Seeking Alpha

Rockstone's  Instablog

Send Message
Stephan Bogner is mining analyst at Rockstone Research, he has independently analyzed capital markets and resource stocks for more than 11 years. He is also CEO at Elementum International AG of Switzerland trading precious metals and storing them in a high-security vaulting facility within the... More
My company:
Rockstone Research Ltd.
View Rockstone's Instablogs on:
  • Cardiff Energy About To Become A Producer In Texas

    On October 26, Canadian based oil and gas explorer Cardiff Energy Corp. (TSX.V: CRS) (OTCPK:CRRDF) announced to have completed drilling of the Clayton #1H horizontal well in Runnels County, Texas, USA, without any technical issues. Numerous strong gas kicks and oil shows from the target formation, the Gardner Lime, were encountered, which is a strong indication that the upcoming flow test may turn out impressive.

    Before the eagerly awaited flow test starts, Cardiff Energy and its operator must prepare the site with equipment for well completion. This completion stage is a mere formality and no issues are expected. Rockstone anticipates the announcement of initial flow rates next week. The 1 day flow test will be conducted once the well has been completed, including clearing the location and releasing all drilling equipment, moving in the completion rig and frac tanks, rigging up flow lines and bop, running tubing in the hole, performing swab runs to kick well off flowing in order to monitor and measure flow rates. An acid wash through the lateral may be required after the swab runs, whereas a nitrogen treatment may also be required to further enhance cleaning and consequently flow rates. Rockstone expects this work to be completed this week so that the initial production test can be performed next week with results to be disclosed shortly thereafter.

    On October 26, Cardiff Energy's operator, Martin Energies, reported:

    "We have completed the lateral drilling of the Clayton #1H and will be commencing completion activities shortly. The lateral was drilled with no issues, and encountered numerous strong gas kicks and oil shows from the Gardner zone. We have high expectations for this well."

    A few days earlier, on October 23, the operator commented:

    "During the past few days of drilling numerous impressive gas kicks and oil shows were encountered. The deeper into the zone we drill the formation appears to be much richer in hydrocarbons. With drilling scheduled to be completed this weekend we are looking forward to testing the well."

    On October 19, Marin Energies stated:

    "We have landed the lateral into the Gardner Lime and have encountered significant Gas and Oil shows, indicating a zone with strong potential. The zone came in structurally at a very favourable sub sea level. This drill out has thus far exceeded our expectations."

    Considering such statements from the operator, Rockstone also has high expectations for this well and anticipates initial production rates in excess of 500 barrels of oil equivalents per day, which should pave the way for a significant revaluation of the company. Jack Bal, Cardiff's President & CEO, stated on October 26:

    "We are excited to be entering the completion stage for the Clayton #1H and are looking forward to reporting the initial production rate."

    Jack Bal also announced to have increased its working interest in Clayton #1H to 60%:

    "We are elated with the drilling results to date and are extremely excited to have increased our WI in Clayton #1H to 60%. With funding secured and the well scheduled to be completed this weekend we are looking forward to the initial flow test."

    The phase between exploration/development and production typically provides most upside potential. With Cardiff on the verge of changing its status to a profitable producer, Rockstone anticipates an increased investor's interest in the upcoming weeks. In addition, follow-up drill sites are being selected for an upcoming drill program on its property, whereas negotiations continue for the acquisition of "prime oil and gas leases" in Runnels County. In case Cardiff can report positive production rates from Clayton #1H, the company will be in a favorable position to drill more horizontal wells on its property. This would allow the company to grow even faster as a producer.

    On October 19, Cardiff announced:

    "The Company is also pleased to report that they have acquired an additional 100 Acre prime oil and gas lease bordering the Clayton #1H and have entered into a letter of intent to acquire an additional 400 Acre oil and gas lease adjacent to the Clayton #1H. Furthermore, the Company continues to negotiate other strategic oil and gas lease acquisitions in Runnels County, Texas."

