“Profit from Putin’s Resource Roulette: World’s Most Dangerous Man?” part 1

By Travis Johnson, Stock Gumshoe, April 20, 2008

This teaser came in a couple weeks ago, and a few readers have sent in suggestions about the possible solutions, so I thought a lovely Spring weekend here in Washington, D.C. would be the perfect time to take a gander at Andrew Mickey’s teaser … and lordy me, it’s a long one. At least three companies teased, all weaved into a web of fear and greed. I had to read three pages before I even found out which newsletter it was for.

And this is a lengthy one, indeed, so I think I’ll be spreading it out across a couple missives to you, dear readers.

But probably most of are are primarily interested in the number one pick here, anyway … so let’s take a gander at that one first.

This first one follows a lengthy build up about Gazprom … we hear about how Putin is using Gazprom’s massive gas reserves to bully Europe, and especially to force Ukraine to knuckle under. We hear that Gazprom is now essentially using an anti-U.S. message in trying to expand their reserves in Africa.

And that leads us to … something that has precious little to do with Russia at all. Mickey talks about a secret little island in the Pacific that’s beyond Putin’s reach — an island that holds massive reserves of natural gas that, until recently, were thought to be too virtually useless.

So the argument is a bit thin (Putin’s command of natural gas threatens the U.S., because the U.S. depends on natural gas for electricity, and therefore this company’s reserves should be worth as much as reserves in the U.S.), but, nonetheless, it’s worth a look.

The specific clues?

Well, we know it’s on a Pacific island, and it’s an island that’s already seeing big investments by CNOOC, ExxonMobil, and InterOil to build LNG plants that will make it possible to transport the stuff to end markets, particularly in China, Korea and Japan, all big LNG customers.

And he says it’s a 40 cent stock, with a market cap of around $50 million … and that they recently bought 8.4 million acres of land on this island for gas exploration.

Well, if this sounds familiar … that’s because Andrew’s in some ways piggybacking on the research of his colleague Ian Cooper (colleague in the broad sense, I don’t know if they know one another) — Ian was the one who teased us with the story of InterOil, which is a much larger company working on this same island.

And that island, of course, is Papua New Guinea. It is indeed in the Pacific Ocean, and it’s certainly not in Russia.

Which brings us to the company, which the Thinkolator tells us, with great certainty and conviction, is …

Invicta Oil & Gas (IGG in Toronto, INOGF on the pink sheets)

Oh, wait … I mean, it’s LNG Energy, Ltd.

Sorry, they just changed the name of the company about three weeks ago — you’ll probably see it listed under both names if you decide to do some research.

And, super bonus for you, the shares are no longer at 40 cents … they’re down quite a bit, to about 30 cents now.

Did I mention how handy it is that my beloved Greenback is now at rough parity with the Loonie? I may be losing money, but I don’t have to do currency conversions … yippee!

The shares hit their high of around 80 cents last Summer, after they announced their plan to acquire that acreage in Papua New Guinea, and it’s been basically straight down every since … it looks like they were only at about 40 cents for long enough for Andrew Mickey to get his quote, so apparently his recommendation has yet to move this one.

So what do we think about this one? Well, if you believe that the market for liquefied natural gas (LNG) will remain strong, or grow much stronger over the next few years, it’s possible that you’ll find an intriguing lottery ticket here. Mickey claims that similar acreage would be valued at $300 million in natural gas basins in the U.S., and he says that the fact that it’s only valued at $50 million or so means it’s trading at a huge discount. It should be pretty clear that this is a bit of a stretch — natural gas that’s a cheap pipeline ride away from the end user will always be worth much more than natural gas that is years from being drilled, and that will have to be turned into a supercooled liquid and then shipped via tanker to the end user.

That’s not to say that this company’s acreage isn’t worth more than the shares are trading for now — that’s possible, and I haven’ dug nearly deep enough to tell you one way or the other. But I’m sure they’re not worth more than a similar company in the U.S.

