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Naamplao · #4 05-11-2008, 10:04 PM

This article is not about Petrolympic at all??? Agreed that this company has an interest in the general area...but we are talking potential Apples/oranges here.

Also I thought it would be instructive to post comments to this Financial Post article that can be found at Questerre, Gastem rated 'buy' in first Utica shale play ratings - FP Trading Desk

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by Jonathan Blake
May 06 2008
12:42 PM

I find Ms. Shao's numbers difficult to understand as they significantly conflict with legal filings and company presentations. Furthermore, the "first mover" standpoint above is inaccurate as Junex and Altai have been in the play well before Gastem and Questerre. I am also unsure what she means by the sweet spot as many factors enter that calculation (geological, geophysical, facility, pipeline, topographical, etc). The gastem acreage is not necessarily the sweet spot and much of the Forest and Junex acreage is on top of pipelines; unlike much of the Gastem, Questerre, and Talisman acreage. Pipeline costs will be enormous in this undeveloped area, and it will greatly reduce ROI's.

This is a very complicated play for anyone that has not worked for at least 10 years in oil and gas development. I believe a great amount of experience is required from financial, geological, and petroleum engineering standpoints; all of which I was unable to determine about Ms. Shao from Fraser Mackenzie's website. I am very skeptical. It is important to note that the website says that she is an associate, rather than an analyst as stated in this Financial Post article (associate's are often recently out of university and treated as trainee's due to their low experience). Regardless, the fact many analysts are jumping into the play well after the discovery is indicative of their low experience in the play.

By interviewing company executives and by analyzing press releases, corporate presentations, annual reports, and inter-company contracts the NET acres in the St Lawrence Lowland shale area are:

Junex 724,600 net acres

Questerre 350,000 net acres

Altai 167,500 net acres

Gastem 153,200 net acres (only 17,043 in the heart of the Utica play , Mr Shao includes the royalty burdened New York farmin in Gastem's acreage which is clearly out of the heart of the play, and far from the discoveries)

These values assume that the companies exercise their "working interest back-ins". Thus Gastem and Forest would lose acreage due to back-ins from Junex, Talisman, Questerre, and Epsilon.

Note that the Junex acreage above does not include the 4 million acres it owns in the Gaspe area targeting Ladyfern plays, or the Trenton zones that were not farmed out to Forest in the Utica area.

Although most investors have been confused, the market is now starting to realize that Junex and Altai have the most stock price upside; with Junex clearly being the dominant land holder in both Utica shales and conventional zones.

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by East Coast
May 07 2008
10:55 AM

Mr. Blake

You seem knowledgeable and informed. Do you have a background in oil and gas?

Please continue to provide information on an educational basis.

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by Jonathan Blake
May 07 2008
12:25 PM

Thank you. I feel it is important to temper the often one sided views of the financial analysts and media. Many incentives governing Wallstreet and the media are not favorable to the small retail (or even large institutional) investor. Not only that, but many analysts are analyzing oil stocks despite the fact that they have never worked in the industry and do not have a technical background.

Yes, I have an O&G background of 15 years. I have successfully led geoscientists and engineers to both explore and develop large unconventional and conventional plays. I have an engineering degree and advanced finance degrees.

Please keep in mind that this play and the balance of power among players is still highly uncertain. The $31/share numbers thrown around in the article are almost worthless as they are unrisked (meaning they calculate the risk as 0% and a 100% success is assumed in the $31 and $45 per shr numbers). No experienced oil and gas professional or executive would run a business or make investments based soley on unrisked numbers. Unrisked numbers should largely be ignored. Whenever evaluating a reward, you must always pair it with risk.

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by Jonathan Blake
May 07 2008
12:31 PM

Also please note that the FP articles and Frazer Mackenzie analyst reports are very one-sided by focusing on Gastem and Questerre. Furthermore, many of the FP and FM articles can not be commented on as with this one. Given the flood of articles with a narrow focus, caution is warranted and one must question both incentives and intentions.

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by East Coast
May 07 2008
7:13 PM

Mr. Blake

Many thanks for your replies. Just as I thought, you are indeed 'seasoned'.

My interest is in unconventional gas resources. A few years back I studied new drilling methods for tight sands and shale gas. In either of these, it is important not to damage the formations by way of pressure or fluids. Reverse-circulation-center-discharge drilling seems to be the method that circumvents the problems caused by conventional drilling practices.

Having said that, in New Brunswick, Corridor Resources recently drilled through its producing sands and down into its Fredrick Brook shale gas package (using air) and is currently producing from an open hole. While it is still in the test stage, this shale gas package is 1160 metres thick and contains naturally fractured rock. Given all the 'excitement' in and around the Marcellus and Utica shale situations in other Appalachian areas, why has New Brunswick been overlooked? My pardons if it seems as if I'm in any way promoting here, as I'm not, but the shale rocks of this area are both naturally fractured and are very thick indeed, two of the most desired criteria, as you may very well know.

Allowing shale formations to be able to produce is still on a learning curve in many areas. Perhaps, we have here, many of the right conditions required not only how to learn, but to see those successes put into practice. Granted, this appears to speak well for New Brunswick, but it also speaks well for shale gas potential in general as shale gas appears to be a great source of future production.

I decided I would look at Ms. Shao's qualifications as an Analyst of oil and gas projects...they are here Fraser Mackenzie - Research Analysts - Patty Shao

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Patty Shao
Research Associate
Energy - Oil & Gas and Renewable

Ms. Shao graduated with a Bachelor of Business Administration with High Distinction from the University of Toronto in June 2006. She took a specialist program in Management (Finance) and a minor in Economics. As part of her co-op experience, she worked for General Motors in corporate finance. She also held a position as a research analyst at Watson Wyatt, where she analyzed findings on executive compensation and corporate performances.

Ms. Shao is currently enrolled as a CFA Level III candidate.

Hmmmm...she may be a competent person in many areas but she certainly doesn't show an in-depth knowledge of the Oil and Gas industry...does she? And she is not an Analyst...she is a RESEARCH ASSOCIATE. I have an tendency to agree with Mr. Blake's comments on the article....caution is required on this stock.