“Africa’s Hidden $55 Billion Energy Fortune” Crisis Trader

I haven’t looked at an investment teaser from Christian DeHaemer’s Crisis Trader in a while, but he usually has some interesting ones — he wrote to us late last year about lifting the blockade in the gunboat basin, and for some of his other newsletters he spun tales of a secret nickel project in the Philippines, and about the tiny company that got in under the gunfire to buy the rights to Somalia’s oil.

If you’re guessing that these kinds of tiny exploration companies in energy and minerals can be very hit-or-miss … you’re right. DeHaemer has actually had one of the worst records for teaser picks in the history of the Stock Gumshoe — some of them have had quick runs up in conjunction with the newsletter ad campaign, but almost all of them then fell rather quickly. None have yet to reach his stated potential of several hundred percent gains … though to be fair, some of those “promises” were for a year or two, and I don’t think any of his picks that I’ve tracked is quite a year old yet.

Regardless — I like a good story almost as much as I like a good stock idea, so let’s see if this is either. Sometimes these little guys work out pretty well and spin a good yarn (like Centamin Egypt, subject of the “Gold of the Pharaohs” teaser from a different newsletter, or the fight against China’s rare earth minerals monopoly that brought us Lynas. I own both of those stocks, just FYI).

So what are we dealing with here?

Well, it’s a teaser for a Canadian wildcatter that has rights to a large natural gas field in Algeria.

But that’s not exciting enough, so we have to bring Russia in.

Apparently, a former Russian energy official has been part of an effort to wrest control of the company from current management … and there’s a reason for this hostility.

Russia is the primary supplier of natural gas to Europe, and, through Gazprom, has been using that lifeline to put pressure on some former Russian republics (Belarus and Ukraine) and to generally put the fear of Stalin into the hearts of Western European leaders. The UK’s gas reserves are declining, and LNG remains a relatively small business for imports from Qatar and elsewhere, so when Putin grinds his heel into the pipelines and slows delivery, Northern Europe suddenly starts to feel a little chillier, and Italian gas stoves sputter a bit.

So Europe is desperate to get access to other sources of natural gas. One of those promising sources is North Africa, including Algeria, which is just a quick hop across the Mediterranean Ocean from gas-hungry markets in France, Spain and elsewhere.

And the story would be incomplete without Algeria’s precarious history — Algeria has been trying to speed up its recovery from their long civil war, and one way to do that is with more gas extraction, leading to more money, which always helps keep the people happy.

Algeria has also had on-again, off-again deals with Gazprom and Russia, including some kind of complex deal for MiG fighter planes that had something to do with debt forgiveness and possible future gas deals.

Head spinning yet?

The great fear from Europe is that Algeria will partner with Russia in some kind of natural gas cartel a la OPEC.

And the great fear from Russia is that Algeria will supplant it as the major provider of gas to Europe, and thus take away their political strength and their market dominance.

So … what does this mean for our little company?

Well, I don’t know … but I can tell you that DeHaemer thinks it means there will be a bidding war. Gazprom on one side, European energy companies on the other.

(of course, the story is not necessarily that clear cut — Russian and European companies are both already active in other fields in Algeria, and we’re talking about just one of their oil fields here … but still, it’s worth a look).

So what are the clues we get about this little company?

The price is around $3.

Market cap is about $750 million (Dehaemer thinks it should go at least to $2 billion)

Let’s put the possible returns into perspective here — DeHaemer thinks the shares could double by August 2008, but he also says that you could pocket an “extra” $53,330 if you get in by May 31. Apparently that’s off of an initial investment of $5,00 because he says this “rare opportunity now could realistically turn a modest $5,000 investment into $53,330 in less than a year” (by February 23, 2009, specifically). He thinks the shares could go up by 37 times over the long run, with a top possible valuation of $71 and a price target of $35.

Here’s DeHaemer’s whole spiel on the possible valuation, for posterity:

“If the $3 stock I’ve been telling you about controls $16.5 billion worth of Algerian natural gas — and remember: this does not include recovering six times its production costs– it would make sense to pay $2 billion… or one-eighth the value.

“But here’s the thing: This tiny $3 company already has 4.2 trillion cubic feet of natural gas and 800 million barrels of oil in place.

