Cardium Oil Play Valuations Setting Up Big Year for M&A in 2010

The new Cardium oil play in Alberta is rapidly approaching the stature of Saskatchewan’s famous Bakken play, and this is very good news for investors in Canada’s junior oil and gas sector. The four year old Bakken play has created huge shareholder wealth for investors, as companies like Crescent Point Energy and Petrobank bought out junior after junior after junior to increase their land base and production profile.

The same thing is now starting to happen in Alberta’s Cardium play. And valuations (read: stock prices) are getting much richer, much faster than what happened in the Bakken. As an example, TSX listed Result Energy is a Cardium focused play that was just taken over and re-capitalized by the management team from TriStar Oil and Gas, a Bakken play that itself was bought out in August 2009.

Brett Herman and his TriStar team announced several acquisitions immediately, and one Canadian analyst estimated they paid $275,000 per flowing barrel for them. As comparison, the average Canadian listed junior trades at about $60,000, the intermediates at $71,000, and if it’s a natural gas weighted producer, it can be as low as $30,000. Even the leading juniors in the more profitable Bakken play – Painted Pony Explorations would be a good example of this – trade at $140,000 per flowing barrel.....Read the entire article.


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Following the Jockeys in the Oil Patch

You’re only as good as your last deal.

Buy the jockey, not the horse.

That’s what came to mind today when I read that Eagle Rock Explorations (ERX-TSXv) was bringing in a new management and re-capitalizing this 550 boe producer operating in Alberta and Saskatchewan. Half the new group is from Crescent Point Energy (CPG-TSX) the most highly valued intermediate oil producer on the TSX. That’s a great calling card. The other half comes from Wild River and Prairie Schooner, two junior producers that were build and sold earlier this decade.

And the Eagle Rock stock showed the worth of this team, quadrupling to 32 cents on huge volume of 12 million shares – 22% of the stock outstanding. Many investors follow this strategy, find successful management teams who have built and sold companies before, and follow them on every deal. So in my next issue for subscribers, due out in the first couple weeks of October, I will profile three new young companies that are the new ventures for three highly successful management teams in the Canadian oil patch.....Read the entire article