Member Info for Scott22

I like #3

Natural share price increase into drilling season

That is a Canadian newsletter:

"So confident is Alvopetro in its future operations that it started paying a quarterly dividend of 6 U.S. cents in October. The yield is a generous 6.3 per cent, but thanks to a trim share count of just 33 million -- achieved through a 1-for-3 rollback in September -- the annualized cost is a manageable $10-million. Today Mr. Ruttan reiterated his commitment to "provide direct returns to shareholders through ongoing quarterly dividends."

Investors seemed pleased. Many are hoping that Alvopetro will be the third successful Ruttan-Wright promotion in South America, following Pacalta Resources (sold for $1-billion in 1999) and Petrominerales (sold for $1.6-billion in 2013). A separate promotion in Canada did not fare quite as well: Lightstream Resources, where Mr. Wright was CEO and Mr. Ruttan was a director, began trading at nearly $36 in 2009, but then fizzled out and was trading at just 11.5 cents by the time it ceased trading in 2016 and sold its assets to a private company. Mr. Wright (though not Mr. Ruttan) was also a director and key backer of Alberta producer Spyglass Resources, which entered receivership in 2015, its stock having fallen to five cents from $2.60 within two years."

John Wright and Cory Ruttan are making something of alvopetrol (for now) but managed the $36 to $0.11 destruction of Lightstream Resources (a Petrobank spin off) and also the demise of Spyglass. I still shudder every time John Wright gets his free dollop of TXP shares and I wish somehow that TXP could sunset him as the COB. I got my first TXP shares (at $2.06 on 01/11/203) from the purchase of TXP by the cash left behind in the Petrobank shell after the spin off Lightstream (LTS). That is why the OTC symbol is PBEGF. THe PB part is for Petrobank. But LTS was biggest loss of my investing career, in part based on assurances by Wright that the cash flow easily covered debt service. Well the banks did not care but they allowed Wright and cronies to take it private as Ridgestream Resources and keep themselves whole. Anyway it is old news and I love TXP - but when I read stories like the Stockwatch energy piece today in Canada, I always think how much better I would feel if Wright was long gone and no longer getting his free shares every quarter. I am all in with TXP story and with PB and especially XM who I hope has never even met JW. I love the TXP leader sin Trinidad and the culture they have built. Sorry to rant on this. Every small cap energy investor has PTSD from something. But it is past time for JW to go. For fairness I did make money on the sale of PBG (Petrominerales) but that paled in comparison to my LTS losses.

smasher: good idea - if that date is valid there is less than 4 years until renegotiation is possible

... and Cascadura won't be up to 200 mmcf/day for about 2 more years so that will only be two years at full cascadura production until there may be some possibility of a step up.

...on the other hand the current fixed price at 200 mmcf/day is PLENTY to pay all the capex for a continuous 2 rig drilling program and facilities, to pay off all debt, and to begin paying a a dividend. So getting that cash flowing is more important than worrying about an incremental bump in Cascadura cash flow later on.

The signing date for the contract was December 18, 2020. I am guessing that is when the 5 year time clock starts. Maybe company would confirm that.

this was the ngc press release - actual contract not released - actual price confidential though acknowledged to be about US $2.50. Unclear when the 5 year time clock starts but assume either signing date for framework or for actual
contract .

https://media.ngc.co.tt/ngc-signs-framework-agreement-with-touchstone-and-heritage-for-new-gas-supply/

Coho in February and Cascadura in July/August. God willing. And at a fixed price.

Price increase of gas won't help TXP but it should light a fire under NGC.

Need to get first two Cascadura on-line and then the development wells drilled to get that field producing at planned rate of 200 mmcf/day by end of 2023.

Charlie Sharp has been consistently bullish on TXP . Was not phased by the delays during the last year. Likes the result of the third Royston test. His early 2021 target of 200 pence influenced my US $3-5 end of year 2021 target. Not met of course but he has kept his target there going forward.

He also has a good reputation and track record in the speculative small cap and especially energy areas.

According to TipRanks.com, Sharp is ranked #317 out of 7727 analysts.

I am trying to think of which of us would rate 317 out of 7727 in their stock picks. Not me.

Joey, you got an earlier start. I made my first investment in 1987 at age 39. Took me awhile to get to the point in life where I could (sort of) afford to do that. Glad that you got started at a young age. That helps. I am now at an age where I have my son (8 years older than you) take a look over my shoulder at what I am doing, just to catch it early if I start to do things that make no sense (or are not age appropriate). So far he thinks I am doing okay. He likes and owns TXP too (he learned about if from me but did his own thorough analysis and also follows the company closely). It is a very good story - deep value, micro-cap, out of favor sector, good leadership and good company culture, reasonable national government - some challenges for sure but some stability also and far from the worst. Not all good stories end well, but a good story is way more likely to end well than a deeply flawed one. I actually give a lot of credit to Paul and XM and the leadership team and the culture they have built. A company with good leaders also does better than a company with bad leaders. Almost every time.

Cascadura will be the big event in 2022 and also likely in 2023 as the first two wells come on line at 60 mmcf/day (in 2022) and then the 4-6 development wells boost production to 200 mmcf/day.(in 2023). Once Cascadura is producing at 200 mmcf/day then TXP can self fund everything else (two rig continuous drilling program plus all facilities for liquids) at the same time as they pay off all their debt. End of 2023 they can start paying dividend. 10 million mmcf from Coho is $500,000 profit a month or $six million a year. Cascadura is 20 times larger which means $120 million a year. And Cascadura has liquids to sell too.

