen in the oil and gas industry. The company is currently developing a 210,000 acre lease block in Eastern Nevada called the Noah Project. Eden has a 100% working interest in the project and has recently raised over $9 million dollars from some very smart oil and gas institutional investors. Readers may be asking...so Eden Energy has some land and now they raised the capital to see if there is oil there....what's the big deal? What makes this oil and gas idea worthy of our attention? Unlike most of the companies in this sector Eden has a legitimate claim to think they may have a billion barrel discovery on their hands. Drilling begins in the fourth quarter of this year and we expect the stock to move up in anticipation. Shares of the company closed the day at $2.80 per share and with 23,835,869 shares outstanding the market capitalization is $66.74 million.
The Noah Project
Until recently, no one had ever drilled the top of a thrust structure in the Great Basin of Eastern Nevada and Western Utah. The United States Geological Survey had never done a thorough study of this area because it was thought of as a waste of time. One person did think that there was potential for great oil finds in this region and that was Dr. Alan Chamberlain. Beginning in the early 1980s Dr. Chamberlain the founder of Cedar Strat Corp. acquired and began analyzing a proprietary $200 million stratigraphic database from Shell Oil. The data was reevaluated using state of the art surface gamma ray log analysis in a $25 million, multi-decade research effort that also involved extensive fieldwork, and was initially funded by Placid Oil and later, Chevron, Exxon and Texaco.
The digitization of the data and its computer analysis have greatly aided in assembling a conclusive model. This most extensive evaluation of Nevada's geology found that, contrary to earlier tectonic and depositional models, thick, thermally mature, organic rich oil shales do exist along with ideal reservoir rock and over-thrust structures that have the potential to contain giant oil pools. Critically, this work pinpointed where these structures are. Last year Eden management reviewed CedarStrats prospects and were able to make a deal to acquire its initial 95,000-acre Noah Project. Then on December 15th, 2004 a further 106,000 acres were acquired at a government auction, completing the companys lease acquisition plans. The Noah area was identified based on a combination of ideal oil generating source rocks, world-class reservoir rocks, and large over-thrust structures that he had identified. This combination is what holds some of the worlds largest oil fields in such areas as Iran, Iraq, western Canada, Wyoming, and Utah.
Despite Chamberlains discoveries there wasn't a huge audience to hear what he had to say. However, a recent discovery by Wolverine Gas & Oil in the western Utah portion of the Great Basin has really forced everyone in the industry to pay attention. Wolverine's discovery has been estimated as having 896 million barrels of oil recoverable. Its source rock has been identified as Mississippian aged and coming from the West (this is identical to Noah). We found a copy of an in depth article published in the Oil & Gas Journal that talks more about this huge find. It is very interesting that Sidney J. Jansma Jr., president of Wolverine, was said to have raised the drilling funds for his recent discovery from outside the oil industry. Apparently no one believed Jansma either and perhaps this year we shall know whether Noah will be the second example to prove the critics wrong.
Institutions On Board
It is very rare to see so many tier one institutions involved with a small oil and gas play such as Eden Energy. Their involvement lends lots of credibility to the company. One of the largest investors in Eden is none other than RAB Capital, a London based investment management company, founded in 1999. RAB specializes in absolute return funds and as of year end 2004 the firm had approximately $1.75 billion under management. RAB Capital's Special Situations hedge fund manages approximately $416 million dollars and bought 1.8 million shares at $1.50 per share. What is significant about this hedge fund's involvement is that it was Awarded New Hedge Fund of the Year at the EuroHedge Awards 2003. The award is probably attributed to the fact the hedge fund produced gains of 1100% that year.
Canada's top resource brokerage firm, Haywood Securities, also underwrote the company. Their clients bought over $5 million worth of shares. Investment banker CK Cooper was apart of another $5 million dollar financing. Cooper's Chairman, Alex Montano, was ranked America's performing oil and gas analyst by The Wall Street Journal's "Best On The Street."
Since inception, Eden Energy has raised over $9 million dollars in financing to fund the acquisition of leases and exploration of the Noah anticline. The institutions involved here may not be huge names on Wall Street but they most certainly are in the world of natural resources. When it comes to oil and gas it is not easy to find a more knowledgeable group of investors than those that financed Eden Energy.
Conclusion
The U.S. Energy Information Administration (EIA) continues to see a tight global oil supply and demand balance through 2006. The strong demand growth coupled with limited spare crude oil production capacity means high energy prices are here to stay. Global oil demand continues to grow at 2 million barrels per day or more without a comparable increase in crude oil production capacity. It is very hard to image demand slowing or supply capacity growing significantly. That is why the EIA is not expecting oil to fall below $50 per barrel or the U.S. average retail price of regular gasoline to drop below $2 per gallon for a sustained period anytime soon.