    Direct link to above chart (15 min. delayed):

    While oil prices continue its decline, the US is experiencing a massive drop of active oil and gas rigs in the US, which means that drilling costs have nosedived accordingly. This represents the best time to acquire assets from stressed majors and bring online new production wells. Aaron Clark and Stephen Stapczynski support such arguments with a recent Bloomberg article, entitled "Oil Slide Means 'Almost Everything' for Sale as Deals Accelerate":

    "More than $200 billion worth of oil and natural gas assets are for sale globally as companies come under renewed financial pressure from the prolonged commodity price rout, according to IHS Inc.

    There are about 400 buying opportunities as of September, IHS Chief Upstream Strategist Bob Fryklund said in an interview. Deals will accelerate later this year and into 2016 as companies sell assets to meet debt requirements, he said. West Texas Intermediate crude has averaged about $51 a barrel this year, more than 40 percent below the five-year mean.

    Low prices have slashed profits and as of the second quarter about one-sixth of North American major independent crude and gas producers faced debt payments that are more than 20 percent of their revenue. Companies have announced $181.1 billion of oil and gas acquisitions this year, the most in more than a decade, compared with $167.1 billion the same period in 2014, data compiled by Bloomberg show. "Basically almost everything is for sale," Fryklund said Oct. 8 in Tokyo. "Low cycles are when a lot of these companies can rebalance their portfolios. In theory, this is when you upgrade your existing portfolio."

    Buying Opportunities

    Companies with strong balance sheets are seeking buying opportunities, said Fryklund, citing Perth, Australia-based Woodside Petroleum Ltd.'s $8 billion offer for explorer Oil Search Ltd. and Suncor Energy Ltd.'s $3.3 billion bid for Canadian Oil Sands Ltd. Both targets rejected initial offers.

    California Resources Corp., the Occidental Petroleum Corp. spinoff, said on Tuesday that it's considering selling stakes in oil and natural gas fields, pipelines and processing plants to pay down a $6.5 billion debt burden that's more than four times larger than its market value.

    Clayton Williams Energy Inc., an oil and gas driller run by Texas wildcatter Clayton "Claytie" Williams Jr., is exploring a sale, according to people familiar with the matter. It's working with a financial adviser to solicit offers from potential buyers, though it ultimately may decide to remain independent.

    Default Risk

    As of August, one out of every eight junk-rated oil companies was in danger of defaulting, according to Moody's Corp. WTI plunged below $40 a barrel in August to the lowest price in six years. The grade slipped 2 cents to $46.64 a barrel Wednesday on the New York Mercantile Exchange.

    Next year the U.S. benchmark may trade around $55, said Fryklund. It will take several years for supply and demand to rebalance and prices may rise to about $70 a barrel by 2018, he said.

    "These down cycles are really great for defining the winners for the next cycles," said Fryklund. "The ones that have cash right now, the ones that have good financials are seeing lots of opportunities."

    On October 25, CNBC reported on a Chinese investment company to buy Texas oil fields for $1,3 billion, demonstrating the opportunistic times for some oil and gas companies in a stressed market:

    "A Chinese investment holding company said it has signed a letter of intent to purchase oil fields in Texas for 8.3 billion yuan ($1.3 billion) through a limited liability partnership. In a disclosure to the Shanghai Stock Exchange, Yantai Xinchao Industry Co. Ltd. said the oil fields in Howard and Borden counties would be bought from Tall City Exploration and Plymouth Petroleum, two Nevada-based companies. In the Saturday filing, Yantai Xinchao said it signed a letter of intent Friday with Ningbo Dingliang Huitong Equity Investment Center, a limited liability partnership, and its seven shareholders to buy the oil fields through a Ningbo Dingliang subsidiary, Moss Creek Resources LLC. It said the transaction has been approved by the Committee on Foreign Investment in the United States."

    The horizontal rig which drilled Clayton #1H in Runnels County, Texas:

    (click to enlarge)

    Direct link to above chart (15 min. delayed):

    Direct link to above chart (15 min. delayed):

    Direct link to above chart (15 min. delayed):

    About Cardiff Energy Corp.

