This one is the $3.50 Coal Bed Methane (CBM) company that many of you have been asking about — it’s been teased several times recently by Mike Schaefer and the Pure Energy Report, which will run you about $495 for a year.
Or … if you just want to know about this company … you can come to the Gumshoe and it’ll be free (though I happily accept donations!).
Mike Schaefer sells himself as a sort of Warren Buffett of the coalbed, with notes in his ads about how he spoke to Buffett and essentially got the advice: Be an expert in something, then invest in it.
He chose mining and energy, and has been a newsletter stock spam staple for some time. Several of the big successes he brags about in his ads have been coal bed methane stocks, and he may well be an expert — I don’t know anything more about him than I read in his emails, and I don’t have any reason to think he’s anything but legit.
But I don’t want to send him $500 just to find out about “The Secret Key That Unlocks the Forbidden Treasure Chest.” So the Gumshoe has a new research project.
The ad is based on a few premises: First, that the powder river basin in Wyoming and Montana is one of the great sources of natural gas in the United States (in coal bed methane form).
Second, that this area must be developed as part of the President’s 2005 Energy Plan.
Third, that the environmental costs of producing CBM in this area can be immense, because the by-product is polluted and saline water that can ruin the local environment (that’s the “great flood” in the headline) … and because the process depletes important underground aquifers.
And Fourth, that there is only one company with the technology and know-how to safely and efficiently deal with that waste water, by reinjecting it into aquifers.
And according to Schaefer, the company’s management is going beyond just offering their patented technology for reinjecting water into aquifers …
“You see, this company intends not only to generate a whopping revenue stream through the leasing of the tool to other drillers – but to utilize this exciting new technology itself. They have plans to acquire, explore and develop potentially rich CBM properties in the other half of the Powder River Basin, in Montana.”
So who’s the company? There are a few specific clues:
They’ve got a patented process and device.
Market cap of $96 million (it’s gone up a little since the email was written).
“just sealed a deal to install its device in 500 CBM wells owned by a major natural gas producer that does over $12 billion in annual revenue.”
Stock was trading around $1.50 last year (when Schaefer says he first recommended it).
So if you’re going to, in Schaefer’s words, “Get ten times your money within the next 24 months . . . even if gas prices plummet to $2 per Mcf,” which company do you need to buy?
The Stock Gumshoe, after a few minutes in the intelligence-enhancing hyperbaric chamber, can tell you that the company being teased here is …
Big Cat Energy (BCTE.OB)
The patented technology they own is called the Aquifer Recharge Injection Device (ARID), and it is actually a pretty cool idea — the “tainted” water doesn’t actually ever leave the ground and doesn’t need a new reinjection well, it’s reinjected into a shallower aquifer using the same well simultaneous to the production of the gas. At least, if I understand this properly that’s how it works. Pretty interesting.
And while they’re not currently at $3.50, they were at about the time this email began circulating — and as recently as Thursday of last week they did dip briefly back down to $3.77, but this one has been very volatile (range on Thursday was $3.77 to $4.45, which is a pretty wild swing without any particular news that I’m aware of … maybe it was a newsletter push that moved it, who knows). They were indeed at about $1.50 a share as recently as last November.
The big deal mentioned in the tease was in early February, when a company owned by Williams Companies (the “$12 billion in revenues” firm) had a successful test of the ARID device and triggered the deal for Big Cat to begin the permitting process for approximately 500 ARID wells in the Powder River Basin for Williams. That’s what brought the price up to roughly today’s level from the $2.50 range.
And that’s all I know — they do have a patent, but I don’t personally know if they really have the only effective device or technique in this area. They’re not profitable, but perhaps they will be in relatively short order if this ARID device really does take off — and at least they don’t appear, on a cursory glance, to be loaded with debt.
They apparently are making the ARID device available on a lease arrangement to control the devices and the technology, but I don’t have any idea how many they need to have in use to start breaking even, or if the production they’re planning on doing on their own is likely to start soon or be successful. All things you might want to try to understand before investing, in my opinion.
That’s as far as the Stock Gumshoe goes … I don’t own shares in this one, and I’m not sure I want to make the effort to fully understand this business, but at least I can tell you who the company is. If you think Schaefer’s “$3.50 CBM play” is the next home run, let the rest of us know why. Good luck. And just as a quick note, I’ve added this one to the spreadsheet with a buy at $3.50 on March 27th, which is the email date I saw … but Google Finance doesn’t provide data on this company, so it won’t automatically report the current price or performance.
Mike Schaefer has gotten plenty of criticism for being a stock promoter, by the way, check out this article at Barron’s.