Oil and Gas Discovery

Brian Hicks

Updated May 3, 2008

We’ve spoken a lot about the explosive opportunities in Bakken, even about the opportunities that lay in the Marcellus Shale.

But to understand the potential we’ve spoken of, let’s revisit the Interoil (IOC:AMEX) stock we spoke of in December 2007.

Granted, this is not a Bakken stock. But it exploded Thursday on a gas discovery. And I bring it to your attention, because it’s the same kind of "discovery" pops we’re looking for with Bakken.


IOC Chart May 2008


T. Boone Pickens and Interoil

"I learned long ago not to bet against T. Boone Pickens," I reported in December. "He’s not one to throw around investment dollars at just any company. A man of his stature is sure to have done plenty of research, and is sure to be well in the know before investing in any company."

That’s why when he increased his holdings in this beaten down oil play with opportunities in Papua New Guinea, Interoil became the "buying opportunity of a lifetime."

"But to make real money in Interoil, you have to play it smart," I advised Pure Energy Trader (PET) readers in a February 2008. "Hedge your bets with IOC puts and calls."

It turned out to be a smart move. Two months into the IOC trade, the stock pulled back sub-18, which gave PET readers the opportunity to cash out the puts for up to 29% gains.

But we also saw no reason to sell. In fact, we’re seeing more reasons to buy.

Here’s why.

Oil: Still the Buying Opportunity of a Lifetime

In early July 2007, it took four days for shareholders to send Interoil Corporation (IOC) to pre-Elk1 discovery at Papua New Guinea levels — a 58% plunge on nothing more than rumors of a dry well that cast doubt on the Elk structure.

As an Australian company, Interoil is required, on a weekly basis, to produce drilling results. But when IOC failed to report test volumes, it was viewed as a negative. Shareholders got nervous, and sent the stock screaming lower violently to the downside.

"But, nowadays, even at $20, it remains quite a bargain – something made very clear by T. Boone Pickens’ two million share ownership of Interoil after a 943,964 share buy in August 2007," I told readers.

While it isn’t known why T. Boone Pickens made his move, we do know that IOC is developing that natural gas project in Papua New Guinea. Say reports, Merrill Lynch Commodities, Pacific LNG Operations Ltd, and Interoil have agreed to develop a liquefied natural gas project in New Guinea, with hopes that the project will begin production by 2012.

But to realize the full potential of IOC, you had to have patience.

After months of watching it dip, rise, and trade sideways, patience finally paid off Thursday morning.

Yep, for patient investors, there’s plenty of good news.

"Despite a substantial Interoil (IOC) pullback, which gave us a 29% gain on half the Interoil June 20 put (IOCRD), we held… and it’s a good thing we did," I told PET readers.

After months of waiting, our Canadian company with operations in Papua New Guinea announced a gas and gas liquids discovery in the Antelope structure in its Elk-4 well.

Says a recent press release:

"The Elk-4 well has successfully penetrated the Antelope structure, a new discovery which will significantly augment the gas found at the Elk-1 discovery well. Drilling operations experienced a gas kick and a flow of gas and gas liquids to surface which was circulated and flared. The well is now being prepared to drill deeper under pressure followed by comprehensive evaluation.

‘This well confirms the presence of hydrocarbons in the Antelope structure," said Mr. Phil Mulacek, CEO and Chairman of InterOil. "We are very excited about this early result and we look forward to drilling ahead to establish the commerciality of this discovery.’"

Needless to say, this is great news. And with more news likely followed by hopeful upgrades, the sky’s the limit for our Interoil stock… This, my friends, is the potential we see behind Bakken stocks.

Who said you couldn’t make money following billionaires?

Ian L. Cooper

P.S. Right now, investment opportunities are flooding the Bakken oil formation. And yet, knowing which companies will emerge most profitable requires expert insights into exactly what’s going on there.

Inside this new report, you’ll learn the details surrounding a little-known U.S. Government application. It’s a form that every company operating in this area MUST fill out. Amazingly, shortly after Uncle Sam decides to approve it, the company’s share price often launches.

Best part is… it’s published BEFORE anything typically happens to the share price.

To get our new report, click here.


In case you missed our other investment opportunity highlights, here’s what we covered in Wealth Daily, Gold World, Energy and Capital, and your free blogs for the week of April 28, 2008.

The Marcellus Formation: Natural Gas "Super Giant" Ready to be Tapped for Massive Profits
As we discovered recently here at home with the Bakken oil find, the massive gas reserves confirmed within the Marcellus Formation may be part of the answer to those increasingly inadequate supplies.

Bakken Oil Stocks: OPEC Won’t Rule Out $200 Oil… Making This Play All the More Enticing
Sure, a recession is technically defined as two quarters of negative GDP, but "you can throw that model out," he says. "I think it’s defined by the man in the street a little differently than whether there’s been two quarters of reported (negative) GDP growth. We’re in a recession, unless you want to stick strictly to the technical definition, which I think really doesn’t have much meaning to the fellow who has lost his job or is facing a money market fund that isn’t paying him out or whatever it may be."

Peak Oil: Living on the Banks of Denial: On Accepting Peak Oil—And Finding Profit
I have often reflected on how coming to grips with peak oil is much like the process of grieving, as identified by Elisabeth Kübler-Ross in her 1969 book, On Death and Dying. In peaker terms, I’d describe it like this…

Water Infrastructure Stocks: How to Get Your Piece of a $374 Billion Emerging Market
The Environmental Protection Agency (EPA) recently estimated that $374 billion will be needed over the next 20 years for water main replacement and renewal. That works out to about $18 billion per year. The problem: we currently only spend about $1.1 billion per year. But that spending is growing at a 25% annual clip and is expected to continue to do so for the immediate future.

Home Depot Shutting Down 15 Stores: Big Boxes are Going Empty
If you’re looking for signs of a weakening consumer, here’s another one. Home Depot has decided to close 15 stores over the next two months. Poor performance is the reason. It is a dubious first for the renowned big box chain.

Countrywide Strikes Out Again: Lender Loses Big in 1Q
Somewhere in his private moments, Angelo Mozilo must be laughing his head off today. After all, Angelo "earned" $10.8 million last year and cashed in on $121.5 million in stock gains as his company, Countrywide Financial (CFC), got absolutely hammered by losses on idiotic mortgage loans. Not a bad payout. In fact, all told Mozilo made over $450 million on sales of CFC stock as the company he founded began to fall apart. But his best work was saved for Bank of America CEO Kenneth Lewis.

Investing in CNG: How to Fill Your Tank for $5
That’s what some car owners are doing in Utah, where gas is selling for $0.638 per gallon.

69% and 9% in Two Days… Bank Half
Smart strong hands, including you and I knew better, and held, only to watch the stock tack on $7 upside in two trading days.

Special Report: Trading Secrets of the 3160s
As companies acquire new permits to drill (3160 letters), the rapid hit-and-run trades we’ll take advantage of will more than cover any rising cost of food and gas. In fact, with the doubling of permits expected this year, just using this one area carefully could triple your money this year.

That’s it for this week. Have a great weekend.

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