    Cardiff Energy Corp. is an emerging junior oil and gas company engaged in the acquisition, exploration, development, and production of oil and gas properties in the United States of America with plans to expand operations into the Western Canadian Sedimentary Basin. Management is focused on building shareholder value. To achieve this, Cardiff's business strategy is to:

    • Identify oil & gas investment opportunities employing modern technology and practices to realize & optimize production and ultimate recoveries from currently and/or previously productive horizons.

    • Identify untested opportunities employing modern technology and knowledge to bring such situations to the production stage.

    • Identify and partner with operators who have experience and expertise to exploit the opportunities before them. Tapping into this wealth of experience and knowledge base of successful operators is an effective business tool for reducing risk and increasing Cardiff's exposure to unique business opportunities in the oil and gas sector.

    Analyst Coverage

    Research #5 "Final Countdown to the Day of Reckoning" (October 7, 2015)

    Research #4 "Cardiff Energy: Back in the Game" (September 9, 2015)

    Research #3 "Cardiff Energy About To Reach The Finish Line" (August 5, 2015)

    Research #2 "Cardiff Energy Starts Horizontal Drilling in Texas within 24 hours" (June 15, 2015)

    Research #1 "Cardiff Energy Capitalizing Window of Opportunity with a Horizontal Well in Texas next Week" (June 8, 2015)

    Disclaimer: Please read the full disclaimer within the full research report as a PDF (here) as fundamental risks and conflicts of interest exist.

    Oct 28 12:20 PM | Link | Comment!
  • Voisey‘s Bay 2.0

    Today, mining analyst Stephan Bogner from Rockstone Research published an update on Equitas Resources Corp. (EQTRD TSX.V: EQT; Frankfurt: A12CWK) as the company provided a drilling update yesterday after market close.


    The discovery of the Voisey's Bay Nickel-Copper-Cobalt Deposit in Labrador has been heralded as one of the most significant discoveries made in Canada in the last 30 years. Last month, Equitas Resources Corp. announced the start of a phase 1 drilling program on its Garland Property, some 30km southeast of the Voisey's Bay Mine. As per yesterday's news, 4 of 10 prospective anomalies have already been drill tested and assays are expected shortly. In the meantime, it may be worthwhile to look back at the initial discovery of Voisey's Bay some 20 years ago. As Mark Twain said: "History never repeats itself but it often rhymes."

    The full research report can be accessed with the following links:

    English (PDF):

    Web version:

    German (PDF):

    Disclaimer: Please read the full disclaimer within the full research report as a PDF because fundamental risks and conflicts of interest exist.

    Oct 21 6:49 AM | Link | 1 Comment
  • Emergence Of The Most Prospective Explorer In The Athabasca Uranium Basin

    In July, Lakeland Resources Inc. and Alpha Exploration Inc. announced plans for a strategic business combination. Shareholders approved the merger in September. The new company, ALX Uranium Corp. (LRESD), commenced trading in Canada and Germany on September 25. Soon thereafter, ALX announced on September 29 that drilling was underway at its Kelic Lake Property located along the southwestern margin of the Athabasca Basin in Saskatchewan, Canada - the preeminant high grade uranium district in global uranium production for the past 40 years.

    The newly combined Board of Directors and management team of ALX Uranium Corp. brings an unusual depth of expertise and track record of success to the junior exploration sector.

    "The consolidated share structure and anticipated market capitalization for ALX will provide a niche in the junior uranium space for potential new investors, underscored by the combined marketing strength and technical expertise of both companies, and their track record of success in exploration spanning the past 30 years." (Jon Armes, President & CEO)

    "With this business combination we believe the combined company can leverage the strategic treasury to facilitate rigorous and aggressive exploration on a merged property portfolio which spans the PLS camp along the southwest margin of the Athabasca Basin to the Black Lake area along the northeastern margin of the Basin." (Dr. Michael H. Gunning, Executive Chairman)

    From Alpha, Dr. Michael Gunning has been appointed as Executive Chairman and Director, and Warren Stanyer and Benjamin Ainsworth as Directors. From Lakeland, Jon Armes will continue in the position of President, CEO and Director, and Jody Dahrouge and Steven Khan will continue as Directors. Sierd Eriks from Alpha will continue his work as Vice-President Exploration for ALX. Charles Roy from Alpha will continue in his position as Technical Advisor to the Board for ALX. From Lakeland, Mr. David Hodge and Mr. Neil McCallum have resigned as Directors.