TXP under US $2.00 is compelling buy. But Joey 1998 is right that there is a certain fatigue from the duration of the buying opportunity. (If Joey was born in 1998 I have jeans older than that).

US closed US $ 1.30 which is C $1.64

Hoping for an Eve-Adam. Got the Eve. Just need to see the Adam. I'm more of a story buyer (hard to call it exactly fundamentals at this point without some of the projected growth starting to manifest) but at this point maybe a little hoping for a TA assist is not all bad.

...on a day when other energy issues ramping. Do not see any news of any sort, or any rumors either. Story intact as far as I can tell. Just has to unfold, hopefully unfold a little faster.

Maybe the mother of all double bottoms. Or the mother of all crashes - hope not that.

"Not clear why this is so unloved by Canadians? Just a bit odd."

Maybe because the conversion price (from Petrobank) was US $2.06 on 1/11/2013. I have some of those shares. There is a certain amount of shared PTSD with owners of US shale drillers. And of course Petrobank shareholders still own this issue which never went bankrupt. While Lightstream shareholders lost all their investment.

But like the US share drillers the question is - what are the prospects going forward, not backwards. TXP is very early in a pretty compelling story that suggests shares currently are undervalued and worth holding (or accumulating). Of course US shale drillers were up richly last year, but TXP turn is coming. Hopefully.

This is a diversion but you were right about US shale drillers from 2014 through March 2000. Since then US energy E and P companies are second biggest gainers in US market. They are keeping production flat with a fraction of their revenues and are generating huge profits and profits and free cash flow, paying down debt, buying in shares, increasing dividends. That is set to continue for next few years at least, and likely longer. My personal best example is Ovintiv up from $3 to $35 over that interval of 20 months but many others have done well. I also own Advantage Energy in Canada. You could have bought almost any energy shares in March of 2000 and made huge money. (Buying in 2014 and holding was a wealth destroyer). TXP will benefit from many of the same dynamics once their production starts to ramp (better pricing for oil and gas based on worldwide under investment in the sector and demand holding at fairly high levels despite necessary push towards real energy transition which will take several decades). Here is a little review. TXP not a shale producer, has much better economics (conventional reservoirs, lower costs, slower declines). But still will benefit from macro-enconomics of oil and gas sector. Likely even more than US shale drillers. Another company that is not a shale driller but will benefit greatly is Cenovus energy, out of favor for years as an oil sand producer, but hugely profitable now and for years to come. Their dividend will likely increase 400% by 2025.

https://www.bloomberg.com/news/articles/2021-06-17/after-blowing-300-billion-u-s-shale-is-finally-making-money

Trinidad is 2,000 square miles.

Permian basin is 86,000 square miles with many benches.

Williston basin is 200.000 square miles with Bakken and Three Forks most productive layers.

TXP will get a huge amount of production from only 6-8 wells at Cascadura because the pay is 1000 feet thick, the reservoir is under high pressure with great porosity and permeability.

Another issue is the complex nature of the sands with all the folding. You don't have to necessarily drill a horizontal well to get better production "... let the geology work for you ...drill along the steep dipping beds .. use the dip of the rocks to your advantage." When you have a sand folded in such a way that a vertical well encounters hundreds of feet of pay, it should produce very well if it has good porosity and permeability and is hydrocarbon charged . The Bakken formation is only 20-40 feet thick and extends over 200,000 square miles. Although the depth is variable, it changes gradually like a huge dish several thousand feet deep at the edges in Saskatchewan Canada and more than 10,000 feet below surface in center of North Dakota. In any one area the oil sandwich is pretty horizontally oriented and the horizontal drilling method is not only favorable but necessary as otherwise each well would tap 20-40 feet of reservoir. I think the Ortoire block is a little more complex and the convential reservoirs in many cases, even when pretty complex, can be produced from a relatively small number of vertical wells. But we will see as they learn more. Likely some areas will be different than others.

We are early in the TXP story. Lots to come. Just need to get the wells (and the cash) flowing.

If you are getting that impatient, why not split your bet in two if you have conviction about another speculative issue. Then if either one goes up 5 times, you do fine if the other falters. Think of the seller's regret if you leave this ship while the story is still intact, and jump on to a leaky vessel. I have five pretty speculative holdings right now - I always do since the first Peter Lynch book - making up 5% of my total portfolio. Not all have to be wildly successful. Just one or two. Or even better three.

"Drilling and fracking shale is crap."

A little oversimplistic. In US tight oil production went from 800,000 bopd in 2010 to 7,000,000 bopd in 2018 (of total of 12,000,000) turning US rather unexpectedly into an energy sufficient country and indeed a major oil exporter. Shale gas went from 10 BCFd in 2010 to 65 BCFd in 2018 (of 85 BCFd total) in same interval turning US rather unexpectedly into a major LNG exporter. Permian, Bakken, Eagleford all depended on long horizontals with fracking to become economic.

"Wonder if the rig crews are knowledgeable of ...(horizontal drilling)."

I would say since it is a Canadian rig and 90% of all wells drilled in Canada are horizontals - probably so. Real question is if the geology is favorable. These are not tight shale wells.

Not exactly like "newbies were suckered in".

Helium 1 was amazingly close to being able to test a helium reservoir below the Karoo seal at TAI-1. Stymied by broken drill pipe and then by difficulties with small bore hole.

It was a good bet for any newbie who is knowledgeable and experienced in this sector and this market and in speculative investing. I haven't sold any, I continue to bet that Helium 1 is going to discover and prove commercial a producible helium reservoir in 2022.