What’s Tony Sagami’s “$1 Dynamo” of Australian Shale Gas?

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I was just mentioning Tony Sagami the other day, in a reference to his teaser pitch about some bird flu companies a year or so ago that turned out to be a lucrative idea, so it caught my attention when a bunch of readers asked about his latest ad spiel over the weekend.

Turns out, he’s got a new newsletter going now called Disruptors & Dominators – I have a hard time keeping track of the shifting deck chairs at Weiss Research, with the various letters disappearing and being reborn under different names every year or two (they’re not the only publisher like this, many of them cut loose new letters if they fail to bring in readers for a few months), but it appears that the letter of his that I wrote about most recently, The Asian Century, no longer exists … maybe this replaces it, sort of, in focusing on “disruptors” from around the world.

Here’s how his ad begins … you can see why folks started drooling when they read it:

“This ‘$1 Dynamo’ is Preparing to Tap 10 Bakken Oil Formations

“Here’s the one, tiny company — trading for $1.21 — about to crack open a gas jackpot worth upwards of $2 trillion … and why it could double your money by September, 2014 … and hand you gains of 536% in the next 12 months … and potentially soar as high as 3,548%!”

It’s a long ad (as are they all), and it’s mostly about how he went to Australia to research Linc Energy (LNC in Singapore, LNCGY or LNCGF on the pink sheets) because of their large potential in the Arckaringa Basin in South Australia, near Coober Pedy, but was steered instead to the “closer to reality” gas play that he’s teasing today. Here’s how he hints at the stock:

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“Little did I know how far off from the real story I was.

“Today, I’m going to reveal what I ‘accidentally’ discovered in the great outback.

“Something far more exciting, and immediately profitable, than any trumped-up speculative play … though hardly anyone I’ve come across is reporting it!

“Tucked away in one of the most inhospitable regions of the world … sits an investment opportunity so ripe for the taking, it’s a wonder the New York Times, Forbes, or The Wall Street Journal isn’t blowing it up….

“… shrewd investors who get in at the ground-floor could secure an easy windfall … all thanks to an almost completely unknown company I’ve nicknamed the “$1 Dynamo.”

“But don’t be fooled — because this tiny company, with a market cap of less than $2 billion, holds the key to doubling every dollar you invest by no later than my forecast of September, 2014.”

This kind of language paints a pretty and compelling picture but is — you need no reminder — not a guarantee, and not nearly as specific as one initially thinks. “Could secure an easy windfall” is a description you can apply, without even making the lawyers sweat too much, to pretty much any publicly traded stock in the world. Presumably there’s something behind this six-month catalyst Sagami is talking about, though, so what are the details?

“I sought out Professor Peter Hartley … who many would consider the #1 natural resource expert in the world.

“And, the moment I opened my mouth, Professor Hartley delivered a swift blow.

“Just as I started to explain my interests in the Arckaringa Basin, and Linc Energy, Professor Hartley shook his head and told me to forget all of that.

“Instead, he told me about a different company — one whose share price is sitting at a mere $1.21, right now. By literally going against what everyone said, this firm successfully unlocked a completely different deposit in Australia … a deposit worth as much as $2 trillion … and they’re the only ones tackling it right now.”

Perhaps a few more detailed tidbits that we could feed to the Mighty, Mighty Thinkolator?

“… for over 50 years there has been one reliable basin in Australia — the Cooper Basin.

“In its 50-year history, this basin generated a mere 6 trillion cubic feet of natural gas.

“And now, thanks to fracking technology, this company is about to rewrite history … and make investors who jump on it with both hands rich beyond their dreams of avarice….

“Recently, this firm reviewed its potential resources — using fracking technology — to tap this single gas deposit in the Cooper Basin….

“Their findings show an estimated 600 trillion cubic feet of gas … worth approximately $2 trillion … more than the entire GDP of Australia itself!

“Of that, anywhere from 10-20% is ready to be extracted, right now.

“That’s 60-120 trillion cubic feet of natural gas … valued at anywhere from $201 billion to $502 billion.

“And this company currently only has a market cap of less than $2 billion!”

And the fact that this company is drilling in the heart of an established energy production area is a big help when it comes to ready infrastructure, we’re told:

“Because of their location, they have easier access to the network of pipelines out of Moomba.

“While it may seem trivial, lack of pipelines for efficient oil and gas distribution caused a logjam in the United States that caused the spot price of crude to nosedive.”

And Sagami says that they have the potential to get investments from China, which is hungry for Australian LNG exports and has invested in other big Aussie gas projects, but have already gotten a massive commitment from Chevron:

“Chevron is expected to pay this tiny firm a record $349 million by September 2014, to cement its claim in their discovery.”

So who is it?

