Taste of the Friday File: Namibia’s “Oil Kitchen”

By Travis Johnson, Stock Gumshoe, September 10, 2010

Questions are piling in once more about Byron King’s “Oil Kitchen” teaser ads about a big oil field offshore Namibia that he hopes will mirror the huge fields offshore Brazil, so I thought I’d share the article that I wrote to the Irregulars (the paying members of Stock Gumshoe) in the Friday File on July 30, back when this ad made it’s inaugural run. The situations has not changed dramatically for the firm since, aside from an extension on the deadlines for completing work on one of their blocks (most oil exploration grants and licenses have rules like this, you have to have completed the seismic survey within a set number of years or lose the exploration license for the block, etc., and it’s also not terribly unusual to see extensions or renegotiations over time). Oh, and they did release their second quarter results, though most of that was known at the end of July… and the stock jumped to new highs following King’s original ad and is still up about 30-40% from when I wrote this.

What follows has not been updated or revised, my position remains “intrigued, but not buying” and I still have no investment in this company … I was hoping the attention would die down and give me a chance at a more sober look and lower price, but that appears to not be in the cards just yet (which means, I wager, that the ad must have worked pretty well).

July 30, 2010:
This is one of those teases that clearly jumps out at people — when a relatively high profile newsletter teases a new and undervalued oil reservoir held by a tiny penny stock, folks get interested … or at least, that’s what I conclude from the vast number of emails I’ve received in just the last 12 hours since this ad started rolling.

Byron King tells us that this stock could make for life-altering gains … and that it could easily rise tenfold, or a hundredfold as Wall Street gets interested in this major oil discovery, though he also says in some of his promotional materials that he thinks a buyout from another company (like Petrobras, for example) seems pretty likely.

The details of this are available from Mr. King himself, should you choose to subscribe to his “premium priced” (about $1,500) Energy & Scarcity Investor to get the “free” (with subscription) special report. But of course, since you’re so tight with your friendly neighborhood Stock Gumshoe, you get a sneak peek at a few details here today … assuming I can figure it out.

Here are the clues he shared in a recent article/ad:

“The moratorium on drilling in the Gulf of Mexico will only accelerate the “internationalization” of oil exploration. With the moratorium, deep-water drilling rigs will leave the Gulf. The newest, most modern, most capable rigs (and the “safest,” if you REALLY care about safety) will be the first to go. They’re in demand from firms like Petrobras and Statoil to drill in places like Angola and Namibia…. the moratorium will create new urgency to explore and develop deepwater projects elsewhere in the world.

“I recently told the subscribers of Energy and Scarcity Investor about a small Canadian oil developer with BIG acreage offshore Namibia. Out of deference to my Energy and Scarcity subscribers, I can’t divulge the name of Company “X”. But I’ll share a few details about it, just to give you a flavor of the terrific investment opportunities that are now emerging.

“Company ‘X’ holds astonishingly large acreage in oil prospective waters in the southerly regions of Namibia’s offshore. We’re talking about HUGE amounts of prospective oil resource – in the billions of barrels. Yes, billions.

“How good is the acreage? Well, let’s look at the neighbors. You’re known by the company you keep. Petrobras holds the Namibian blocks to the north. Shell holds the South African blocks to the south. Company ‘X’s’ acreage also surrounds a multi-trillion cubic foot natural gas discovery. This natural gas field also contains oil. The oil comes from an ‘oil kitchen’ that the seismic indicates is deep, and to the west, of the gas field. And that’s EXACTLY where Company ‘X’ holds prime acreage.

“What else? Well, if you do the plate tectonic reconstructions, you can see that Namibia used to be right next to what’s now Brazil, in South America. And what part of Brazil did Namibia used to be close to? Why, the pre-salt areas off Brazil which hold oil resources in the range of 100 to 200