Updated: “Best LNG Stock” … and more “Pilbara Profit Secrets”

By Travis Johnson, Stock Gumshoe, April 16, 2008

This post has been updated with a response from Dan Denning at the bottom.

I spent a little time with the ‘ol Thinkolator churning through the several stocks touted by Dan Denning for his Australia Resource and Mining Report — this first one was one of the more interesting ones, and I worked that out earlier if you care to catch up with the group.

A couple of them were also either not that interesting, or too light on the details for me to figure out without much more motivation, so we’ll skip over those. This is what I did figure out:

* The Best LNG Stock in the World

Here’s what we’re teased with about this one …

“This company is easily the best natural gas play in the world. It’s got a lock on Australia’s most valuable Liquid Natural Gas (LNG) projects. Astonishingly – though it may be the best energy stock to ride China’s boom – it is nearly unheard of in America.

“At current prices, it belongs in any long-term energy portfolio. Its recent deal with PetroChina could add as much as $10 billion to its market cap, once the deal is final. And there may be many more deals to come.”

So … not a huge amount for the mighty Gumshoe, but I can tell you that this one must be …

Woodside Petroleum (WPL in Australia, WOPEY for the US ADR).

Which, for someone down under, might as well be like saying “ExxonMobil”

OK, that’s an exaggeration … but this is one of the dozen or so biggest Australian companies, and it is indeed an oil and gas leader, as well as a company that’s expanding very aggressively into LNG to feed the growing Asian markets. I have never looked into them in any detail before, but it’s a big company with real earnings, and they do have an actual ADR, albeit one that trades OTC.

Perhaps some of my delightful Australian readers would like to pitch in with a Woodside opinion — all I know from a quick glance is that the shares do trade at a significant premium to most companies in this sector, which I assume is due to the growth they’ve shown in recent years and promised for future years. If LNG prices remain high and demand keeps increasing with the development of new LNG terminals, particularly in China, things might look bright indeed for these guys … though at their size I wouldn’t look for really dramatic returns in the short term. It does pay a decent yield of 2.5% or so.

The next one …

A “Pick and Shovel Play with Enormous Potential”

Here’s what our friend shares with us about this one …

“Mining services and infrastructure is one of the fastest growing industries in Australia. It would have to be, with all the digging going on.

“… this ‘Pilbara Profit Secret’ stock was originally established as a subsidiary of diamond producer DeBeers. Today it has 5,000 employees and operates a fleet of 1,080 drilling rigs that offer clients earth, rock core, and rock chip samples for mineral analysis purposes. It operates in a US$2.5 billion minerals drilling industry. Customers include Anglo American, Barrick Gold, BHP Billiton, Phelps Dodge, Rio Tinto, Teck Cominco, Xstrata and Zinifex.

“Currently this stock is criminally undervalued at A$2.16 – but it won’t stay that way for long.”

This one, the Thinkolator tells us, is …

Boart Longyear (BLY in Australia, BOARF on the pink sheets, not an ADR but apparently tradeable)

This is indeed one of the larger mining services companies — and the shares were at A$2.16 a little while back, but, as promised, did not stay there for long … they’ve fallen precipitously, you can pick them up now for about A$1.85.

Plus, it’s just an awesome name. If I ever need a stage name, Boart Longyear’s going to be it.

This one seems a bit interesting, too — though not particularly as an Australian play, according to the company their business mix is much more international. “Asia Pacific” revenues, which I assume also includes their sales at home, are about a quarter of revenues — Canada and the US together make up half of sales. So I don’t know that this is particularly the play to make on just Australian mining expansion, but it might be interesting as a play on mining and exploration growth overall.

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