“And with oil trading at roughly $110 per barrel and natural gas at $9.80 per thousand cubic feet, this company’s assets are already valued at $129 billion.

“So let’s combine this company’s current assets with the total value of its Algerian gas field and the number reaches more than $145 billion.

“If one-eighth the value is our conservative takeover price estimate, then it would make sense for a company to pay $18 billion to acquire the tiny Canadian wildcatter.

“After all, Chevron spent $18 billion to purchase Unocal. And Conoco spent $36 billion to acquire Burlington Resources.

“$18 billion is an absolute steal…

“Now at $3 per share, this small company only has a market cap of $762 million. An $18 billion takeover would put this company’s shares at roughly $71.”

Sorry, I should have warned you to have a drool cup at hand before sharing that info. $3 to $71 sounds pretty good, eh?

Maybe a bit unbelievable, sure … but we can dream, can’t we?

The point man for this Russian effort to possibly take over the company is Yuri Shafranik, we’re told, who also is on the board of Waterford Finance, which owns 9.4% of the company.

So all that data goes tumbling into the mighty Gumshoe Thinkolator, and I can reveal to you that this company is …

First Calgary Petroleum (FCP in Toronto, FPL in London, FCGCF on the pink sheets)

They released earnings a couple weeks ago, you can read that press release here for an update of operations if you’d like a cool splash of reality to bring down your heart rate. They’re trying to put together financing right now, with the most likely lenders, not surprisingly, being a few European banks. They claim they’ll not have any trouble getting funding to move forward with their major Algerian project. The big news of late has been the ouster of the CEO as part of the agreement with our Russian friend — I can’t read enough between the lines to tell you whether that means the company will be taken over, or whether this compromise just gives them a better foundation of support to move forward. Certainly, the stock market liked hearing that the CEO was out.

Shares are still around $3 — a little below, C$2.89 today. This is well off their highs of around $6 last summer, but a bit of a bounce off their pre-CEO-departure lows of a bit over $2.

And from there, you’re on your own, go forth and researchify — let us know if you think this is really a good investment, or speculation.

I’d always hesitate to bet on takeover targets unless the company itself seems promising without a buyout, and I can see that there is some potential with this one if natural gas prices remain high … but I’d stay well short of recommending it without reviewing their data much more carefully.

Remember, even though the tale spun is one of urgent moves, international intrigue, huge price spikes, and potential 3,000% returns, that these kinds of promises don’t very often work out. In fact, from the similar stories I’ve seen time and time again, they’ve never worked out, at least so far. Successes happen on this scale on occasion, but so far I’ve not seen one that was telegraphed by a teaser email first.

This might be the one in a million, I suppose, but I have no idea … and if it’s not really going to go up a thousand percent before next week, there’s plenty of time for you to research it, get comfortable with their prospects, and make a sober decision about whether or not to buy. I can’t say that there’s always time to wait and be patient … but there’s almost always time.

Full disclosure: as I noted above, I do own shares of Lynas and Centamin Egypt. I don’t own shares of any other company mentioned here, and will not trade in any company mentioned for at least three days.

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28 Comments on "“Africa’s Hidden $55 Billion Energy Fortune” Crisis Trader"

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G IMBURG
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G IMBURG
May 21, 2008 11:38 pm
I have watched and played the energy markets on and off for about 5 years,and I cant recall ever seeing this market act as it is now trading. My guess is that the demand world wide is increasing as the need for nat gas increases with its low co2 emmision. I read the come on and I admit, it caught my eye. The underlying strength of the need world wide takes some of the speculation out of FCP. I dont trust the time frames of gain without actual production and if it becomes a takeover the price might double, but… Read more »
themayor
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themayor
May 22, 2008 9:45 am

Gumshoe…..I just received a HOT teaser from Daily Wealth…Matt Batiali about a $4 tar sands stock that holds 707,000 acres of prime sands property…..can you look at this and how do I forward the teaser to you…..Thanks!