Shares of Eden Energy have been on a tear reaching its all time high of $2.80 per share twice in the past two months. Monday marks the third time the stock has closed at this price level. Going forward we think that more oil and gas investors will be paying attention to EDNE. Drilling is expected to start sometime in the fourth quarter but high resolution 2D seismic survey over Noah will be occurring very soon.
When it comes to investing in this sector there are only two strategies that make sense. The first is to buy the majors like Exxon (XOM), ChevronTexaco (CVX), or some other multinational for the steady stream of dividends. These giants are as safe as it gets and for some people owning them make sense. However, the second strategy is to find an idea like Eden that has massive potential. The risks are much higher and generally speaking the chances of a junior discovering a major oil find is thought to be a long shot. That is often the case but after taking a very close look at Eden Energy we like the risk to reward that this idea presents.
Ist zwar schon recht gut gelaufen *ggg* von 6 Cent auf 2.8$, aber wer weiß...
Never argue with an idiot -- they drag you down to their level, then beat you with experience.
April 27, 2005
Let's get a raise of hands of those who feel like they are paying too much for gas at the pump. According to a poll taken April 18-20 by the Associated Press-AOL, 51% of those surveyed say that if fuel prices remain high for the next six months it will cause a financial hardship for them. Oh there's more...the survey found that 58% of respondents have reduced their driving, 57% have cut back on other expenses and 41% have changed vacation plans to stay closer to home.
It makes sense that with the ridiculous price of oil hybrid car sales have been increasing. However, we were surprised that the hybrid market has grown by 960% since 2000. New hybrid vehicle registrations totaled 83,153 in 2004, an 81% increase over the year before, according to data released Monday by R.L. Polk & Co., a Southfield, Mich., company that collects and interprets automotive data. Despite the growth of hybrids they represented just 1% of the 17 million new vehicles sold in 2004. Major auto makers are planning to introduce about a dozen new hybrids during the next three years but will it really make a difference?
The world currently produces 83-84 million barrels of oil per day. Of that supply China consumes just 7 million barrels per day while and Asia's gigantic population of three billion people consume 20 million barrels. In comparison, the United States, with just 1/10th of Asia's population consumes 22 million barrels of oil per day. America's thirst for oil is propelled in part by the 250 million cars we have in this country. Even if hybrid cars do begin to catch mainstream attention we doubt the effect will be material if one considers that the number of cars in China is expected to grow from 24 million to approximately 100 million by 2020. (Interesting note: gas in Beijing was around $1.60 per gallon because the taxes levied are much lower than that of the U.S.)
The world's thirst for oil is not going to subside anytime soon and unfortunately we don't see the price of oil dropping very much if at all in the foreseeable future. This is a major problem with no solutions because oil, contrary to the way our country consumes it, is a finite commodity. Scary to say but the world's oil production seems to be tapped out. To make matters worse, no matter how much the price of oil increases to there is no way to "just produce more oil" in a short period of time.
Production requires the discovery of new oil and the world is extremely short on new places to find vast quantities of the precious black gold. Since the inception of the SmallCap MarketWatch we have seen our share of oil and gas ideas. The majority of them offered too little upside because we were just not interested in some company producing a few hundred or even a few thousand barrels per day. The rest were pipe dreams that had about as much chance of finding oil as you and I have of hitting a gusher in the back yard.
Our reluctance to embrace the industry meant missing out on some impressive gains. The Amex Oil Index (XOI) has more than doubled in the past three years along with almost all of the major oil and gas companies. While the most of the world was recovering from the tech bubble, energy investors were printing money hand over fist. This frenzy has increased investor awareness of the sector but the downside has been an increase in the number of shoddy new companies that have sprung up to take advantage of "hot money". We've been searching and waiting for the right opportunity... now we've found it.
Eden Energy Corp. (EDNE), the subject of today's trading alert presents one of the most fascinating opportunities we have ever seen in the oil and gas industry. The company is currently developing a 210,000 acre lease block in Eastern Nevada called the Noah Project. Eden has a 100% working interest in the project and has recently raised over $9 million dollars from some very smart oil and gas institutional investors. Readers may be asking...so Eden Energy has some land and now they raised the capital to see if there is oil there....what's the big deal? What makes this oil and gas idea worthy of our attention? Unlike most of the companies in this sector Eden has a legitimate claim to think they may have a billion barrel discovery on their hands. Drilling begins in the fourth quarter of this year and we expect the stock to move up in anticipation. Shares of the company closed the day at $2.80 per share and with 23,835,869 shares outstanding the market capitalization is $66.74 million.
