$82 billion opportunity disappearing soon? (Frank Curzio’s Phase 1)

Promo says "Frank has just unearthed what could be the most ridiculous windfall in the history of Phase 1"

By Travis Johnson, Stock Gumshoe, February 6, 2014

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Several intrepid readers sent this pitch flying my way while we were digging out of our latest snowstorm, and I figured a nice little panic about an $82 billion “missed opportunity” ought to warm me up.

Phase 1 Investor, the big “upgrade” letter from Stansberry & Associates, usually gets our readers attention when they send out a new promotion… partly because the publisher has one of the biggest mailing lists in the world, and partly because it’s too expensive, at $5,000 (or “on sale” for $3,000) for most individual investors to seriously consider a subscription. And despite any evidence to the contrary, some investors persist in believing that more expensive newsletters automatically pick better stocks, which means these promos get even more attention.

The stocks Frank covers with this letter tend to be small and sensitive ones, usually in tech, biotech or natural resources, and they’re often quite illiquid … but they’ve almost always got a good story. So what’s the story this time?

The headline of the actual ad says that we need to “Buy this ‘Under $0.50’ Stock by February 15th, 2014” … which started to ring some memory bells in my head, and the lead-in from the email pitch got us interested thusly:

“You see, Frank has just unearthed what could be the most ridiculous windfall in the history of Phase 1.

“It’s a microscopic energy company – with a $40 million market cap. It currently trades for about 46 cents per share.

“Yet it happens to be sitting on a truly massive petroleum formation.

“We’re talking about an estimated 500 million barrels of oil… and 7 trillion cubic feet of natural gas.

“The estimated net present value: $49 billion in crude oil… and $33.4 billion in natural gas.

“Yeah, that’s about $82 billion – some 2,050 times bigger than the company’s current market cap.”

Yes, $40 million is “microscopic” and we run the danger of helping Stansberry & Associates draw too much attention to the name just by writing about it here but, well, what are you gonna do?

I do draw the line at some stocks, some of the time — I unveiled a little $10 million market cap name being teased now earlier today, but I assuaged my guilt a bit on that one by limiting the article to the much, much, much smaller group of Irregulars (those are our paying members) … still, when you’re talking about a stock with a sub-$50 million market cap any yahoo with a blog or a twitter account can probably impact the price if he makes an effort, so, as always, be careful and think for yourself.

What’s Frank pitching now, then?

Well, it turns out that we were right to think it sounded familiar — this is a slight revision of a teaser that Curzio sent out last Fall and that we covered here about four months ago , and in fact the “presentation” still carries the “October 2013” date down by his signature, though they have updated the “Must buy by November 1” to “Must buy by February 15” … and they did add in a couple other edits to refer to their 2014 drilling program instead of the 2013 one … but this is still East West Petroleum (EW in Canada, EWPMF on the pink sheets), and news is still fairly slow in developing.

I own East West Petroleum shares — I picked some up when I wrote about them last Fall, largely because they had some catalysts coming in the form of drilling in New Zealand and possibly the start to their Romanian drilling campaign that’s been delayed for a couple years, and the news so far has been fairly ho-hum in New Zealand and nonexistent in Romania so I’m still sitting on my shares and watching. Curzio’s attention drove it from 40 cents to about 70 cents very briefly, as he loaded on the enthusiasm and hosted a conference call with the company’s management, but it’s now back to about where it was in October.

And yes, it’s pretty disingenuous to say Curzio “just unearthed what could be the most ridiculous windfall in the history of Phase 1” when you’re talking about a stock that he originally pitched almost two years ago.

So, now what? I guess this gives me a chance to take another look at the stock, something I’ve been meaning to do anyway. Win-win!

