This one comes in from Brian Hicks, who is selling what I think is a new newsletter service called the $20 Trillion Report …

… and this one has a nice little twist — it’s built around a book that Brian Hicks and Chris Nelder just wrote called Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century.

So maybe if they play their cards right, you’ll sign up for their newsletter and buy their book — nice work if you can get it!

But, as they say, “this company’s stock isn’t waiting for the release of the book.”

It’s on a bull run that they think will last for years — and they’ll share it with you now for a meager subscription fee. And this one is interesting, they say the regular price is $495 a year, but for now they’ll let you subscribe for $79. With auto renew. Does it renew for $495 or $79, I wonder? I do have a guess…

So, this stock is supposed to be their favorite oil sands play — I think we all know what oil sands are, right? This refers, usually, to Canadian oil sands, which are huge stores of something akin to oil trapped in massive sand deposits.

As you might expect, it’s a lot more expensive to get oil out of oil sands than it is to just merrily pump it up out of the ground. But then again, we seem to be running low on places where it bubbles nicely out of the ground without much effort … and most of those places seem to be full of people who don’t like us very much, or are under five miles of water. And with oil at these ridiculously high prices — and remember, a year ago we thought $60 a barrel was ridiculously high — oil sands makes a lot of sense.

They often refer to Alberta as the Saudi Arabia of the oil sands, and it’s true that this is the major reserve, and depending on how you count there is more oil under west-central Canada than there is in the Saudi desert. It’s just that it costs at least $35-40 a barrel to get it out and refined and send it to market, and a lot of it isn’t worth extracting at all with current technologies (some of it is in fairly thin seams of just a few meters, not worth much work to extract). So oil sands have been a big hit with investors. I even enjoyed some returns from Suncor, one of the few big cap oil sands pioneers, and the other firms that have been in the oil sands for years saw some real vindication of all their expensive, capital-intensive extraction work in the last couple years.

Man, I do blather one sometimes. On to the teaser.

There are essentially two ways to extract oil sands — strip mine the actual sand and truck it somewhere for processing, or somehow generate heat inside the ground to loosen the bitumen from the sand and pump this “syncrude” out and get it to a refiner who can turn it into something like crude oil, then into gasoline or what have you. The big operations have for the most part been miners, and that’s what you’re most likely to have seen on CNBC or elsewhere — those massive Caterpillar trucks that are larger than my house, hauling tar sands to the processing plant.

But this stock is one that’s involved with a different kind of extraction — and a patented technology, apparently. The big one that I’ve heard about quite a bit this year is Steam Assisted Gravity Drainage (SAGD), which involved injecting steam into a well, forcing the bitumen to melt into a lower well, and pumping it out of that second well. Generally you use natural gas to generate the steam, though they occasionally talk about building a nuclear power plant in the area instead. That’s why Connacher Oil & Gas, for example, bought a natural gas company — to get affordable access to an energy source for their SAGD extraction.

This teased company here, however, uses something else. They don’t mention the name, but essentially say that it’s similar to SAGD, but involved using the actual in situ bitumen to generate heat — essentially, lighting the tar sands on fire to generate heat to melt some of the other nearby tar sands. And pumping the liquefying tar out. And hoping, I guess, that the fire doesn’t burn it all up.

And the teaser says that this company will not only be making lots of money by generating oil using this technique on their own land, but also by licensing this patented technology to other companies for, essentially, free money.

In the words of the teaser, “They use a new combustion process that combines a vertical air injection well with a horizontal production well. A combustion front is created where part of the oil in the reservoir is burned, generating heat that reduces the viscosity of the surrounding oil and allowing it to flow to the horizontal production well. The next generation oil sands production technology recovers an estimated 80 percent of the original oil in place while partially upgrading the crude oil on site.”

That “partially upgrading” means that, as a bonus, the bitumen gets slightly upgraded by the heat, so it becomes a little bit easier to process.

What else to we learn about these guys?

The stock is up 194% in 2007.

“sales are up 74% year-over-year!”

They have “multiple barrels of oil per share” — “potentially … almost $1,000 worth of oil for every share.”

Apparently this stock is featured in Chapter 7 of Profit from the Peak, their aforementioned forthcoming book. That doesn’t help us all that much, since the book isn’t available for a couple months.

He takes credit for recommending fellow oil sands plays Connacher Oil & Gas, which I mentioned above and which was a favorite of quite a few newsletters for a while, and UTS Energy, both of which have done very well.

