PSA 0.00% 2.1¢ petsec energy limited

sunday petsec ramp!!!!

  1. 1,317 Posts.

    This week Petsec closed on Friday at 80 cents up 8 cents or 11% week on week. It closed the previous Friday at 72 cents. Petsec wasn¡¯t alone in having a good week, ARQ and AYO were also up 8 cents on the week gains of 7% and 10% respectively.

    The big difference between PSA and those companies I like to put in its peer group (sorry Graham!) ie. ARQ, AYO, AWE etc is that the latter trade in volumes much greater than Petsec. Last week for example PSA traded 756,692 shares whereas both AYO and ARQ put through around 4 million each. The difference value wise is even greater.

    So the point is not difficult to make that Petsec is still a very thinly traded stock. As Miningnut noted during the week it is tightly held with the top twenty shareholders accounting for nearly 70% of the shares on issue. It doesn¡¯t take much volume to move the shares in either direction.

    For the time being it remains an unloved, undiscovered, unwanted, unheralded and certainly under promoted stock which should be attractive to any one looking for unrecognised value in an oiler. When interest in it is eventually sparked and investors chase the stock in volume the only place it can go is up.

    But what will stimulate that interest?

    The first point to make is that it is now almost a month since the drilling of the two new wells at West Cameron and the company said at the time that it would take about three to four weeks to get them into production. So that time is about now.

    I am hoping that the company will announce this week that the new wells are up and running and will tell us what the production rate is net to Petsec. The last rate we had was ¡®better than 25 mmcf ¡® back in May. (I understand that figure was gross and not net to Petsec.) Usually this type of production announcement is good for the share price.

    Then at the end of October, PSA will put out its September quarter activity report and financials. I am not expecting great things for this last quarter given lower production rates, in part due to the drilling program they conducted, and also lower summer prices.

    But it should still be a very acceptable result. And with the earlier than usual increase in winter gas prices and the new wells, the December quarter should be very good. The northern hemisphere winter is a boon for PSA¡¯s revenues another plus for the share price.

    The final year result should be at least gross revenues of $45 million and net profit of $25 million and that on the production of just 4.5 to 5 bcf of gas. I know people question PSA¡¯s reserves but just let me say that if Petsec can¡¯t replace 5 bcf of reserves each year it shouldn¡¯t be in the business.

    I would suggest that the two new wells combined will have added the equivalent of this year¡¯s production to reserves without taking into account any new discoveries at Vermilion or China.

    And Petsec knows it has at least 8 bcf of the 33 bcf targeted at its about to be drilled West Vermilion prospect because Forest Oil discovered that back in 1988.

    And speaking about Vermilion and China we can¡¯t be far off learning when drilling is to commence. Last I heard both prospects were to be drilled in November.

    Petsec has recently achieved a bit of broker interest. I understand Intersuisse have upgraded their recommendation from a ¡°speculative buy¡± to a ¡°buy¡±. The Sun Herald also had it as a buy recently. And Quenton Cameron has Petsec as the stockpick of the month in his latest bulletin with a value of $1.20 on the stock.

    So in summary, it looks to me like Petsec is poised for the next run up. Lets see where we are a week from now.
 
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