East West Petroleum has two important assets: shares in wells that are now being drilled by TAG oil in New Zealand in the Taranaki Basin (that’s New Zealand’s core production area for onshore oil and gas, and the wells may not be gushers but are relatively low risk and in or near proven areas), and four blocks in Romania that are just about to be explored for gas. East West is buying in to the New Zealand stuff, paying to drill the wells to earn-in their 30-50% share, and the opposite is true for Romania — in Romania they’ve let Gazprom Neft buy in to operate the four concessions, with EW getting fully carried on costs for the first 12 wells and getting 15% share until there have been three wells drilled on each of the four concessions at a minimum investment of $56.6 million.

So in 2014, East West will be spending something like $12-17 million on New Zealand drilling and seismic, depending on whether they get through five or eight wells (three are conditional and planned for later in the year, five are more firmly scheduled) and nothing on Romanian gas. The New Zealand wells are all expected to break even over roughly six months, so there will be cash flowing in as well as cash flowing out … which tells me that they can easily cover their commitments with their cash on hand (about $16 million) and their revenue from the first few wells (should be several million by next month, recouping their costs within a few months of drilling) as long as they don’t have a big problem anywhere this year or make other big commitments. That’s not to say they won’t sell more shares and raise money, they could easily do so (and might want to do so to give themselves some more growth capital if the stock spikes up on some good news).

They have other projects around the world as well, including an unconventional oil/gas partnership in Eastern New Zealand, also with TAG, and small projects in Morocco, California and India, but none of those should have any real impact on East West’s books over the next couple years as far as I can tell.

The $82 billion and 500 million barrels of oil in the teaser pitch is, of course, a pipe dream — I suppose it’s possible that East West could reach those numbers from their combined exploration areas, but I’d happily take the “under” on that if we’re betting. Doesn’t mean it’s a bad stock at $40 million, obviously, since I’ve already told you I bought shares myself, it’s just not a lottery ticket. Going up a few hundred percent would please me just fine, we don’t need to see billions in value — and dreaming about those billions is probably bad for you.

East West’s producing and likely-to-produce-anytime-soon oil is estimated to be in the range of 2-13 million barrels in their lower-risk New Zealand Taranaki wells, and the big unconventional East Coast project potential in New Zealand, which may well be over 100 million barrels, won’t even see its first drill bit from the EW/TAG joint venture for probably three years. And I don’t know whether Romania might end up having trillions of cubic feet of natural gas in EW’s million acres of exploration blocks, but neither does anyone else — there’s almost certainly oil and gas in there somewhere, just as there is right across the border in Serbia, where their partner Gazprom Neft has already made discoveries, but we can’t really put any numbers on it yet.

The pitch talks about a 20-well work program for 2014, but that’s really more than they’ll do just this year — New Zealand is a maximum of eight wells this year, with probably a little less being more likely, and Romania is a possibility to drill three wells this year as they start what will be a 12-well work program, so that’s a total of 11 wells possibly in 2014. They only had the final 3/4 of their Romanian blocks ratified by the government in November, after extended delays, so there’s been little progress made at identifying drill targets, etc. — apparently seismic is underway now on the first block in Romania, the one that was ratified earlier, and that’s where the drilling of potentially three wells is expected to come in the second half of this year. Their partner has two years from this past November to drill twelve wells under the terms of the current agreement, though I suppose it wouldn’t be shocking if there were delays or extensions.

That’s enough to have me holding on to see how things go. They’re producing oil and gas in New Zealand, they have cash flow and some upside potential if the New Zealand wells end up being a bit better than expected (so far it strikes me that they’re slightly worse), and, since they have cash for their drilling commitment in New Zealand and get a free ride in Romania, the downside is relatively limited compared to other teensy oil explorers. I bought this one for the potential of a near-term (within six months) catalyst, but the fundamentals are solid and I’m now at least planning to wait out the next six months or so and see how the drilling in Romania goes.

So what do you think? Interested in this Frank Curzio play from October that’s being refreshed now that the shares have come back down? Or is it all still too speculative for you? Either way, shout out your feelings to the world with a few words in the friendly little comment box below.

