What’s Byron King’s $27 Trillion Israeli Oil Stock?

I like to mix things up a bit, cover different newsletter “gurus” and their teaser picks and try to put a good variety of folks under the Gumshoe microscope — but Byron King’s latest ad has caused so many questions to come pouring through the floodgates here at Gumshoe HQ that I feel like I have to cover it for you today … even though I wrote about some different Byron King teaser picks for the Irregulars in the last Friday File.

So what’s the latest pick? The ad I’m seeing over and over now is for a huge Israeli oil find — and no, it’s not Zion Oil and Gas (ZN), which is perhaps the most well-known little Israeli oil company (in part because of the story they pitch, about using the Bible to direct their search — they haven’t found oil), or the companies behind Israel’s now-well-known giant offshore gas field in the Mediterranean (that’s mostly Noble and Delek, who share the Leviathan field). So who is it?

Here’s what the intro to the ad says:

“In this exclusive presentation, Byron King releases exclusive information regarding a mammoth $27 trillion oil discovery has been found in a huge Israeli ‘Oil Vault’. It could be the second largest ‘Oil Vault’ in the world…

“And ONE tiny, little-known Canadian company recently won the rights to a sizeable piece of Israel’s massive oil find….

“The Beginning of the End for Money-Grubbing OPEC…

“Israel discovers what could be the 2ND LARGEST ‘Oil Basin’ in the world… officially giving OPEC the ‘middle finger.'”

And …

“According to the World Energy Council, Israel’s massive oil discovery could ultimately yield as many as 250 billion barrels of oil … worth over $27 trillion.”

There’s even a surprising quote from the Wall Street Journal (surprising, at least, for those of us who are accustomed to thinking of Israel as among the least-blessed countries in terms of natural resources):

“… this could turn Israel into one of the world’s leading oil producers.”

Man, if we think the fight over borders and security between Israel and its neighbors is bad now … just wait and see how bad it gets if it turns out the land is actually worth something.

He quotes Dr. Vinegar, who used to be at Royal Dutch Shell and is now with Israel Energy Initiatives, as saying that this might give Israel oil reserves that are second only to Saudi Arabia — and far larger than the remaining reserves in the Saudi Ghawar field.

We’re told that the oil was unreachable until fracking made this oil discovery, which is “under Israel’s sacred ground,” accessible at a reasonable cost.

And yes, as usual, there’s a “tiny Canadian company” in the profit crosshairs over this, according to Mr. King:

“I was ecstatic when I uncovered ONE tiny, little-known Canadian company that recently won the rights to a sizeable piece of Israel’s MASSIVE oil find.”

It’s a company that has a market cap of under $75 million (which, since the ad has been running for a couple days, has probably changed — it doesn’t take much attention to spike a tiny stock), with a stock price under 85 cents per share. And that has a $2.76 billion oil find.

Notice that $2.76 billion? Yes, that’s much, much smaller than $27 trillion … though it still sounds quite impressive compared to a $75 million market cap.

There have been two major oil and gas stories from Israel in the last couple years — the first was the discovery of the Leviathan field, found and being exploited by Noble Energy and Delek, which itself was just the most recent iteration of several discoveries in the eastern Mediterranean, where commercial gas production has been underway for six or seven years. The next gas field coming online is the Tamar field, and it’s expected that production from the Leviathan field and other potentially larger finds in the Levant basin, most of which is in Israeli waters, will proceed apace.

But that’s mostly natural gas — which is obviously important, and could bring Israel some energy security and even turn them into an energy exporter in fairly short order … but it’s not as sexy or profitable as a big oil discovery would be, given the relative pricing of those two commodities.

So the second attention-getting story was that Israel can possibly become a major oil shale player — which is where the story of the $27 trillion and the 250 billion barrels of oil comes from, the stories that really headline this ad.

This is not shale oil that’s extracted by fracking, as we find in the Bakken — flipping those words makes a big difference. This is oil shale, oil that is not trapped by rock layers but that is actually embedded in the rock (that’s probably not exactly accurate, this is just the best way I can describe it). It’s an important distinction — oil shale is found around the world, including huge potential reserves in Colorado, Russia and elsewhere, and the latest oil shale discoveries in Israel put them in the top tier of potential, estimates that I’ve seen say they have the third largest oil shale field … but no one is going out of their way to explore for oil shale, since it hasn’t been particularly feasible to extract it in commercial quantities.

