Tuesday, November 23, 2010

Commentary on Energy Stocks ; (OTC.BB: AAPH), (NYSE:OXY), (NYSE:BRY), (NASDAQ:BEXP), (NASDAQ:BBEP)

CFA Commentary on Energy Stocks ;  (OTC.BB: AAPH), (NYSE:OXY), (NYSE:BRY), (NASDAQ:BEXP), (NASDAQ:BBEP)

Point Roberts WA- November 23, 2010  www.Investorideas.com, an investor research portal specialized in sector investing, issues energy commentary from Lisa Springer, CFA,  equity research analyst and financial writer, featuring American Petro-Hunter, Inc. (OTC.BB: AAPH). The report discusses the oil and natural gas deposits in California and the related public company plays.

Energy stocks in this report: American Petro-Hunter, Inc. (OTC.BB: AAPH), Occidental Petroleum, Brigham Exploration, BreitBurn Energy Partners

Central Valley Has Largest California Oil Find in 35 Years
Lisa Springer, CFA, Equity research analyst and financial writer
Best known for solar energy, California is also rich in oil and gas. This state is one of America’s top producers of crude oil, accounting for more than 10% of domestic production. Sizable oil and natural gas deposits are found across six geological basins in California, located primarily in the Central Valley and along the Pacific coast. 

California is home to 17 of the nation’s top 100 oil fields, including the Belridge South field, believed to be the third largest in the contiguous US. Most of the state’s drilling operations are concentrated in Kern County and the Los Angeles basin, although substantial activity also takes place in offshore waters. Exploration of Kern County fields is ramping up following last year’s announcement by Occidental Petroleum (NYSE:OXY) of a major discovery believed to be the largest oil and gas find  in California in more than 35 years. Occidental estimates reserves of between 150 million and 250 million barrels of oil and gas. The Kern County discovery has received the most press, but experts estimate there are at least six fields in the region that contain reserves exceeding 100 million barrels of oil.

Wildcatters have been successfully drilling in California's Central Valley since the 1860s. Like oil reservoirs in Texas, Louisiana and Pennsylvania, early explorers got a hint of what lay beneath the surface from the area’s many above-ground oil seeps, which Native Americans had known about for thousands of years. 

Today, California has nearly 52,000 oil wells together producing over 630 thousand barrels of oil per day. There are also some 1,600 gas wells pumping more than 760 million cubic feet of natural gas daily.  Occidental is California’s largest gas producer and second largest oil producer, but there are many large independents  active in California’s oil fields, including Berry Petroleum (NYSE:BRY), Brigham Exploration (NASDAQ:BEXP), BreitBurn Energy Partners (NASDAQ:BBEP)  and privately held West America Energy Corp.  

Another independent producer exploring in California fields is American Petro-Hunter (OTC.BB: AAPH), which owns a 25% working interest in a 1,000 acre drilling prospect west of Modesto in the Central Valley near Sacramento. The Central Valley is known as “California’s Gas Country” and has accounted for over 400 billion cubic feet of gas production to-date. Natural gas wells in the area are known for their long lives, relatively stable rates of production and predictable declines.

American Petro-Hunter’s Sacramento Gas Project is estimated to contain 42 billion cubic feet of potential recoverable reserves. The gas is found at depths of 7,400 feet in a 50 foot sand pay zone. Third party engineers think a commercial well on the site could easily achieve initial production of 5,000 Mcf of gas per day.

Output from nearby analog gas fields supports the expectation of high production rates. These fields currently produce between 2,000 and 4,000 Mcf of gas per day. The close proximity of American Petro-Hunter’s prospect to the Union Island, McMullin Ranch and Vernalis fields also suggest the presence of sizable gas reserves. These fields are estimated to contain in aggregate over 437 billion cubic feet of natural gas.  

American Petro-Hunter (OTC.BB: AAPH) and its partner completed seismic testing at the Sacramento Gas Project last year and are combining this data with seismic reports purchased from other engineering firms. The seismic data will be used to identify promising drill targets.  American Petro-Hunter expects to complete drill site selection early next year.  Once the drill site is chosen, preparations for drilling will begin almost immediately. The company plans to drill a test well to 7,800 feet, which will hopefully confirm the presence of trapped gas already indicated by the 2D seismic data. Drilling of the test well will likely begin in the summer of 2011. American Petro-Hunter must wait until the dry summer months to drill because the site is close to sea level. A total of three wells are planned as part of the drilling program.  
Assuming gas is found in commercial quantities, American Petro-Hunter plans to sell its production to groups such as PG&E Citygate, which supplies natural gas for electric power generation in the Sacramento region. The company will benefit from California gas prices, which are among the highest in the country. Current gas prices for PGE-Citygate are around $4.50 per Mcf.

American Petro-Hunter (OTC.BB: AAPH) is strongly committed to growth through the drill bit and the development of America’s vast untapped oil and gas reserves. The Company’s aim is to become a mid-tier producer within the next three years, which it plans to accomplish by aggressively developing its Poston (Kansas) and North Oklahoma prospects and exploring its Colby (Kansas) and Sacramento prospects. At present, American Petro-Hunter holds working interests in 10 projects in various stages of development.  The company is already generating revenues from two wells at its Poston project and is in the process of completing a second well at its North Oklahoma project that may be 500 barrels per day producer.

Lisa Springer, CFA -Bio and disclaimer: http://www.investorideas.com/About/Lisa-Springer-CFA/
The author, Lisa Springer, was compensated for writing this article and doesn't own shares of any of the companies mentioned in this article.

More info: American Petro-Hunter, Inc. (OTC.BB: AAPH)
The Company is a goal-oriented exploration and production (E&P) Company aiming to become an intermediate level oil and gas producer within 12 months. The Company is in production at the Poston Project in Trego County Kansas with new drilling activity and production underway at the North Oklahoma Oil Project. With the achievable target of becoming a 1000 BOE producer as our goal, American Petro-Hunter is actively on the hunt for domestic petroleum assets. http://www.americanpetrohunter.com/
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