+ Watch PBEGF
on My Watchlist
Undervalued. Oil will be strong during recovery
dogpiling on TMFBabo's pick.
Seems an overreaction
Today's drop in share price seems to be from the new reorganization, in which Petrobank shareholders will receive shares of New Petrominerales that represent their proportional interest in Petrominerales. Since Petrobank shareholders will receive the new shares, the shares of Petrobank Energy have fallen by the perceived value of the Petrominerales shares since Petrobank shareholders are now receiving separate shares of Petrominerales instead of owning it through Petrobank's shares.To put this all in perspective, I'm going to refer to TMFDeej's pitch (http://caps.fool.com/Pitch/PBEGF.PK/5261203/the-margin-of-safety-in-petrob.aspx), in which he described the parts of Petrobank Energy. Keep in mind this was posted in October, so some of the parts may have changed (I have not made adjustments):1. 110M shares of Petrobakken valued at $2.5B market cap2. 65M shares of Petrominerales valued at $1.6B market cap3. 670 million BOE residing in its parent company4. Ownership of a potentially game changing oil sands extraction technology that could be worth billionsThe market cap of Petrobank at the time was $4.2B. Going by that information, the Petrobank shares are losing the $1.6B interest in Petrominerales shares and shareholders will instead receive separate shares in New Petrominerales. $1.6B/$4.2B is 38.1%. Today's correction (currently at over 45%) seems to be an overreaction. I believe this new reorganization adds further value to Petrobank. Assuming the Petrobank still owns 58% of Petrobakken (PBN.TO), the value of those shares has a market cap today of $2.38B. Assuming 106M shares are still outstanding for Petrobank, the market cap is $2.49B. For $0.11B, Petrobank shareholders get its interests in the 670 million BOE from the parent company and whatever interests it owns in the potentially game-changing oil sands extraction technology.The original thesis was that the sum of parts was much greater than the market cap at the time. Today, Petrobank rid itself of the Petrominerales shares (worth $1.6B in October) and took a $2.1B hit in market cap (45.8% drop as of 11 AM on 12/29/10). It seems the market overreacted by $500M to the news of the new reorganization. Not only that, the potential undervaluation of the sum of parts has now been magnified.
caps worst 30days
It's technology, if it works, will revolutionize the oil industry by drastically cutting the cost and increasing the yield of heavy oil extraction, and iIt appears to be proving out.
This stock was picked by TMFJake for the 2008 Stockpicking Contest.
Petrobank has some conventional oil and gas production, especially in the Bakken formation. But what makes them unique is their patented THAI (Toe to Heel Air Injection) heavy oil recovery process, an in-situ combustion (=underground controlled burn) technology for the recovery of bitumen and heavy oil from Alberta's oil sands, and also likely from oil sands in Columbia / Venezuela. This process has the potential to significantly reduce cost, energy and water inputs for oils sands production, and is already working on a demonstration / small scale production basis. Petrobank took the concept of underground combustion, or "fireflood" from theory to practice, so far with apparent success. With the end of easy, cheap oil in sight, this company could be immensly profitable. Also worth it for the Bakken play alone, even if THAI somehow turns out a failure.The real stock is on the TSX, and has made money for me since I bought it for 15$ a year and a half ago. One of my favourites.
With most of the oilsands worldwide in deeper deposits including a big part of the canadian deposits, the easy mining will be running out soon. Comparing the tech available to extract the rest, PBG's is clearly superior in many fronts. In addition, the assets it holds alone should put the price well above what it is today.
An oil sands company which is in the middle of developing its oil sands. Price is getting up there but it still has a long way to go. It is one of the better oilsands companies. One company not yet recognized is Connacher Oil and Gas which I rate even higher. Its production is just coming on line the first quarter reporting in May. How can you go wrong with two companies increasing production and with higher oil prices.
Oil and Gas pick - Oil Sands.
Petrobank Energy are the best player in the Canadian Oil Sands fields. They have patented the THAI system of steam injection to extract heavy oil from deep deposits. This does away with the need to excavate (and dispose of the spoil ecologically) it reduces the amount of water required and therefore saves on energy expended in extraction. The process is applicable to their other interests in Saskatchewan and in S America.
Has the technology which could revolutionize oil sands production. Very sensible 2008 P/E due to rising profits.
THAI(Toe-Heel-Air-Injection) Process, 78% ownership in Petrominerales, has play in the Bakken in SE Saskatchewan
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