Companies keep trying, and this general idea has been teased before particularly for those Colorado projects, which have been attempted since the 1970s with no real success, but so far no dice.

The problem with oil shale is that the only way you can really separate the oil from the shale is with heat — so most projects have been designed to superheat the shale either underground or after mining it, to extract the oil, which is obviously both very technically challenging and very energy intensive. To my inexpert mind it seems sort of like the Canadian oil sands, only more difficult and extreme, and no one has so far decided that it’s worth turning the Rocky Mountains into rubble in order to extract the oil trapped in the rock via mining, so “in situ” solutions have been the focus of study and pilot projects.

This is very different from shale oil, which has been relatively easy to extract thanks to new horizontal drilling and fracking technologies, and which has turned North Dakota into a booming state ripe with oil millionaires — shale oil is more like shale gas, it’s in there and liquid, you just have to figure out how to release it from the less permeable rock that traps the hydrocarbons, which is what high-pressure fracking does — it blasts holes in the rock and the proppants hold those holes open, and then the gas and/or oil can escape up the drill pipe.

As far as I know no one has talked about hydrofracking in Israel, this big 250 billion barrel find is all about oil shale, the hard stuff.

So which company is King pitching here? Well, when we get into the details it turns out that King’s promo was a bit, well, disingenuous. That’s fancy talk for “misleading.”

Because when he teases the specific company details, here’s what we learn:

This small firm’s Israel position is just a small part of their portfolio, they apparently have oil and gas interests in Colombia, Brazil, Argenitna, the United States, and Canada.

And they have just 15% of this giant Israeli oil field, which King says is estimated by USGS at 1.7 billion barrels.

So what happened to that 250 billion barrels and 27 trillion dollars, you ask? That’s where it’s a bit misleading.

Because King mentions that the properties around this company’s project also have a ton of natural gas. He said USGS estimated 122 trillion cubic feet alongside this tiny Canadian company’s holdings.

Which means that this stock is not at all involved with Israel’s way-in-the-future oil shale potential, that “maybe as big as Ghawar” oil shale field with potential for 250 billion barrels that’s largely located to the southwest of Jerusalem, and which was what got us excited about the $27 trillion stuff.

No, this one is involved in a small portion of the offshore Israeli licenses covering the Leviathan field and the rest of the eastern Mediterranean — an area that does, indeed, have estimated technically recoverable but undiscovered oil of about 1.7 billion barrels, according to the USGS. And that, also according to this same USGS estimate from last year, has about 122 trillion cubic feet of natural gas. Note that this is what the USGS thinks should be there and recoverable, not what has been found — and the folks at the USGS don’t have to worry about their share price if they’re wrong.

So that means for this teaser we’re looking at a little company that does indeed have a 15% share of some offshore oil fields in the eastern Med, a company called Brownstone Energy (BWN in Toronto, BWSOF on the OTCQX, the high class section of the pink sheets).

Brownstone is a global company, though a teensy one — their two core assets are shares in licenses offshore Israel and blocks in Colombia. The Israeli stuff is all offshore, and it includes two blocks in the deep water where they have a 15% working interest that are between the Gaza Strip and the huge Leviathan discovery, along with some others that are closer to Leviathan and on which they have far smaller working interest (less than 1% for the two most exciting areas, which combined, they say have over 7 trillion cubic feet of risked gas potential), and a 6.75% stake in the Samuel block that’s immediately offshore in shallow water.

They believe that either their Colombian assets or the Israeli assets could be “company makers,” though they appear to be further along with the Colombian blocks — and with the joint ventures in both of these countries they have been able to get experienced operators on board to do much of the work and keep their costs relatively low. They also have joint ventures in Quebec, Argentina, Brazil, India, Oregon, and Colorado — so the teaser matches that as well, though those projects are either so small or so preliminary that they aren’t even included in the latest corporate presentation.

The company has some pretty good connections, particularly because their Chairman and CEO is also the founder, Chair and CEO of the natural resources venture capital firm Pinetree Capital, Sheldon Inwentash (Pinetree and Intenwash together held about 15% of Brownstone shares as of last year). And I like the general idea of working in the prospective Israeli and Colombian energy patches, as well as the idea of having joint venture partners in these kinds of projects, but I don’t actually know much more about Brownstone Energy than that — interesting, but I don’t know that they’re particularly close to announcing huge news (there is continuing exploration going on in most of their major blocks this year, both seismic and some drilling) … and I do know that they aren’t anywhere near Israel’s 250 billion barrel oil shale assets.