    As the former Executive Chairman of Alpha Minerals (the precursor to Alpha Exploration),Michael Gunning led equity financings of more than $20 million dollars, which funded exploration at the Patterson Lake South (PLS) uranium discovery. He also steered the eventual sale of the company in an all-share transaction valued at $189 million dollars, while retaining working capital and non-core assets for the successor company, Alpha Exploration. Prior to Alpha, Dr. Gunning was President and CEO of Hathor Exploration Ltd., where he successfully transitioned the company from the grass roots discovery to the delineation and economic evaluation of the Roughrider Uranium Deposit, and the eventual sale of the company to Rio Tinto in an all-cash transaction valued at $654 million dollars.

    Alpha brings another high-calibre personality to the merged team at ALX: Benjamin Ainsworth, who had a senior role at Alpha Minerals (formerly ESO Uranium) from 2005 to 2013, as Director and originally as VP Exploration and eventually as President and CEO. Mr. Ainsworth led the development of the company's exploration portfolio and directed its exploration efforts, including the joint venture partnership, additional staking and grass roots exploration program that led to the discovery at the PLS Property. Ainsworth was a Director at Hathor Exploration from 2005 until the successful sale of the company to Rio Tinto in 2012. Initially, he acted as VP Exploration, and was active in the grass roots exploration that led to the discovery of the Roughrider Uranium Deposit, the first significant high grade discovery ever made by a junior in the world's premier high grade uranium district in the world, the Athabasca Basin.

    (click to enlarge)

    Drilling underway at Kelic Lake Property

    On September 29, ALX announced the start-up of drilling at the Kelic Lake Property located along the southwestern rim of the Athabasca Basin. Some 1,800m of diamond drilling is planned in up to 6 holes located on a single drill fence. Drilling is expected to take 3-4 weeks to complete. ALX will evaluate the extension of the drill program depending on results.

    (click to enlarge)

    The drill target is multi-faceted, including:

    • Airborne V-TEM conductor, with coincident ground-based fixed loop and TEM conductors;
    • Airborne gravity low as well as radiometric low;
    • North trending magnetic gradient (contact) of regional extent;
    • Elevated radon in soil gas, and uranium in Ae horizon soil samples ;
    • 1km east of radioactive spring.

    Overall, the exploration target is shallow. Thickness of Athabasca sandstone cover in the area is approximately 100m based on historic drill holes.

    Recent exploration on the property by ALX includes:

    September 2015: Surface geo-chemical program, including: 92 Ae horizon soil samples; 52 radon flux measurements at amenable soil sample sites; 13 stream silt samples along Mirror River.

    March 2015: Airborne radiometric survey, and magnetic and FALCON® airborne gravity gradiometer surveys: 1,210 line-km at 200m line spacing covering a grid area of 10 x 11.5 km. The current drill program is helicopter-supported. A near-by full-service lodge provides cost effective logistics.

    (click to enlarge)

    The Kelic Lake Property is a large, contiguous block of 6 mineral claims covering more than 10,000 hectares (~25,000 acres). The property is situated approximately 50km east of Highway 955 and straddles the southern margin of the Athabasca Basin, approximately 65km east of the recent discoveries at Patterson Lake. Major regional structures are a critical element to the formation of unconformity-type uranium deposits in the Athabasca Basin; the Kelic Lake Property is in between the eastern boundary of the Clearwater Domain and the crustal-scale Virgin River shear zone, which is regional host to the Centennial Uranium Deposit located around 70km to the east of the property.