LNG is certainly getting the attention of many investors these days (we even looked at a much larger LNG-focused company just last week), and there are examples that Papua New Guinea might be able to follow of little island nations that have turned LNG into their lifeblood (particularly Trinidad and Tobago in the southern Caribbean), but the vast majority of natural gas is still transported via pipeline and consumed on the same continent as the wellhead. I’m inclined to believe that LNG will become a more and more important part of the natural gas market, and that it will, over time, help to smooth the differential between nat gas and oil by developing an international spot market for natural gas … but it’s probably going to take a while. I have no idea whether this particular exploration company will find the amount of gas they hope, whether they’ll be able to extract it profitably, or whether their partnerships with InterOil and the larger firms will work out and get the needed LNG infrastructure built and working in a reasonable time frame.

I know there are many of you out in GumshoeLand who love the cheap little exploration and production stocks … so if this is up your alley, let us know.

And I’ll get to the rest of these “Putin/Russia” plays next time — I’ve got most of the solutions, just have to do some thinkifyin’ …

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stringman (Steve Woloshyn)
stringman (Steve Woloshyn)
April 20, 2008 9:43 am

Trevor, I think many Americans are falling victim to all the US propaganda…”Putin….World’s Most Dangerous Man” (to say nothing about China, that is another story!). I think every Wester Hemisphere dweller should read “The Confessions of an Eeconomic Hit Man” by John Perkins, an American, to put danger in a more focused perspective.
I believe Putin has 80%+ support in his country, you cannot say that for the American leader! In fact, I think many might agree that Bush could wear that dangerous title more fittingly, along with a few other less than flattering ones.

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Paul Heron
Paul Heron
April 20, 2008 11:35 am

Beware! Invicta is the most recent incarnation of several earlier names that are based out of Vancouver, BC. I can personally attest to the fact that a lot of investor money has disappeared thru some slick legal maneuvering.

April 20, 2008 2:03 pm

God bless you
reading you has saved me thousands of dollars

tony carmen
tony carmen
April 20, 2008 3:42 pm

putin for pres of the u.s.the rich get richer politicians all retire wealthy and WE EAT CROW washington does O we were a nation on wheels ENERGY the poor got poorer if you believe in capital punishment it should start a the capital from the top on down go to HISTORY.COM STROLL DOWN TO “TVA” =tennesee valley authority 1933 PRESIDENT FRANKLIN D. ROOSEVELT THE HIGH PRICE OF ENERGY IS STRANGLING AMERICAS [CITIZENS]front page headlines read on the pres was infuriated and confescated the TVA later paid twenty four mill to the thieves involved read on FROM THAT POINT ON AMERICA MOVED forward instead of stall, starvation PS THERE IS NO GAS SHORTAGE BULL I OWN PLENTY

Brian B.
Brian B.
April 20, 2008 4:24 pm

Demand outpacing supply by 25% right now, hence the price jump from $6 to near $10 per 100 Cu. Ft. in the last 6 months. So I disagree with Tony, but the company in question could bare watching.

April 20, 2008 7:06 pm

Hey SG, it’s just a matter of time until you’ll be calling them peachbacks vs greenbacks. The color of the new currency is a little strange, but then again whoever came up with that color may be a little strange .
Again, cudos on your sleuthing. Hope you enjoy the weekend.

Ole Berentson
Ole Berentson
April 20, 2008 7:28 pm

I really appreciate the advise and the thinking on
Gumshoe, thanks for that.I am interested in finding
something like you are talking about (Invicta) LNG
energy, INOGF,,LNGYF Can’t find any of them on nasdaq or
anywhere else. Maybe cause I don’t know what I’m doing. Could anyone help a greenhorn?

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Gravity Switch
Gravity Switch
April 20, 2008 8:41 pm

Hey Ole, they’re not on a US exchange, they trade over the counter and prices are quoted on the pink sheets. Most any broker can buy them, but caveat emptor.

👍 7
April 21, 2008 12:01 pm