Frank Curzio is tantalizing us to subscribe to his Penny Stock Specialist newsletter (Stansberry & Assoc.) by teasing about a few penny stocks in the shale gas business — but of course, that’s not enough, there has to be a huge back story as well.

And the story this time, should you choose to sit through the long promo “video,” is that the Saudi’s are trying to cut back on domestic oil consumption because they’re afraid high oil prices will help spur adoption of the “fuel of the future.” I’ll spare you the long rundown, but basically the first couple pages (minutes) are a pitch for the revolution in horizontal drilling and fracking that has made natural gas cheaper and more plentiful in the US, and possibly in many other places around the world.

Shale gas has clearly been a focus of big energy firms, with lots of merger and acquisition activity to get access to acreage in areas like the Marcellus Shale, and natural gas as a transportation fuel has also been promoted many times before, most vociferously in the “Pickens Plan,” so Curzio basically puts these two trends together, adds some more details (continuing tax credits for natural gas vehicles, continuing, albeit slow, adoption of natural gas in the trucking industry), and predicts a boom for small shale gas companies with valuable acreage — a boom that will come either because they’re bought out, or because natural gas demand continues to grow and they make lots of money as producers.

But all of that is probably stuff you’ve heard before — what Curzio’s teasing in this latest ad is that he’s got specific ideas, he calls them “Penny Shale Firms,” that he thinks will at least double. He’s pitching a special report that he’ll give to new subscribers, called “How to Make a Fortune on the Shale Gas Megatrend” … but, thankfully for your friendly neighborhood Stock Gumshoe, he also provides a few wee clues that we can stuff into the Thinkolator … and perhaps we can identify these stocks for you without subscribing to another newsletter, eh?

So with that preamble, let’s get to sleuthifying … here are the clues for the first “Penny Shale Firm:”

“Penny Shale Firm #1: 160% Overnight Potential

“The hottest shale resource in America right now must be the mammoth Marcellus field that covers virtually half of the east coast.

“Penny Shale Firm #1 owns 40,000 acres in this region… and expects to begin producing from its first well in under six months, with plans to drill 21 more wells this year.

“These assets alone – based on the prices Big Oil is willing to pay – make this tiny firm worth over $550 million. Today, that’s 160% more than its current market cap.”

And Curzio tells us that he thinks the Marcellus acreage is worth 160% more than the company’s market cap — but that they also have another asset:

“This tiny firm also has extremely valuable assets in Texas’ ‘Deep Bossier’ region…

“A field so rich in shale gas, they’ve “struck gold” on 23 of their first 25 holes.”

So … hoodat? The only other basic info we know is that since this is a Penny Stock Specialist idea the share price must be below or near $10 … toss all that info into the Thinkolator, and … waiting … OK, here we go, this must be: Gastar Exploration (GST)

Hmm, rings a bell, though I can’t say I’ve heard much from them lately. Gastar used to be into coalbed methane in Australia, too, though they sold that to pay down debt and focus on Texas and the Marcellus, (they also do have a coalbed methane project in the Powder River Basin).

I should be clear here: there’s some chance that the Thinkolator has churned out an iffy response to this one — Gastar is very leveraged to the Marcellus, and also to the Deep Bossier, which is where their primary producing assets live. They did successfully complete 23 of 25 Deep Bossier wells, though I don’t know that they’d use the “struck gold” expression for all of them, but the clues for the Marcellus are a little bit off — Gastar says they now have about 80,000 net acres in the Marcellus Shale/Appalachia, so if I am right I don’t know how the 40,000 number comes in unless someone made a mistake in figuring net acreage.

For the other clues, Gastar did report in that they had drilled their first well in the Marcellus in the third quarter and hoped to frac it by the first quarter of 2011, so that is a six month timeframe — but it’s not the next six months, they should have some news before then. In that same report they also announced that they planned at least 20 wells in 2011, so the 21 is a pretty close match — and I suppose you could interpret the guidance to be 20 more wells after this first completed one. Their latest investor conference presentation noted that the 15-month drilling program included 22 gross horizontal wells in the Marcellus, so the teased numbers are generally in line (it’s only about 10 net wells, incidentally, due to their newer Marcellus JVs).

