“Tiny Oil Stock, Drilling in the Hottest Region” Penny Oil Speculator

By Travis Johnson, Stock Gumshoe, September 11, 2008

This teaser ad has been around for a while, but I’ve recently been seeing it again, and even got a print copy in the mail recently, so I thought I’d give it a look. It’s from Chuck de Castro, who brought us one rapid riser earlier this year in Eromanga Hydrocarbons, which a few weeks after he wrote about it went from about 15 cents to more than 50 cents (though it eventually fell back down, it’s around 18 cents now).

So will this be lightning in a bottle again? An opportunity for a short term trade, or even a potential long term investment? Well, let’s have a look so you can get started on your research.

Penny Oil Speculator, you’ll be unsurprised to hear, looks for tiny oil exploration companies that generally tend to have big moves when their drilling results are released — though of course those results can be good or bad, and the stock price can also move both directions. These aren’t little companies that are making money, these are little companies that are betting on their drilling acumen.

And this company is no different, though it has made some progress already, and it’s significantly bigger than Eromanga Hydrocarbons.

This is how the tease begins:

“… a tiny penny oil drilling on a large property in the hottest oil region in North America. New technology recently unlocked a huge oil deposit straddling the US-Canadian border.

The U.S. Geological Survey calls it the largest oil discovery ever made in the lower 48 states, and says that there are billions of barrels of oil in the deposit.

Major oil companies are rushing into the region. But this flea-sized company nailed down 76,000 acres in the heart of it. They’ve drilled 14 test wells and all 14 were gushers. They’re bringing those into production and starting to drill another 40 wells.”

Sounds pretty good, eh? And just to let you in on a little secret, the shares are trading today for about 60% less than they were in late May when this one first came to the attention of my readers.

The ad includes lots of examples of great performing picks from the Penny Oil Speculator, of course — including Nido Petroleum, Ultra Petroleum, Hurricane Hydrocarbons, etc. Most of those also rode a big wave of investor enthusiasm for the Bakken formation over the course of this past Spring and early Summer, but are now down to near their 52-week lows.

If you’re not familiar with the Bakken Shale Formation or the Williston Basin, then you’ve been missing out on a lot of hyperbole. This is the large oil reservoir that’s trapped between layers of shale, deep beneath North Dakota, Saskatchewan, and Montana, and in recent years new drilling techniques — mostly hydrofracture and horizontal drilling, have opened this oil to production, leading to a land rush and an investor frenzy.

If you’re interested in the Bakken generally, and want to know the language and some of the players, I think a good place to start is an article that appeared originally in Bloomberg Magazine — you can read it here online if you like.

But what about this specific penny oil company?

More from deCastro:

“Tucked in among the giants, is a tiny, little penny oil which nailed down a large property right in the heart of the Bakken Formation. This little penny oil was started by five oil men who had worked for the big oil companies — and helped develop the techniques that cracked the region open to commercial exploitation.”

He shares some other stuff, too — that this is light, sweet crude oil, which is what the refineries really want. That five investment banks “just invested $38.2 million in the company.”

They’re going to drill 40 test wells this year, and plan another 60 next year, all from just a tiny portion of their big 76,000 acre holdings.

And he thinks that this company will turn your $4,000 into $84,000 (so far, it would have turned your $4,000 into about $1,500 … but perhaps we can give him some more time).

OK — so, if you want the name of the company, you can send Chuck deCastro a check for $5,000 … or, after joining the Gumshoe Irregulars with a small contribution out of the goodness of your heart, you can find out right here what this company is.

No? Ok, then I’ll tell you for free … this is …

Painted Pony Petroleum (PPY.A and PPY.B on the Venture exchange in Canada, PDPYF on the pink sheets)

If you’re one of those who likes confirmation, those specific numbers are from a March press release, so you can check that out if you like. There was also some discussion of this stock back when the teaser initially started circulating in May, when womanwithportfolio unmasked the company for a few interested folks, so you can always