The Noah Project
Until recently, no one had ever drilled the top of a thrust structure in the Great Basin of Eastern Nevada and Western Utah. The United States Geological Survey had never done a thorough study of this area because it was thought of as a waste of time. One person did think that there was potential for great oil finds in this region and that was Dr. Alan Chamberlain. Beginning in the early 1980s Dr. Chamberlain the founder of Cedar Strat Corp. acquired and began analyzing a proprietary $200 million stratigraphic database from Shell Oil. The data was reevaluated using state of the art surface gamma ray log analysis in a $25 million, multi-decade research effort that also involved extensive fieldwork, and was initially funded by Placid Oil and later, Chevron, Exxon and Texaco.
The digitization of the data and its computer analysis have greatly aided in assembling a conclusive model. This most extensive evaluation of Nevada's geology found that, contrary to earlier tectonic and depositional models, thick, thermally mature, organic rich oil shales do exist along with ideal reservoir rock and over-thrust structures that have the potential to contain giant oil pools. Critically, this work pinpointed where these structures are. Last year Eden management reviewed CedarStrats prospects and were able to make a deal to acquire its initial 95,000-acre Noah Project. Then on December 15th, 2004 a further 106,000 acres were acquired at a government auction, completing the companys lease acquisition plans. The Noah area was identified based on a combination of ideal oil generating source rocks, world-class reservoir rocks, and large over-thrust structures that he had identified. This combination is what holds some of the worlds largest oil fields in such areas as Iran, Iraq, western Canada, Wyoming, and Utah.
Despite Chamberlains discoveries there wasn't a huge audience to hear what he had to say. However, a recent discovery by Wolverine Gas & Oil in the western Utah portion of the Great Basin has really forced everyone in the industry to pay attention. Wolverine's discovery has been estimated as having 896 million barrels of oil recoverable. Its source rock has been identified as Mississippian aged and coming from the West (this is identical to Noah). We found a copy of an in depth article published in the Oil & Gas Journal that talks more about this huge find. It is very interesting that Sidney J. Jansma Jr., president of Wolverine, was said to have raised the drilling funds for his recent discovery from outside the oil industry. Apparently no one believed Jansma either and perhaps this year we shall know whether Noah will be the second example to prove the critics wrong.
Institutions On Board
It is very rare to see so many tier one institutions involved with a small oil and gas play such as Eden Energy. Their involvement lends lots of credibility to the company. One of the largest investors in Eden is none other than RAB Capital, a London based investment management company, founded in 1999. RAB specializes in absolute return funds and as of year end 2004 the firm had approximately $1.75 billion under management. RAB Capital's Special Situations hedge fund manages approximately $416 million dollars and bought 1.8 million shares at $1.50 per share. What is significant about this hedge fund's involvement is that it was Awarded New Hedge Fund of the Year at the EuroHedge Awards 2003. The award is probably attributed to the fact the hedge fund produced gains of 1100% that year.
Canada's top resource brokerage firm, Haywood Securities, also underwrote the company. Their clients bought over $5 million worth of shares. Investment banker CK Cooper was apart of another $5 million dollar financing. Cooper's Chairman, Alex Montano, was ranked America's performing oil and gas analyst by The Wall Street Journal's "Best On The Street."
Since inception, Eden Energy has raised over $9 million dollars in financing to fund the acquisition of leases and exploration of the Noah anticline. The institutions involved here may not be huge names on Wall Street but they most certainly are in the world of natural resources. When it comes to oil and gas it is not easy to find a more knowledgeable group of investors than those that financed Eden Energy.
Conclusion
The U.S. Energy Information Administration (EIA) continues to see a tight global oil supply and demand balance through 2006. The strong demand growth coupled with limited spare crude oil production capacity means high energy prices are here to stay. Global oil demand continues to grow at 2 million barrels per day or more without a comparable increase in crude oil production capacity. It is very hard to image demand slowing or supply capacity growing significantly. That is why the EIA is not expecting oil to fall below $50 per barrel or the U.S. average retail price of regular gasoline to drop below $2 per gallon for a sustained period anytime soon.
Shares of Eden Energy have been on a tear reaching its all time high of $2.80 per share twice in the past two months. Monday marks the third time the stock has closed at this price level. Going forward we think that more oil and gas investors will be paying attention to EDNE. Drilling is expected to start sometime in the fourth quarter but high resolution 2D seismic survey over Noah will be occurring very soon.
When it comes to investing in this sector there are only two strategies that make sense. The first is to buy the majors like Exxon (XOM), ChevronTexaco (CVX), or some other multinational for the steady stream of dividends. These giants are as safe as it gets and for some people owning them make sense. However, the second strategy is to find an idea like Eden that has massive potential. The risks are much higher and generally speaking the chances of a junior discovering a major oil find is thought to be a long shot. That is often the case but after taking a very close look at Eden Energy we like the risk to reward that this idea presents.
Ist zwar schon recht gut gelaufen *ggg* von 6 Cent auf 2.8$, aber wer weiß...
Never argue with an idiot -- they drag you down to their level, then beat you with experience.