And yes, to avoid trying to profit personally from attention that we give to tiny stocks, I promise not to trade East West Petroleum for at least three days per Stock Gumshoe’s trading rules.

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Leave a Reply

48 Comments on "$82 billion opportunity disappearing soon? (Frank Curzio’s Phase 1)"

avatar

Edward Ramonas
Guest
0
Edward Ramonas
February 6, 2014 4:07 pm

This one has been a pleasant surprise for me, don’t remember who I read to pick it, but bought at .3o sold 1/2 at .60 now on what they like to term the free ride.

tony goncalves
Guest
0
tony goncalves
February 6, 2014 4:35 pm

Curzio gave me a good winner ( actually you did here Travis ) with Vringo. Took a nice ride on that wagon couple of weeks ago and cleaned up. Usually he knows something that will pump the stock – not necessarily fundamentally, but at that price, I buy lottery tickets and hope his hype makes a good push..

vivian lewis
Guest
0
February 6, 2014 4:37 pm

there is no such thing as a free ride. just as there is no free lunch. wise up

Tom Bates
Guest
0
Tom Bates
February 6, 2014 4:37 pm

I bought a fairly good chunk of this last time around…it went down a couple of cents and then up ten or twelve cents and I sold in less than ten days, can’t remember if it was five days or more. Might consider throwing a little at it again, but its hard to buy $50,000 of a 50 cent stock.

Myron Martin
Author
197
February 6, 2014 4:37 pm
Like Travis I am being patient with this one after profiling it a few months ago. These types of stocks are definitely speculative, but with good drill results they can deliver stellar returns. One of he reasons I decided to share my stock research is because of my experience with U.S. newsletters subscriptions over a 10 year period. Right now I wish had the $10,000 I wasted subscribing, because for the most part they are over hyped, even when they do make a good pick. Setting expectations too high is in my view self defeating because it deceives naive investors… Read more »
arch1
Irregular
4390
February 6, 2014 6:06 pm

Myron I think also nearly all I have spent on pricey newsletters wasted. Maybe If I had gone all in & hit a winner it would be different but a lot of small winners,few large losers = not worth it. I might think better of this venture if did not have Romanian connection, understand some how people there feel about exploitation & thus regard this even if “not to worry”.

arch1
Irregular
4390
February 6, 2014 6:16 pm

Myron perhaps should not newsletter shop using pen name “frankly naive” Hmmm.

JayBee
Guest
0
JayBee
February 9, 2014 4:37 pm

Frank,

Are you from a different country, or a different planet? I literally cannot understand half of what you are trying to say.

Deborah G Flynn
Guest
0
February 6, 2014 5:01 pm

I find the Stansberry group just a wee bit too Carny for me. I mean the guy was selling shares of his own boat not too long ago or leasing it out when he wasn’t using it. Makes me think he’s a bit of a scammer. That’s why I won’t pay a whole lot ogf attention to his expensive letters but do enjoy Travis’s research and might look at it FOR MYSELF NOW. They do have a way with words LOL IF he was so successful what does he need to be pitching penny stocks for?

Ventureshadow
Guest
0
Ventureshadow
February 6, 2014 5:22 pm

Eats Wets Petroleum jelly, sounds like a baby sort of stock, and is. Buying this is like going to Las Vegas, but without drinks, cheap gourmet dinners, or shows. Also it takes longer for me to lose my money (and, just maybe, I’ll win).

