Oilsands Quest - BQI
Ok fools, this isn't a pitch for or against BQI. I'm soliciting opinions from anyone and everyone out there who might have a handle on this company. For those of you who don't know, BQI is a company currently in the exploration phase of, not surprisingly, Canadian oil sands. They have rights to extract a lot of acreage in known oil sands rich territories in Canada, and their exploration drilling seems to be yielding good results.
You can find their website and investor information here: http://www.oilsandsquest.com
The outlook for this company is extremely positive, if their production numbers can be achieved. I've long felt that any oil company that is increasing output, especially over the next 5-10 years, is going to be a big, big winner (due to increasing global energy demands, falling dollar, and peak oil).
Based on their most recent presentation, BQI has anywhere from 2-7B barrels of oil in reserve (from low to high estimates, with a middle estimate in the 5B range). They have started a test program construction which will be pulling up some oil, but it appears that large scale commercial production will be at a minimum 4 years down the road, and possibly 5 years or more. According to their website:
June 2008: Announcement of initiation of preliminary engineering of a 30,000 barrel per day commercial project planned for the development of Axe Lake. Management assessing a "fast-track" approach to a first prospective project, which could result in completion in 2012 or 2013.
I can't find it on their website now, but previous projections had their test facilities pulling up 1k barrels a day starting next year, increasing to 7k until the fully commercial oil extraction program was up and running.
What this means is that there is a long, long wait for the payoff on a fundamental basis for BQI before it is cash-flow positive. In many ways this company is like a biotech, although with greater odds for survival and eventual profits. A company like this is so enticing to me, a HUGE potential payoff, but in the interim, how much more share dilution will we see, how much debt will they have to take, will BQI be able to last that long, will they get bought out by SU or ECA, and how reliable are management's predictions? From all I can see, the management appears to be reputable and running the company well, but since I have no insider knowledge of the oil and gas industry (just my common sense), I have no idea if I can trust BQI's management, or their projections.
Another thing to note, regarding share price, is that in the short-term BQI's share price basically goes with the price of oil, although it is much more volatile, so anyone trading oil can trade BQI like a barrel of oil (either long or short). However, I'm looking at this as a long-term investment. The potential for BQI is 10-bagger (or more) if their projections pan out, and if they can get things up and running. I will have to reassess my opinion of oil in 5 years, because I do believe that one way or another, we will be using less of it; the question is, how much demand destruction will there be, and what alternatives will be coming on line in 10 years? My belief is that in 5-10 years, there won't be significant enough demand destruction to significantly bring down the price of oil, but after 10 years, there very well could be. And if BQI isn't producing lots of oil before then, the fundamentals may not be as strong (especially in oil sands, where there is a significantly higher cost to extract oil).
So I've kind of layed out both the bull and the bear case. Currently I own no shares of BQI, but am seriously considering it as a speculative swing-for-the-fences. Any advice or opinions in either direction are welcome, but I'm hoping some of you guys who work in oil and energy can shed some light on this company.