Tuesday, September 21, 2010

Which Came First, God or the Government?

From guest blogger Keith Schaefer at Oil and Gas Investment Bulletins.....

CEO Tom MacNeill likes to throw that line out to investors as he explains the opportunity at 49 North Resources Inc. (FNR-TSX). 49 North is a specialized venture capital company that is quickly morphing into a fast growing oil producer, with a twist. It’s focused solely on Saskatchewan. The map that illustrates his point shows a stark contrast between Alberta and Saskatchewan. In Alberta, the map has an abundance of oil and gas properties being developed. Moving east across the border in Saskatchewan is like falling off a cliff; there is a dramatic and immediate drop off in the amount of activity in oil and gas.

The productive oil and gas geology doesn’t stop on a dime like that, says MacNeill. He sees huge opportunity in that map. His theory is that 40 years of socialist governments in Saskatchewan have slowed the development of the province’s energy resources, but the new business friendly government of Premier Brad Wall has created a huge wealth of opportunity for energy entrepreneurs like himself. “This is early days (in resource development) in Saskatchewan. The only thing that’s held us up in Saskatchewan is politics. We are at Year 1 in a 50 year process. We have 50 years of upside,” he gushes.

“Use Alberta as an analogue,” he adds, noting that Saskatchewan already has more conventional oil production than Alberta. “We do 500,000 bopd of conventional production. Alberta production peaked in 1983, 40 years after (the original) Leduc #1 (well). We are 40-50 years away from Peak Oil (in Saskatchewan).” 49 North has a suite of mining and oil and gas assets, but has recently been increasing its energy weighting. As is typical of these public venture capital companies, it trades at a 40% discount to its Net Asset Value.

MacNeill has invested directly in several oil and gas land packages, and has production net to 49 North of 80 bopd now, but hopes to have an exit rate of 1000 bopd from its 10 net section land package that produces from the Viking formation “This is not exploration in the Viking. We can do 16 wells per section and we have 10 sections.” 49 North had 100% success on the five wells it drilled last quarter. MacNeill joint ventures or buys out many small operators, and helps them get big fast. “We have so many opportunities, we could make swiss cheese out of this province” he says. “We’ve done a lot of geophysical work in this province. We have a lot of proprietary information from mineral exploration work we’ve done in our mining assets, and there are great synergies there (for oil and gas).”

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