Market cap is $4 billion.

“I believe it could eventually become one of the biggest players in the Canadian oil sands. And we’re getting in at the right time.”

He even sweetens the deal a litte: “As you’ll see, this play is super safe … It’s like buying Suncor back in 2001 when it was trading for $9 a share.”

What other clues do we get?

$100 million in annual sales.

The new, patented process they own was discovered in 1993.

So phew, a lot of clues, eh? Unfortunately, there are also quite a few oil sands companies out there these days … but have no fear, the Gumshoe’s trusty Thinkolator 4000 was able to chew up all these clues and spit out our answer:

Petrobank (PBG in Toronto, PBEGF on the pink sheets)

The market cap is indeed just shy of $4 billion (Canadian) — about 3.8 billion today. Shares are right around $50 and the PE is pretty high (about 84) off of the trailing earnings of .59 cents … but revenue and earnings have certainly been growing pretty quickly of late.

The 74% growth that’s teased is for the first 9 months of 2007 versus the same period of 2006.

And they do indeed own a patented extraction technique … and they “expect a pipeline of licensing opportunities”, according to their last quarterly report.

The company has several subsidiaries — Archon Technologies for the technological advancement and patent and licensing businesses, another subsidiary that they have partially ipo’d called Petrominerales, which does light and heavy oil projects in Colombia. And they also have some light oil production and leases in the Bakken formation.

Their current oil sands project, where the viability of their technology is really being tested, is the Whitesands site. The technology is called Toe to Heel Air Injection (with the cute acronym of THAI) … and it really was discovered in 1993. They have some pretty informative materials on their website about the technology and their demonstration project if you want to check it out (petrobank.com, naturally).

You can come up with any “barrels per share” assessment you want to, probably, depending on what level of reserves you count (and what level of dilution you take into account). The way I read it, they claim 2.6 billion barrels of reserves and have about 90 million shares, fully diluted. I don’t know how much it’s going to cost for them to get those reserves out of the ground, and of course it has a tendency to gets more expensive with each barrel.

The company actually looks fairly interesting to me, and they do have some potential with a large amount of oil sands reserves, and perhaps their road will be a bit smoother than the pure oil sands players since they also have other operations to bring in steady revenues.

What else should we think about when investing in oil sands generally?

They’re going to be fighting for qualified workers in Alberta.

They’re going to have to deal with potentially significant changes in provincial and national tax rates for oil extraction — Alberta just goosed everyone with higher taxes, and the trusts have hit problems with the national government, so in an area like this that’s always something to check on.

Kyoto, believe it or not, might be an issue — their extraction technique is claimed to be 50% more efficient in terms of greenhouse gas emissions than SAGD or conventional mining, but it still uses a lot of energy and probably has a fairly nasty emissions profile, so it might be worth keeping in the back of your mind.

I find oil sands to be one of those investments that is a constant tease for me — I keep getting tempted, then finding myself resisting an investment. The stakes seem fairly high to me, with a reliance on high oil prices, massive cost escalation at most oil sands projects thanks to competition for resources in Alberta, and the fear that these are probably the most expensive barrels of oil that the world is currently producing — meaning that you’re essentially working at the margin, where there isn’t as much room to maneuver. And for this company, we can add on the fact that the technology is very promising but not yet really operating at scale and generating profits.

That’s not to say that there’s anything wrong with oil sands or Petrobank — the tempting part is that this is a way to continue our oil-based lifestyle for many more years than would otherwise be possible, and the riches flow to our closest friend and neighbor in the frozen North, and the country that is already our largest supplier, so we get to say that we’re not sending more cash to Riyadh or Caracas.

So … if you like the idea of investing in oil sands, and you believe that this new extraction technology is the promise of the future … or if you’re a little skeptical and just want to do some of your own research and dig a little deeper, this is one place to start. Let us know what you think, and happy investing!

The author will always disclose any direct long or short equity, debt or option position in any stocks written about as of the day of publication, and will not trade in any stocks mentioned for three days (72 hours) after publication. Full disclaimer is at the bottom of the page.

More Gumshoe goodness: Complimentary Industry Resources

Stock Gumshoe has joined forces with TradePub.com to offer you a new, exciting, and entirely free professional resource. Visit http://stockgumshoe.tradepub.com today to browse our selection of complimentary Industry magazines, white papers, webinars, podcasts, and more across 34 industry sectors. No credit cards, coupons, or promo codes required. Try it today!

20 Trillion Report, Brian Hicks