Which is probably a good thing, given that the huge oil shale field will be many, many years from development even if they can get a pilot project to work — the pilot is apparently underway now, but unless I’ve misread the articles on this it sounds like it will require heating the rock for two years before they produce anything. That oil shale stuff, by the way, is being done by that same group mentioned in the teaser, Dr. Vinegar’s Israel Energy Initiatives, which sounds like a government agency but is in fact the Israeli oil shale pilot project owned by Genie Oil & Gas, which itself is a division of the mostly-telecom company IDT Corp (IDT). Phew. The basics of that oil shale project (and the big picture for the offshore blocks) are touched on in this article, if you’re curious to know more.

Brownstone’s latest investor presentation goes into the details of their Israeli and Colombian assets pretty well, and according to the latest quarterly report their balance sheet looks quite clear and they should have enough cash on hand to cover their planned exploration costs in at least one of those countries this year, though probably not both. It wouldn’t be surprising to see them raise some more money soon — particularly if King’s recommendation helps their share price to stay elevated, though there are also some near-the-money warrants expiring over the next year or so that could bring in additional capital.

So … are you excited about Brownstone Energy? Prefer other ways to play the oil and gas potential of either Colombia or Israel? Let us know with a comment below.

Related Gumshoe Articles

“Energy’s Last Great Frontier … The Untold Story”

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“How to Grab Explosive Mining and Manufacturing Gains All in One Shot”

Closing out our look at Byron King's teaser for "Miracle Materials" with a Beryllium stock

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23 Comments on "What’s Byron King’s $27 Trillion Israeli Oil Stock?"

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BombVark
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BombVark
June 8, 2011 3:29 pm

I like Adira Energy (ADL.V) ADENF on the pinksheets, to play the Israeli side of things. Off shore properties, nearer to the shore than the Levithan. CBE properties on shore. New CEO, just named, with Israeli government connections. Soros invested in company paying in the low 60s cent range, where the stock ended today. Pinetree also take a stake.

RVWick
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RVWick
June 8, 2011 3:31 pm

I relish your thoughts and comments on these off the wall exaggerations we see from time to time. I myself have been lured into some of these only to learn that they are quite misleading for the most part. Thanks again. RVW

leveragedlady
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leveragedlady
June 8, 2011 5:05 pm

Nice write up, Gumshoe.

Re: Leviathan:

Noble Energy owns 39.66% of Leviathan, and Delek Group Ltd. (DLEKG.TV) units Avner Oil Exploration Ltd. Partnership (AVNR.L.TV) and Delek Drilling each own 22.67%. Ratio Oil Exploration Ltd. Partnership (RATI.L.TV)) owns 15%.

leveragedlady
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leveragedlady
June 8, 2011 5:09 pm

With Egypt withholding nat gas from Israel, demanding payment of 2x the current contract price, Leviathan just got a whole lot more urgent.

BombVark
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BombVark
June 8, 2011 5:24 pm

Lol, yes the details are really the devil in this case. I just naturally tend towards the smaller cap plays. It was the Soros investment that first caught my eye

@CleverTrade
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June 8, 2011 6:46 pm

BWSOF Security Details
Share Structure
Market Value1 $92,331,072 a/o Jun 07, 2011
Shares Outstanding 90,930,739 a/o Jan 20, 2011
Float 77,586,394 a/o Jan 20, 2011
Authorized Shares Unlimited a/o Jan 20, 2011 (!!!)

Unlimited A/S…???…don't burn your fingers here

john sloan
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June 8, 2011 9:23 pm

Great report
Agora has been publishing some letters taking them to taks about the hupe and misleading link in King's pitch to oil rather than gas.

Doug
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Doug
June 9, 2011 1:01 pm

BNTNF also has a position in Leviathan and Tamar fields, so this way I can play on both fields.

Rudy
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Rudy
June 9, 2011 6:36 pm

Thank you for the details to this obvious misleading report.