The Thinkolator tells us that Sagami is teasing Beach Energy (BPT in Australia, BEPTF on the pink sheets), which is a decent-sized Aussie energy company that does indeed have one of the better drilling portfolios in the Cooper Basin (according to what I read, I don’t want to imply that I’m any kind of an expert on this) … and it was at about $1.21 a little while ago, though the shares are higher now (They closed at A$1.68 in Australia, pink sheets stocks almost never trade in exact match with Aussie stocks because there’s no trading overlap, but at the current exchange rate that’s about US$1.50).

I don’t know much about this one, but it is a decent-sized company, they do have that deal with Chevron for a portion of their Cooper Basin shale gas project and everyone sounds pretty optimistic that this project will continue advancing, and they’re reasonably priced. It’s about a $2 billion company, and according to Bloomberg it’s trading at a single-digit PE and with a dividend of about 2.5%. So that gives me an initial reaction that it’s probably worth a closer look, and I didn’t see anything of concern in their financial highlights (I guess that’s to be expected, the bad stuff wouldn’t make the “highlight” page) but since I’m not particularly interested in buying another energy stock at this moment for my portfolio I’m not climbing all over it.

They put together a roadshow presentation just today, so they’re apparently ramping up their efforts to appeal to investors — which often means a big project in the offing at some point, or just a grouchiness among their executives that the stock is too cheap.

And beyond that, well, you’re on your own. It’s a significantly easier name to research than Linc Energy, and it seems to have a much less controversial history and a better current financial position — and they could certainly produce gas from their basin before the Arckaringa stuff heats up, though it’s early days for fracking there, the reserves and flow rates don’t appear to be understood at all yet, and I don’t know if fracking will end up raising the ire of Australians. There is likely to eventually be, if there isn’t already, a debate in that country about the practice of hydraulic fracturing, given the nervousness many Aussies must feel about water resources. I have no idea how prospective the Cooper Basin stuff is, but there are some encouraging articles here and here.

So… go forth, researchify to your heart’s content, and come on back and let us know what you think — boom or bust in the future for Beach Energy? Unburden yourself of those thoughts with the friendly little comment box below.

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43 Responses to What’s Tony Sagami’s “$1 Dynamo” of Australian Shale Gas?


  1. This company is a buy,we have been following it for the past two years and find that the companies exploration is expanding rapidly.Their finances are strong and they pay a dividend.Tony Sagami has stumbled onto a little gem.

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      • Hi all, I’m pretty ignorant in the foreign stock trading area, can someone tell me why a company would have both an ADR and a pink sheet to trade in? And is one generally less / more risky than the other. The only thing I *think* I know is that ADRs are more regulated than the pink sheets. Is that right or wrong?

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        • Kerry; I will give it a try ADR is American Depository Receipt. A n American financial co. sets up a unit in a foreign country to hold that countries stock in trust for a buyer. In this case it is priced in US $. or about $1.50 X 20 = $30. Some like the idea they can go visit their shares in Canada for example. Actual buying & selling of shares takes place in country of origin & if this is more or less safe depends ‘I think’ on if their currency retains value as well as US$.

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  2. This looks like a potential 10 bagger to me. The big oil connection is interesting, so I may take a flyer with the pink sheet shares; initially between 500 and 1000 shares if I like what my
    research uncovers.

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  3. The only down under play I’ve found worth the price of admission is one island to the right…TAO.
    Canadian owned Tag Oil is the most promising New Zealand’s hottest O&G.
    Zero debt, 100% ownership in a shale formation that dwarfs the Bakken, 10% share repurchase this year, a new refinery and privately owned infrastructure, 350% revenue growth over last year and enough cash to fund all their future exploration.
    Catman
    Whats not to love?

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    • Chester – I don’t know where you are getting those stats on TAOIF ….. I certainly can’t confirm them on my broker site (E*Trade) and their share price has consistently gone the same direction since Aug 2012 – DOWN.
      Mike

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      • About TAOIF, I read about it here last year and bought 600 sh at 4.63; but finally sold it last months at 2.669 for a loss of over $1100 because it had been going down and so I gave up.

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  4. Beach looks promising. Big deals with Chevron. As the article says, they are making major moves in that region and coming up with good results. Bought in at 1.30 and recently the stock jumped to 1.50 when it reported its finanicals for 2013. As far as Linc goes, it was the big story about a year ago.
    http://www.proactiveinvestors.com.au/companies/news/38622/linc-energy-affirms-arckaringa-basin-shale-oil-prospectivity–38622.html
    I’ve researched it some. Seems to be “in talks” with big Oil and appears to be selling off its Gassification business in order to focus on the coober pedy find. It delisted from the ASX and moved to Singapore. Might be good to keep track of it. Could be some big announcements soon.