Gravity Switch
Admin
11
May 22, 2008 9:50 am

Hi Mayor — sounds like it’s still the same one they’ve been touting for a few weeks now, BQI. My original writeup is here:
http://www.stockgumshoe.com/2008/03/badiali-the-oil-sands-story-60-minutes-missed.html
I’ve also noted the company a couple other times, you can use the search box to find those articles.

And since I’m noting the company here I should disclose that I continue to hold call options on BQI.

themayor
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themayor
May 22, 2008 9:56 am

Thank You , Gumshoe………YOU’RE THE BEST !!!!!

Ralph
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Ralph
May 22, 2008 11:04 am

Gumshoe, hope its alright to ask here. Michael Williams, MARKET MOVERS had an article on (BSHF)up to $6.50. System being used in Dubai. The system is supposed to revoluntionize the sewage treatment market. Its just under $3 now. Have you heard anything about it and whats your opinion on it?

SageNot
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SageNot
May 22, 2008 11:23 am

Gumshoe (Travis), are you enrolled in the CNBC million $$ contest? If not, why not, my money w/b on you to be in the TOP 1%?

Gravity Switch
Admin
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May 22, 2008 11:39 am
Ralph — no, never heard of it. I thought the sewage game was pretty well understood and didn’t need revolutionizing, so clearly I better read up on that! And SageNot, no, I haven’t bothered to join the contest. I appreciate the vote of confidence, but I’m afraid I have no idea how to predict which stocks will be winners in the next week (other than just gambling on earnings surprises or takeovers, which seems to be the only way to win that short-term contest). I’ll stick with trying to be in the green over the next year … and better… Read more »
Bruno in TX
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Bruno in TX
May 22, 2008 1:14 pm

FCP had a nice chart up to Jan 05. Got as high as 24.90 after a steady rise. It has been downhill since then. Right now it looks like a hanging chad. I don’t like the chart. I’ll have to dig into the story, but offhand it doesn’t look too good.

Richard E. Lowman
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Richard E. Lowman
May 22, 2008 1:16 pm

(BSHF) is supposed to eliminate 97% of domestic sludge according to Michael Williams and also got a teaser from Jarret Wollstein “Intelligent Investor Report” who was paid $ 10,00.00 for his advertisement. Supposed to revolutionize sewage treatment market if you believe what you read. Any other comments from gumshore readers is welcome.
Richard

Mort
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Mort
May 22, 2008 3:09 pm
BSHF started in the Netherlands several years ago and moved its headquarters to Califirnia a few months ago. It has developed a very interesting and innovative — and probably very important sustainable system involving a lot more than removing sludge! Here is what they say — “BioShaft is an innovative wastewater treatment technology based on Bio-Filtration utilizing sludge carriers. These plants are made using the Hans BioShaft Turbine that is at the heart of the wastewater technology. It was developed in the Netherlands in 1994 and was improved upon by Dr. Hans Badreddine and implemented as Hans BioShaft®. It is… Read more »
john
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May 22, 2008 4:17 pm

DOES ANY ONE KNOW ABOUT THE 4$ OIL STOCK IN CANADA THAT STANSBERRY IS TOUTING? TAR SAND OIL?

barney palmer
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barney palmer
May 22, 2008 6:35 pm

Hoe do I donate and give me a clue about your expectations of the ammount. I think you are the best. BP

DT
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DT
May 22, 2008 8:31 pm

this one teases several biotech stocks that will make ME a millionaire by June. Any idea?

http://oxfonline.com/Access/acc0408.html?pub=ACC&code=EACCJ516&o=1488133&u=17819977&l=1581943

jon
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jon
May 23, 2008 8:06 am

I lost £50000 on this stock, that was a lesson in trading I won’t forget…this has potential, but its Algeria, (nightmare), Russians just arrived, (could be good or bad), board have been absolutely useless over the last few years…massive dilution very likely to get the Oil &Gas to market…however it should one day be a winner, personally why not stick to politically safe Canada, loads of Oil, Shale plays there at the moment, bags of money to be made in the Quebec lowland gas discoveries at the moment for instance rather risk money here

AG
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AG
May 23, 2008 9:01 am

DT – I can tell you that the second company your teaser discusses is Cytori Therapeutics (CYTX). They’re the company working on adipose derived stem-cell treatments and currently have clinical trials ongoing in Japan for breast reconstruction (I do own a small stake). I do not, however, know what the first company – the primary concern of your teaser – is.

gmcg
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gmcg
May 23, 2008 3:46 pm

Mort and John re BSHF — my dd indicates the BSHF company in California was a TV company (in Nevada) that apparently failed. Do you have better information as to the background of the management and financials of BSHF? BioShaft concept looks like a great idea but I do wonder about the people who are behind it. Thanks for your input.