    (click to enlarge)


    Rockstone values the strategic merger between Lakeland Resources Inc. and Alpha Exploration Inc. as the emergence of the most prospective uranium exploration company known in the Athabasca Basin. The company started a drill program on its Kelic Lake Property last week, and a discovery of a major uranium deposit could be right around the corner. ALX Uranium Corp. is well-financed and focused on exploration discovery at the drill bit; several other drill programs are planned over the next 6 months.

    ALX not only has a merged board and management team with a diverse and proven collective track record, efficiencies of merged G&A structures, and a significant combined treasury (approximately $3 million CAD), but it also has a significant consolidated land position at the Carter-Hook Lake Project in the high profile Patterson Lake (PLS) camp.

    (click to enlarge)

    (click to enlarge)

    The combined Carter-Hook properties covers approximately 15km length of the PLS conductive corridor immediately to the northeast of the recent discoveries in the camp, namely: PLS, 600W, Arrow, and Spitfire Zone. ALX's consolidated Carter-Hook Property covers all 3 of the target conductor corridors. Further, Cameco Corporation, the western world's leading uranium mining company, has established significant land positions adjacent to ALX. Rockstone looks forward to the drilling of this promising uranium property.

    Overall, ALX will focus on 6-8 highly prospective drill-ready projects over the next 24 months; the goal is shareholder value through exploration discovery in in the Athabasca Basin, the world's well established and preeminant high grade uranium production district.

    Pictures from the current drill program on the Kelic Lake Property located along the southwestern margin of the Athabasca Basin in Saskatchewan, including base camp, drill rig, drill crew, core shack, and helicopter support (slinging equipment):

    Devon Graham at the drill control panel:

    Devon Graham, Myron Nezcroche and Sierd Eriks at the drill:

    Sierd Eriks and Myron Nezcroche at the drill:

    Sierd Eriks logging drill core:

    Logged drill core:

    About ALX Uranium Corp.

    ALX Uranium Corp. was formed as the result of a business combination between Lakeland Resources Inc. and Alpha Exploration Inc. ALX Uranium Corp. is a uranium and mineral exploration company focused on the Athabasca Basin in Saskatchewan, Canada; a leading district in global production for 40 years, and home to some of the world´s largest and richest high-grade uranium deposits. ALX is well-financed to actively explore a portfolio of early-stage properties. ALX continually and proactively reviews opportunities for new properties, whether by staking, joint venture or acquisition. The newly combined Boardof Directors and management of ALX brings to the junior exploration sector an unusual depth of expertise and track record of success.

    Company Details

    ALX Uranium Corp.
    1450 - 789 W Pender Street
    Vancouver, BC, Canada V6C 1H2
    Phone: +1 604 681 1568

    Shares Issued & Outstanding: 41,443,462

    Canadian Symbol (TSX.V): AL
    Current Price: $0.08 CAD (Oct. 7, 2015)
    Market capitalization: $3 million CAD

    German Symbol / WKN: 6LLN / A0J2Q3
    Current Price: €0.046 EUR (Oct. 8, 2015)
    Market capitalization: €2 million EUR

    Direct link to above chart (15 min. delayed):

    Analyst Coverage

    Research #7 "Lakeland Resources and Alpha Exploration Propose Strategic Merger" (July 23, 2015)

    Research #6 "Historic Turnaround in Uranium Prices and Equities in the Making" (incl. interview with geologist Neil McCallum; November 27, 2014)

    Research #5 "Gibbons is getting drilled finally" (November 5, 2014)

    Research #4 "Bright Stars in the Athabasca Basin Uranium Hunt" (incl. interview with geologist Neil McCallum; February 27, 2014)

    Research #3 "Highest Radon Values Ever Detected in the Athabasca Basin" (January 9, 2014)

    Research #2 "No Dead-Cat Bounce: A Dead-Serious Warning From Uranium" (December 5, 2013)

    Research #1 "Athabasca Basin: The Place To Be For The Upcoming Uranium Boom" (November 4, 2013)

    (click to enlarge)

    Disclaimer: Please read the full disclaimer within the above mentioned full research report as a PDF (here), because fundamental risks and conflicts of interest exist.

    Oct 08 10:46 AM | Link | Comment!
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.