Janina
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Janina
June 10, 2011 3:18 pm
There is shale and a lot of organic matter-but no oil- in oil shale; and–there is shale -and oil- in shale oil deposits. Nature has not have not enough time to generate oil in the oil shale –so we, the humans have to finish the oil gneration job by heating the organic matter in oil shales first–and this takes input of heat and often water — which means huge costs. In shale oil deposit oil is already generated and is caught in the dense fabric of the rock — all one needs to do is to produce it. However, the… Read more »
John Harvey
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John Harvey
June 11, 2011 1:35 am

BWSOF just sounds like another “Dog and Pony Show” with an extra NO Charge Ticket to a “Flea Rodeo” next door ! It is a Real Shame that Small Investors, trying to ‘make a buck’ get SUCKED into this sort of ‘Crap Advertisement” which I am totally sure that Bryon King received a Large Payment for ! This is one subject that the S.E.C. refuses to address !

len cooper
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len cooper
June 11, 2011 10:32 pm
IF the twenty seven trillion dollar oil deal off Israels shores had any truth in it , I am wondering what kind of a “blessing” it would be.– – – – Consider for a moment ,Israel , a tiny country , surrounded by hostile neighbors, who have her total demise as a part of their DNA , enters the equation. – – – Do you think for a moment that they would sit on their hands while Israel raked in that kind of “gelt”? – – – It has been written , that Israel has benefited from “Divine Intervention” in… Read more »
jay
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jay
June 18, 2011 9:51 pm

I see nothing but sheep on this site.

Myron Martin
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June 23, 2011 5:16 pm
I do not in any way condone misleading advertising and have complained bitterly to Agora over their tactics numerous times on numerous issues. That being said Byron King has made me quite a bit of money, in fact i can't think of a single pick i invested in that turned out to be a dog, which is why it surprises me that Byron would distort the facts as he apparently has in this case. What made me suspicious was that in trying to track it down it was fairly easy to find Noble as being the primary operator as well… Read more »
Jeff Cunningham
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Jeff Cunningham
July 1, 2011 3:37 pm

I am also surprised at Byron King's stooping so low and the obvious distortion of the facts. You really have to be careful with some of the Agora people. Chris Mayer for example has lost me a significant amount of money. I'm now far wiser though and make my picks far more carefully.

Vito Buonomano III
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Vito Buonomano III
July 1, 2011 3:41 pm

Once again oil companies money and power to calm the world about peak oil.
The world will never know the truth until peak oil slaps us in the face.
Major oil fields in the world running out of gas are kept quiet from the money they have produced over their life time.

Derek Lowther
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Derek Lowther
July 5, 2011 12:22 pm

One only needs to look at the length of time the Australians have been trying to develop shale oil with the help of Suncor to know that this is not a good investment for the smaller amn.

Raymon Gerard
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Raymon Gerard
July 11, 2011 3:37 pm

I am a WWII combat veteran, 90 years of age and with todays inflation have sought some relief in Agora and Porter Stansberry. Big mistake on my part because it takes money to make money and I didn't have enough…Raymon Gerard

Lee Stetson
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January 6, 2012 2:13 am

Just saw a news report on CBN News today about Israel Energy Initiatives (IEI). So I found this great Stock Gum Shoe site through the search engines looking for information on this company. Thanks for all your help.

Jim
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Jim
March 16, 2012 3:20 pm

Last year Soros Quantum Fund invested over 6 million dollars in Adira Energy paying in the low $.60 / share. Any thoughts on why the stock is now selling at less tha half that price?

PAUL
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PAUL
June 11, 2011 3:35 pm

MAKES ME REALLY WANT TO THINK ABOUT INVESTING IN THE STOCK MARKET.
WHO CAN ONE REALLY TRUST ANYMORE. MIGHT JUST PUT MY MONEY IN THE'
MATRESS HAHAHAAHA!!!!!!!!!!!

Robert Phipps
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Robert Phipps
July 9, 2011 2:26 pm

I agree completely! And, so many of the penny stock promotors are the same – receiving payouts. The BWSOF crap sounds a lot like John Meriwether's recent promotion of JAMN. He was absolutey sure it would rocket but only plummeted in value. Too bad I had to lose a chunck of money before losing and learning where penny stock promotors interest really is. Bottom line – it's not with the investors welfare.

Mike
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Mike
June 13, 2011 2:07 am

Len, you appear to be of that category of person who is generally labelled as "defeatist".

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