The Surest Thing in Oil Sands Exploration
Tuesday, January 16, 2007
Our belief in BQI has not faltered since we first brought
this to our readers' attention nearly a year ago. Although gains are quite small
in theinvestar's portfolio, all indications are that this is the next
Suncor...that is if Oilsands Quest does not eat their lunch first! Although that
is pure speculation, you have to look at the industry now and take a picture.
Now we love to think of ourselves as a step ahead of the heard, and our history
indicates that we have been in many cases. So let us look at that picture of the
oil and oil sands industry as it stands now, and let us visualize as to what it
will look like in the next 10 years.
It now appears that BQI has that one project that is the
company maker. What is so scary is the sheer size of it, and although they must
relinquish a large part of it, the project will still be one of the largest oil
sands projects in Canada, if not the world! To think that the company may have
doubled (or laid the groundwork to triple or quadruple reserves this drilling
season) their proven reserves today is mind boggling. To put this in
perspective, the company could achieve a growth rate associated with the
internet stocks of the world while also becoming one of North America's largest
and premier oilsands/oil plays.
If you remember in our last article, we mentioned that our
mentor thought that oil would see $48 before it bottomed out, because (and we
are paraphrasing here) the first bottom is seldom the last bottom. Well with
oil's fall to just above $50 today, it has gotten halfway to the point where he
thinks is the potential bottom. With the dramatic fall today, oil also held back
BQI from the large gains expected and realized in past drilling seasons.
Although in the short-term the stock had a negative reaction to the news, it is
the long run we are truly concerned about because the market is hardly right
over the long-term (it is always right when setting prices at the time, however
there are times when the market briefly undervalues securities in regards to
their future potential value). Once again we must reiterate that we fully
believe that BQI is going to go to $10 and potentially higher (the price we have
highlighted is $20 for a watermark high THIS YEAR).
Getting back on topic for what we see in the future, the
latest press release said that the company had now discovered and established a
deposit on 13.6% of the company's land. What's more is that they actually
increased their already unbelievable success rate to 87% from last year's 80%.
This means either last year they were not exactly sure about the geology of the
area, or that there are more areas within their property with richer bitumen
deposits. Either way it appears to us that BQI is going to ultimately discover
bitumen on ATLEAST 30% of their lands and most likely experience a 75% success
drill rate in the future.
There is a very distinct possibility that BQI could possess
bitumen reserves greater than their current peers before selling JV
partnerships. If they come anywhere near where we believe that their project
will progress to, we would not at all be surprised if Suncor were to sign on in
order to jump on this great opportunity (and get knowledge of this area to bid
on future Saskatchewan bitumen concessions) and BQI to get access to valuable
industry knowledge when it comes to mining from the industry leader. Some may
not believe these words we write, but remember the old saying, “if you can't
beat 'em...join 'em.” Everyone missed this opportunity, which in hindsight
appears to have been a no-brainer, so look for intense bidding for the JV
agreements up for sale/negotiation this summer.
Also at this time we would like to entice our readers to
take a second look at Strathmore Minerals. We believe that their historical
resources may be under reported meaning that the company could have the best
valuation in the uranium industry right now for pounds per share. They could
also be another company adding JV partnerships soon, and with the dramatic
increase in uranium prices this last year, this deal, or these potential deals
could be worth more than anyone is expecting. If this company was valued at $5
per pound in the ground, each share would be worth $10 per share! Apply the
price being paid for some companies at this time who possess smaller deposits,
and the stock could sell for as much as $20! This is with the company not
needing to drill a single hole, but rather permit their existing projects. We
believe that this is a great story, and see large future gains. There should be
more on this subject later, at which point we shall notify you.
We are holding strong in our shares of BQI and will not
sell at this time. We shall not be “played” by the market, but shall await until
everyone realizes what the company has to offer. Our bet is that the stock will
shortly begin to act accordingly and rise from this solid base that it has built
over the past summer. Should China or India move in to sign a JV agreement this
summer, the stock is going to blast off and the company will have instant
credibility. With those events playing out, many will be wondering why they did
not see this at the time, and the reason shall simply be that they were scared
off by 'Ol Mr. Market'.