Dividends4Life
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0
May 23, 2008 5:14 pm

Wow, that was some some journey to get to the $3 to $71 punch line! I’ll keep this one in the dream category. 🙂

Best Wishes,
D4L

KatCFP
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KatCFP
May 24, 2008 4:33 am

Does anyone have any info on CEDU China Educational?
It’s a Richard Hsu stock. Gumshoe?
Kat

ponce
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ponce
May 25, 2008 2:21 am
I have to be cautious with Dehaemer because he is rather overly optimistic in his recommendations. If I remember correctly he recommended YUKOS OIL. I bought some at $8 but it tanked the following day. I got out before it became worthless after Putin orchestrated the breakup of the company. Dehaemer was right though in recommending Eurasian which later merged with Uranium One as UUU.TO. It had a nice run up until the uranium sector got a 50% haircut. I am still bullish on Uranium because of its longterm prospect. The demand is more than current productions. I still own… Read more »
ponce
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ponce
May 28, 2008 6:14 pm

Travis, your statement I pasted below really gives me a kick. It is funny. I still laugh when I remember it. It was late night and I was drowsy while reading your report but that sure woke me up. Keep up the humor. Thanks.

“Sorry, I should have warned you to have a drool cup at hand before sharing that info. $3 to $71 sounds pretty good, eh?”

rockeytop6365
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May 30, 2008 11:35 pm

We need to remember that liquifying natural gas is a very expensive and complex process! That will cost more than developing and producing the gas.

Warren
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Warren
June 3, 2008 10:47 am

#11 John – That’s Oilsands Quest Ticker BQI. Plan to do a lot of digging and due diligence as the company is years away from actually processing the oil sands. Disclosure: I own shares purchased at $3.60.

bob beer
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bob beer
September 18, 2008 10:01 pm

FCP just got offer for $3.60!!!!! … need 66% Shareholders vote. Hopefully “NO DEAL”

Nowhere near $71. What were they thinking??

Aaron H
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Aaron H
January 20, 2009 9:32 pm

Dear Gumshoe,

I am confused about this article and how it has been reported in your 2008 tracking spread sheet. Your spreadsheet is reporting it at a 100% loss where as the stock actually jumped quite significantly before Eni’s purchase. Are you going to modify your stock tracker to correct for this bug? Otherwise, it makes certain stock advisors performance records look very different then they really are. Thanks for your time.

Sincerely,
Aaron H

Al
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Al
January 31, 2009 10:17 am

Travis,I jumped into FCP in the last Qrt, @ 2.20, It sold to ENI @ 3.60×10,000 shares not to bad, but very lucky. When I was in Italy I saw that Eni was thinking about the purchase. Thanks, you are doing fine.

Robert Burch
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Robert Burch
September 25, 2008 4:14 pm

Hi:
I’m responding to your FCP Stock statement. I thought this stock was supposed to go above $12.00
or more. According to the Crisis Trader Newsletter, Stock FCP is supposed to go up dramatically, what has happened, any ideas. It’s at $3.44 today, 9-25-08. Why is it so cheap. Curious to say the least.

Sincerely
Robert Burch

Gravity Switch
Admin
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September 25, 2008 4:20 pm

Apparently FCP wasn’t listening to Christian DeHaemer — they decided to take the money from ENI and run. Unless the deal falls apart or another bidder emerges, I would guess this is just a merger arbitrage now.

Gravity Switch
Admin
11
January 31, 2009 3:02 pm

Hi Aaron — sorry, I often don’t get around to updating the spreadsheet for mergers and splits unless someone calls it to my attention, so thanks. It’s fixed now.

And on a sad note — the 30% gain or so from FCP puts it in the top ten performers for 2008. Ooof.

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