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

Checking out the first teaser pitch from Disruptors & Dominators

By Travis Johnson, Stock Gumshoe, March 3, 2014

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:

“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….

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“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 u