Gastar is an interesting company, they have big (for their size) positions in two of the lowest cost shale gas fields in the country, but they’ve had tough times — when they sold off the Australian coalbed methane assets that was a company saver, and they’ve scaled back development in the Deep Bossier before due to low gas prices, they don’t have the huge resources of the largest gas companies so they have to be flexible at cutting back capital programs when prices change. They do hedge a fair amount as well, and they have some joint ventures to pawn off costs on partners, which is probably sensible even if you’re convinced that natural gas will really be on fire again sometime soon.

But I must say, whether or not Curzio is really pitching this one, it does appeal at least a little bit — it’s obviously risky, since pretty much all the shale gas plays get unprofitable down under $3.50 for a gas price (that’s $/mmbtu) and the Henry Hub price now is around $3.80, but they have done some hedging and cost controls, their balance sheet is in good shape, and they are very levered to the Marcellus, including the somewhat less controversial western end of the Marcellus, and some liquids-heavy areas (natural gas liquids currently give a nice boost to returns since they’re more connected to oil prices than gas prices) — so if you think natural gas is the place to be, it may be worth some more investigating. They also, for what it’s worth, have some Eagleford property that they’re currently testing for oil at some expense in 2011, so if that works out well it might spur the shares a bit, but Gastar will continue, I presume, to be very much focused on gas and on the Marcellus, for good or ill.

More? Let’s see what else is teased:

“Penny Shale Firm #2: Could Quadruple from Here

“Penny Shale Firm #2 is also drilling in the Deep Bossier – with 42,400 acres in the area, and another 62,500 in nearby Cotton Valley….”

“Over the past five years, this company has increased its gas production by 568%.

Are you getting our free Daily Update
"reveal" emails? If not,
just click here...

“Since 2009, they’ve taken more than half their rigs offline (slashing costs)… and still increased production by 40%.

“I think it won’t be long before word really starts getting around… and this tiny stock really starts to run….

“Get in now, and you could quadruple your money over the next few years.”

So … the mighty, mighty Thinkolator tells us that this one must be … GMX Resources (GMXR)

Though, to hear them tell it, they suddenly went from being a very successful natural gas company in early January to what is now a firm that eschews gas and is largely focused on oil going forward. They recently acquired some acreage in the Williston Basin and Niobrara, and, though the teased numbers above match what they told us in presentations at the beginning of the year when they said they had attractive economics and “stacked pay targets in the rich East Texas Basin,” they now say that they’ll soon be spending more than half of their money developing oil assets to the North.

And yes, they are producing more gas with fewer rigs than in 2009 — they’ve done more completions and fracs over the last year or to, and had four or five net rigs drilling in early 2009, down to one rig for the roughest part of that year, and now two “net rigs drilling” since mid-2010, and over that time they did increase production from roughly 35,000 to a bit over 50,000 MCFE/d, so that fits in roughly with a 40% production increase and a halved rig count. More importantly for our sleuthing purposes, the acreage numbers are an exact match to what GMXR claimed in their early January presentations [PDF] — though the Bossier/Haynesville number is net and the Cotton Valley number is gross.

Like Gastar, I didn’t know much of anything about GMXR before taking this quick look today — but this does appear to be either a very transformative moment for them, or, perhaps (if you’re a cynic), a “me too” move into focusing on oil that might cost them if natural gas recovers as quickly as some gas boosters believe (or if they fail to have initial success in these new Williston/Niobrara projects). If you’re interested to see just how much the company’s focus and “story” about itself has changed in the last couple months, just review their presentation from January 5 here back when they were all about natural gas, and their presentation from February 22 here [PDF] after they started this “transformation to oil.” With the way oil and gas prices have moved over that time you have to say it sounds like a smart move in the short term — whether it works out over time is, of course, something I can’t tell you.

Like Gastar, incidentally, GMXR has also had some painful years (like most gas companies, in fact), and has spent much of the past year repairing the balance sheet, so they have already done at least some of the dilution and debt pay-downs that were clearly necessary — doesn’t mean they’re home free, but it looks like they’re in decent shape cash-wise, especially if they continue to hedge a lot and bring in JV partners to help with drilling costs. That, like all of the info above, is just a quick first impression, and I ain’t a natural gas or drilling expert no-how.

We’ll have to leave the third Penny Stock Shale pick for another day (assuming I can identify it at all), but that should give you a couple $5ish ideas to pick over for your oil and gas pleasure — if you’ve got an opinion (OK, we’ll accept facts, too) about either of these, or other favorite shale plays, well, let us know with a comment below.

And if you’ve subscribed to Frank’s newsletter, we’d like to know what you think — just click here to review Penny Stock Specialist for your fellow investors. Thanks!