Marc
Guest
0
Marc
February 6, 2014 5:27 pm
I can not believe you bought it and are again touting it as a possible buy. EWPMF the MF tells us that they haven’t filed their SEC statements which are required of them by law. Why? What are they hiding? It is possible that this reflects a cooking of the books with a reluctancy toward filing due to the legal penalties. This is gambling in my opinion and thus I would have to advise caution. The free ride comment I do not understand. If he sold 1/2 his investment for double the original costs then he has now broken even… Read more »
arch1
Irregular
4390
February 6, 2014 5:54 pm

Anytime I see Urgent “must buy now” I ask why? Otherwise I might nibble at this,except
maybe he needs sell & bad news coming. Old sayings “look before you leap” & also”he who hesitates is lost” are both sometimes true. I cannot ascertain action & therefor use
1st law of “power of negative thinking” ” I can’t therefor I won’t”.

jhrym1
Member
0
jhrym1
February 6, 2014 6:55 pm

We might all be wise to read Keith Schaefer’s latest pitch. The most obvious Energy takeover in 2014. He’s talking about a company called High North Resources (HN-TSXV). Good Luck To All.

jamespaul108
Irregular
32
jamespaul108
February 6, 2014 9:30 pm

Y’all probably know this, but…

“Romanian Police ‘Brutally’ Remove Protestors Opposed to Chevron Fracking”
http://rt.com/news/romania-shale-gas-chevron-652/

“Romania: Fight Against Shale Gas Continues”
http://www.naturalgaseurope.com/puiesti-romania-shale-gas-chevron-hunger-strike

Anybody know if Gazprom does hydraulic fracturing? I had the impression that it’s mostly a US technology.

arch1
Irregular
4390
February 7, 2014 1:17 am

James fracking has been done in U.S. for I think over 30 years so probably is us invention.
Also it is mostly done at depths where it can’t possibly affect ground water. Also is being used to sequester “evil” CO2 we all emit. Soda water makes good solvent.

jamespaul108
Irregular
32
jamespaul108
February 7, 2014 12:08 pm

The issue is not with what is done at depth, but the possibility of rupture of pipes on the way down.

jamespaul108
Irregular
32
jamespaul108
February 7, 2014 12:39 pm

PS I am not intending to start a discussion of a controversial issue here, only mentioning in this forum to acknowledge the existence of strong views on both sides. These could affect future stock prices.

Quincy Adams
Guest
0
Quincy Adams
February 6, 2014 11:22 pm

These Stansberry guys seem to be the Goldman Sachs of newsletter publishers…rich and arrogant. Have not bit on any of Curzio’s picks, but the performance of the group as a whole in recent times is mixed. On the whole, what I have bought of their recommendations has left me poorer and them richer from what I paid for them. If recent performance is any indication, they must have obtained their wealth more from subscribers than from following their own investment advice.

David A
Guest
0
David A
February 10, 2014 8:04 pm

Say what you want. I have followed their advice and have done not just well, but
VERY VERY WELL. I get a kick out of all the folks here that love to kick Stansberry around. Personally I think they are the BEST of the BEST, and I am ultra conservative.
The critics can say what they want, as grandma used to say; The proof is in da pudin.”

Superchunk
Guest
0
Superchunk
February 12, 2014 1:31 pm
Both of yous might be right…IMO 80% of investing success is about trading technique so someone with good technique could do well and someone else not so well with the same picks. The thing that makes newsletters (including S’berry from what I know, I don’t use them) ) a dirty business is that 1) they emphasize the 20% that you can get in better quality for free other places and that a good investor will look at anyway to do their due diligence, and 2) they generally advocate very bad trading techniques like wide stops which will only work in… Read more »
Don Exum
Guest
0
Don Exum
February 7, 2014 12:26 am

Mr. James Fernow,
Your comment about fracking being a US Technology.. Fracking is just a Technology, actual birth place unknown to me personally, but available for use anywhere in the world where feasible and economically productive, if the environmentalist there don’t impede the process.. All the E&P Energy Companies that I am invested in use fracking where necessary to improve well production and cost payback ASAP. The name of the game..! Good luck with your investing..