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  5. Why do stocks trade as both ADRs and ordinary shares? The ordinary shares can be traded if a brokerage has an arrangement with in this case an Australian counterparty to trade on its behalf when Oz is open. The price will tend to have a big spread (bid to ask) because the brokerage is taking a risk: Australia sleeps when we trade and visa versa.
    Some shlocky brokers set up to trade F shares by buying a bunch of local shares and then selling them hard to US clients with a markup for the house. I have run into these games even by brokers that are not known as Wolves of Wall Street. And if a newsletter writer touts the stock the broker is pushing, the writer is covered by the first amendment of the constitution even if the feds come after the brokerage….
    So an ordinary share purchase–marked by the fact that the last letter of the ticker symbol is an F, for foreign–can be costly particularly when the stock is priced in pennies. Because you may not know the whole story. But always because of the bid-ask spread.
    Cometh the American Depositary Receipt. This is a facility set up by a big bank to offer US investors a more normal stock than an F: it is usually made up of enough foreign penny shares to comprise a normal cUS$30 per share price. It can have a lower spread in proportiion, just because the price is higher. The bank, called the depositary, collects a fee, increasingly paid via your brokerage account annually to the bank. An ADR doesn’t end with an F. The lowest level ones end with a Y.
    Some ADRs are used to raise money on the US market (amounting to the issue of new shares.) Then our SEC regulates the process and this time the fees to the depositary and the lawyers have to be paid by the issuing company back in wherever (in this case Australia). There are some short-cuts but this is a full-court examination of the books.
    Higher still are ADRs which get listed in the US. There is a bit of an easy out at the bottom of the pile for shares which get qualified for a superior pink sheet listing. Then there is Nasdaq and then–you’ve arrived!–the NYSE. The higher the listing level the more it costs the company, so small stocks investing heavily in resource exploration are not going to buy these services.
    There are about 2,500 ADRs quoted with some regularity in US markets. If an ADR falls into the shadows it may mean that the logic of investing in the company has disappeared. For example, there are 88 ADRs which were issued in the last dozen years for Ukrainian companies. Guess what? they are not trading. There are also plenty of Australian stocks that came a cropper because of poor results, fraud, bankruptcy etc. Just because they speak English doesn’t mean they are using comparable auditing standards to ours, or run by honest Crocodile Dundees. Their ticker symbols do not all end in an F, by the way. Some of them went through the whole regulatory process.

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  6. ADR’s made sense to me when the US dollar was losing value relative to the investments home county’s currency, however the high fees and the strengthening dollar offsets any potential advantage that i can see in dealing with the local markets….then there are the liquidity issues. I dont see risk being any issue one way or the other, it remains extreamly high and not for the faint of heart, much less so for those with averssions to it.
    Catman

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  7. Thanks for the info on ADRs. I’m an investor in the UK and wonder if anyone has experiences they could share about investing the other way- buying US stocks from overseas? I have an international trading account and have bought shares in a few big companies (such as Apple, Disney) but I only have modest investments and the transaction and exchange fees make it quite unprofitable for me. Would I be better off looking for pink sheets or something? I tend to buy and hold so poor liquidity isn’t a concern but if I sold one day I’d like to make a decent profit from them. Thanks

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    • Robert – don’t even think of buying US stocks from the UK except through a proper broker; the best I have found is Interactive Brokers. I have yet to have a stock commission exceed $1 (the most I have traded is 500 shares), and option commissions range from a “massive” $1.60 to NEGATIVE 60¢ (I think that’s a sop to providing liquidity). Think Or Swim used to be quite good, until they were bought out by TD Ameritrade: in the UK you are forced to use TD Waterhouse, whose charges are about 10 to 15 times as high, unless you are registered overseas. Or you could use one of the banks or Hargreaves Lansdown who will charge £25-£50 per trade minimum, with indefinite fills.

      Poor liquidity IS something you should care about. The UK seems to take the Ask as the minimum amount to pay, whereas I would always expect to trade within the spread, and would usually put an order in at the mid-price, sometimes even the Bid. Forget that in thin markets. Do you want your money to go to the broker or your pocket?

      I would avoid Pink Sheet stocks other than for punts. Incidentally, it is cheaper to hold UK stock in ADRs in the US than as UK stock in LSE, and much cheaper to trade, in spite of the relative thinness of the markets, eg VOD or LSE:PRU = PUK or LSE:BNC = SAN, Unfortunately, you cannot hold ISAs in IB accounts.

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  8. Hi Travis
    have you had a chance to find this one?
    R.I.P., INTERNET: 1 Explosive InterWorld Stock to Profit HUGE When the Web Goes Dark

    thanks a lot and regards
    Marianne

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  9. Travis, the service “The Asian Century” just changed focus from and Asian focus to Blue Chip Options. Also, Disruptors & Dominators is more in line with Tony’s old service Asia Stock Alert. The idea for both name changes seem to be to move away from “Asia only” research into something more broad.

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  10. I just watched Tony Sagami’s report on the “$1 Dynamo” investment. I am interested, but weary of this type of investment, because there are all types of scams out there and I have been scammed before. Has anyone purchased his one-year or two-year risk free trial?

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