“New Chinese ‘Oil Colony’ Discovered” — So, What is it?

Revealing the stock to profit from China's "occupied territory" from New Growth Investor

This email started churning through the Gumshoe floodgates recently, a tease for Zachary Scheidt’s New Growth Investor, which we last looked at a couple months ago — the marketing for this letter says that they look for “stocks with bright futures ahead or a company with a new product set for maximum gains.”

Which sounds like a very specific description, but could be broadly applied to almost any company. The last time we looked at this letter back in March, Scheidt was teasing us about the “elderly San Diego woman’s dying wish” that could “give you a lump payment of $4,000” — which was a mysteriously worded way to hint at Cargill selling it’s stake in Mosaic, and the possible profit for investors as a result. The stock didn’t get the juicy private bid that Scheidt intimated was possible by the end of April and it’s down a bit (though it’s still being teased much the same way as a “bonus” in the current ad), but that’s water under the bridge, eh? What’s he teasing today?

Well, the heart of the teaser letter, which actually comes from Blair Morse, a “Special Investigator” for Taipan who pulls out all the stops in describing the “cloak and dagger” behind China’s secret colony and the oil wealth they’re accumulating. Here’s a taste:

“From a ‘Covert Operative’ Inside Chinese ‘Occupied Territory’

“For the past two years, I’ve built up contacts in the ‘oil colony,’ both native and Chinese.

“Posing as an oil industry ‘insider,’ I’ve gained their trust and embedded myself unnoticed in the community.

“I don’t work for the CIA or the U.S. military. In fact, I’m not affiliated with any governmental organization.

“I’m an investigator who specializes in the financial research industry. I was actually contracted by a private research company to share the full details on this incredible situation.

“In fact, I just hopped on a plane and hand-delivered this potentially profitable information to my U.S. contact, a trusted friend — and former whiz-kid hedge fund manager.

“He’s the only one with access to my research.

“Why would I deliver it myself?

“Because although this region is not fully controlled by the Chinese, I wouldn’t be surprised if they monitored communication coming to and from the colony.

“The Chinese regularly spy on their own people inside their borders. Why wouldn’t they apply the same paranoia to their ‘colony’ abroad?”

Exciting, huh? Well, I thought so too when I first read it … though the more I read, the sillier I felt. There is a US-listed company being teased in the thick of this goofy chatter about the “Chinese oil colony,” though, so let’s get at a little more of the info and see who they’re pitching.

First, though, we have to figure out about what “oil colony” they’re pitching — we’re told that it’s thousands of miles from Beijing, but is it … Uganda? Namibia? Sudan? Eastern Europe? The mystery builds!

“China began taking a specific interest in a 525,000-square-mile portion of this ‘colony’ over seven years ago.

“It wasn’t just that the area was free from the political turmoil of the Middle East. Early geologists’ reports suggested there was nearly as much oil there as in Saudi Arabia — over 100 billion barrels.

“A few other countries, including the U.S., were aware of the potential cornucopia of oil there.

“But, distracted by two wars in Iraq and Afghanistan, and with our oil industry hijacked by environmental do-gooders, we didn’t act.

“Instead, the Chinese seized the opportunity, pouring billions of dollars into the area and ingratiating themselves with locals.”

And we get some hints about some of the past deals the Chinese have made in this “oil colony” …

“… at least five different projects where China has poured in millions of dollars for future oil riches. The biggest include:

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“Sinopec put $4.65 billion in the colony’s largest oil field, and another $105 million in a smaller, though potentially lucrative field.

“Petro China spent over $1.9 billion for two other massive oil fields.

“And the locals wholly encouraged these investments.”

But, we’re told, this “oil colony” is landlocked! They can’t get the oil out to China — what to do?

“The Chinese have been slowly putting together plans to build a 725-mile pipeline across the colony to a seaport.

“From there, oil will be loaded on ships bound for China. At first, China expects to ship 525,000 barrels of oil a day from the colony.

“But, as infrastructure continues to improve, that number will get even higher.

“My sources tell me the Chinese pipeline won’t be complete until 2016…

“With China’s oil supply desperately low on the home front, they can no longer afford to wait that long. So they’ve come up with an alternative plan to speed deliveries.

“Sources inside the colony report that the Chinese hope to start delivering oil to the sea using existing rail lines.”

And apparently more deals to export this oil may be in the offing:

“Richard Choi, a ‘colonial representative’ in China said a ‘significant’ deal could be announced very soon.”

Well, dang. Wondering why I was feeling silly about getting excited to track down this new “Chinese oil colony?” It’s because all along Blair Morse has been teasing … wait for it … Canada. Yes, our neighbors to the north, and by far our largest supplier of imported oil (second place, in case you’re curious, fluctuates a bit … but lately is close to a four-way tie between Mexico, Venezuela, Saudi Arabia and Nigeria).

OK, probably not just Canada, I suppose, but the “land locked” provinces of Alberta and Saskatchewan, home to most of the heavy oil riches of that country. And yes, it’s this heavy oil, oil sands, tar sands or bitumen (all different terms for the same basic kind of thing) that China is after in central Canada. And yes, arguments over pipelines to the Pacific from Alberta continue — the one I keep hearing about is the proposed Enbridge pipeline, which they’re calling the Northern Gateway, intended to send crude oil westward from Edmonton to the port/terminal at Kitimat (and gas/condensate the other direction — the oil sands producers apparently use natural gas liquids to refine bitumen). If you’re keeping track of the teaser “clues,” then this pipeline would be almost exactly 725 miles.

We’ve been teased about oil sands companies so many times I feel like I’ve practically been there — it wasn’t long ago that Brian Hicks was pitching the “revolution” that would come thanks to his favorite pioneer in SAGD in Alberta, and whenever oil prices are climbing the interest in this huge, politically friendly and environmentally disputed oil reserve drives yet more newsletter writers to grab for their thesauri.

And yes, Richard Choi is a “colonial representative,” I suppose — he’s a trade rep for the province of Saskatchewan in Shanghai, and he apparently told reporters back in January that a deal between Saskatchewan and China, perhaps on transporting crude oil by rail, could come by May. And in case you hadn’t noticed, it’s May now, so perhaps that’s the reasoning behind the tease — hope for a little spike if there’s some substantial news.

So … which company?

“You see, the Chinese don’t have the technology to produce all of this oil themselves.

“Like so many other projects, the Chinese need outside expertise to complete the work. Their ‘oil colony’ is no different.

“A few non-Chinese oil companies are operating in the “colony,” in partnership with the Chinese, of course.

“They aren’t American companies, but one of them is listed on the New York Stock Exchange.

“If you buy shares of this company now, I firmly believe you could double your money when the deliveries start.”

OK, so there are dozens of companies working in the oil sands, and a lot of them, particularly the larger ones, have listings in NY. We need more clues — just saying “in partnership with the Ch