jamespaul108
Irregular
32
jamespaul108
February 7, 2014 11:59 am

Thanks, I thought I had read somewhere that although fracking has been done for decades, it’s only the US companies that have the equipment and expertise to do it currently. Of course, if true, that may be changing.
This is probably not the forum to discuss it, but there are reports of environmental issues associated with fracking
http://www.theguardian.com/environment/2013/oct/02/dangerous-radioactivity-fracking-waste-pennsylvania
http://www.denverpost.com/environment/ci_22586154/water-fouled-fracking-chemicals-spews-near-windsor

jamespaul108
Irregular
32
jamespaul108
February 7, 2014 12:40 pm

As I noted above, I am not intending to start a discussion of a controversial issue here, only mentioning in this forum to acknowledge the existence of strong views on both sides. These could affect future stock prices.

rkatz0
Member
5
February 7, 2014 3:33 am

Curzio seems to be having a hard time these days. Many of the recommendations have gone nowhere or south in his Small-Stock Specialist from what I can see. There were a few ok ones back a year ago but since it seems he is looking for new life.

peterk
Irregular
5
February 7, 2014 4:15 am

East West to buy back up to 8.88 million shares
Here is the article: http://tinyurl.com/pcchwoz

gmanfis
Member
0
gmanfis
February 7, 2014 11:38 am

Porter Stansberry is a clown! You never know when to believe him or not. I stopped subscribing to him or any of his contributors several years ago. You’d think they would separate themselves from him also. Haven’t missed a thing except a lot of bad advice.

David A
Guest
0
David A
February 10, 2014 8:08 pm

I guess I am really a clown, and have laughed in my clown face ALL the way to the
investment bank. I not only have MADE lots of money with the advice, I will NEVER be
without this advice! So one of us has got it wrong, and it aint me. They are the ONLY investment company that I trust. Who else gives themselves an end of year report card and has the “balls” to say if they got it wrong? Nobody! I think folks are just jealous.

seacali
Irregular
0
seacali
February 8, 2014 2:35 pm

Why does he say Feb 15th? Is the a catalyst then. I want to jump in but the stock has just jumped 10% already.

opusnz
Guest
0
opusnz
February 9, 2014 9:45 pm

Tag’s quarter is due to come out by Feb 15th. I think they will have strong results on their joint venture wells done with East West. This will help both companies but if you want a pure NZ play, I much prefer Tag or NZ Energy since they have a much larger land package on the east coast of NZ. Tag is more advanced and also has several deep targets which may be a strong catalyst for growth. The first of these, Cardiff was just cased and will soon be tested.

nortie
Member
0
February 9, 2014 2:18 am

I am an occasional but very interested and grateful reader of yours. I love the depth of your analysis. I also live in New Zealand at the moment. I would like to report this article on the subject:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11196524

gjervis
Member
2
gjervis
March 18, 2014 11:38 am

Based on their latest news release i added more of this company. looking at their new Investor Presentation (march 2014), they have no debt, sitting on 16.7M in cash, the current market cap is a mere $34M, leaving an enterprise value of $17.3M. In addition, they are cash flowing with an IRR of 300% (LOL), Romania is being paid for by some other company, their outlay for 2014 is $12.1M.

in addition they are buying back shares. i am definitely adding at current prices on this one.

http://www.eastwestpetroleum.ca/assets/downloads/EWP_CORPORATE_PRESENTATION.pdf

shrini43
Irregular
0
shrini43
March 20, 2014 2:16 pm

Any idea why this stock is sinking inspite of good drilling results from NZ? They are sitting on cash with zero debt at this point.

Tiekone
Guest
0
Tiekone
June 10, 2014 4:04 am
East West not trading that well because the NZ drilling season has not met expectations, at least my expectations. Out of 9 wells drilled in the Taranaki Basin only 2 (Cheal E1 and Cheal 4) are flowing naturally and Cheal E5 is helped with pressured water : total stable production is around 650 barrel per day (195 net to EW). Cheal E2, Cheal E3 are still in “testing” and is taking a little bit too long to expect good production going forward. On Cheal G only 1 well out of 3 drilled is “in testing” and even this one is… Read more »
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