“Tiny Oil Stock That Could Transform $1,000 into a $144,400 Windfall”

By Travis Johnson, Stock Gumshoe, June 29, 2009

Now that’s a good tease — a tiny oil stock catches attention right away, since with oil prices having recovered we’re all pretending that we were never scared of what $30 oil would do to our energy investments. And $1,000 to $144,400, well, that just speaks for itself, no? I’ve got $1,000, and I’d much rather have $144,400.

So shall we figure out what the heck this is?

The teaser ad is from Colin McCabe of the Elite Stock Report — and of course, he would dearly love it if you’d subscribe to his newsletter. Apparently it’s $200 a year. You can subscribe if you like, I’m all for checking out whatever interests you … but if you just want to find out what this stock is, read on — I’m sure the mighty Gumshoe can figure this one out.

First, the pitch: The basic argument here is that the rising price of oil will create a demand imbalance, because so much of the supply from expensive sources (like deepwater rigs and oil sands projects) was taken offline, or exploration postponed, when oil prices collapsed last year. That imbalance will create a spike in the oil price (beyond what we’ve already seen, apparently), and will be a huge boon to those who have early-stage projects in high-cost areas. After all, when prices rise it’s the high cost producers who see the biggest boost to their bottom line, they go from money-losers to profitable producers almost overnight.

So here’s how this company is teased:

“A few hundred miles north of the Montana border, a tiny oil company has made a massive 2.25 billion barrel oil discovery…

“Independent analysis concludes the discovery is economically viable, capable of producing 56,000 barrels a day…

“And a pre-feasibility study determined the stock is worth $19.39 a share… yet, right now shares are trading for less than $0.50.

“Simply put, this is the greatest profit opportunity I’ve seen in years.”

Nice, eh? But there’s more!

“You see, this company is sitting on part of a vast oil discovery that is larger than the entire state of Florida. It contains more oil than the sheikdoms of Kuwait, Bahrain, and Dubai… combined. And it could satisfy all U.S. demand for the next 100 years.”

Then they start to talk just a little bit about exactly where this company’s land is — and yes, this is an oil sands company. The “north of Montana” bit should probably have told us that, no? And they quote that same old CBS story about the oil sands, which reflects the conventional wisdom that this source of energy will eventually be the largest foreign source of oil for the United States.

“And this tiny oil company… whom almost no one knows about… is smack-dab in the middle of it all.

“56,000 barrels a day… for 18 years

“This company’s beaten the majors to the punch, scooping up a massive swath of land in the heart of a huge oil zone that could fuel America for decades to come.

“Its property package — totaling over 100,000 acres — sits right next to Shell’s enormous thermal complex, where over 7 billion barrels of oil have been discovered. This facility currently pumps out 12,000 barrels a day, and is the crown jewel of Shell’s operations…

“But 12,000 barrels a day is nothing…

“The tiny company I’m telling you about has made a monster 2.25 billion barrel discovery of its own. And one of the most respected independent engineering firms in the business — whose clients include Chevron, Exxon, and Shell — estimates it could be capable of producing 56,000 barrels a day… for 18 years.

“A pre-feasibility study confirms this stock is worth $19.39 a share

“A pre-feasibility study completed by the same independent engineering firm confirms this company has a value of $1.2 billion at $65 oil. That works out to a whopping $19.39 a share.

“Let me repeat: $19.39 a share… that’s a 4,748% increase from today’s price.

“But you know what? $19.39 a share may be far too conservative…

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“You see, the engineering firm based their study on only about 20% of the company’s massive land base.

“There are still tens of thousands of acres left to explore. And most of this land is in the SAME area over the SAME deposit with the SAME geological setting. So the likelihood that this company is sitting on a far greater amount of oil than we now know (possibly double) is extremely high.

“And it gets better…

“Every $1 increase in the price of oil adds $1.29 to the share price…..

“at $95 oil, each share could be worth a staggering $58.16.

“That’s a massive 14,440% increase from where the stock is trading today, enough to turn a $1,000 investment into a $144,400 windfall.”

OK, so I’ll admit — I’m jaded from reading these promises every day, but I still can’t help but do a little bit of drooling when that kind of return is dangled in the face of my decrepit portfolio.

So what is the stock?

Well, you may have noticed that the real clues were not exactly legion — but this is what we have: Worth $19.39 a share according to the feasibility study, could produce 56,000 barrels a day for 18 years, priced under 50 cents, has a project near producing Shell mines.

Throw all that into the mighty, mighty Thinkolator, and I can tell you that this must be …

Strata Oil and Gas (trades over the counter in the US at ticker SOIGF)

Now, before I get any further let me warn you: There are a lot of Stock Gumshoe readers, and volume, though already up about 200% from the recent average, is very low — so be aware that if the price shoots up it’s probably just because lots of folks heard about it here (or from Colin McCabe) and are driving the price higher. That doesn’t mean the stock is any b