For months now I have been trying to get across to our readers how important China is to the price of all commodities, not just gold and silver. I got back from a two week trip to China last week and boy have I been wrong in how I was looking at China.
I sorta thought the demand from China might be responsible for 50% of the price of any commodity. Wrong. On my first day in Beijing, I was looking out of the 18th floor window of my room at the China World Hotel and I counted 20 building cranes. Then I flew to Xinjiang province in Western China and all I could see was building cranes outside my window. Then I flew back to Beijing and on to Shandong province in Eastern China and all I could see was building cranes and worker bees swarming over construction sites seven days a week.
China doesn't just have an impact on commodity prices, it is everything. And prices are going up from here on copper, iron, moly, silver, gold, oil and everything else you need to construct a modern economy in the shortest timeframe in all of recorded history. What is going on in China will determine commodity prices for many years to come.
What exactly does that mean
for the price of petroleum in Albania you may wonder?
All of which needs energy, and oil provides energy the fastest. Don't look for $20 oil anytime soon, It's more probable that you will see $60 oil before you see $40 oil. And a phone call from Robert Cross of Northern Orion fame last week gave me a partial solution you may be interested in knowing about.
Bob Cross is a director of a newly-formed oil company named Bankers Petroleum which just did a deal with the state oil company Albpetrol in Albania. Kinda rolls off your tongue. (Bankers Petroleum BNK-V $.65 Canadian 259 million shares outstanding, 279 million shares fully diluted) http://www.bankerspete.com/.
Basically, the Albanian state oil company Albpetrol realized they needed access to both technical expertise and capital from the west. The President of Bankers Petroleum, Richard Wadsworth has worked on the biggest heavy oil field in Europe at Patos Marinza for the past three years and he came up with a win-win situation for everyone.
Albpetrol signed a deal with Bankers Petroleum this past June 19th whereby Bankers Petroleum would take control of 28 oil wells immediately in Albania at Patos Marinza. In return for a $2 million work commitment, Bankers Pete would take control of a number of oil wells at the field. Banker Pete gets 30% of the existing production and 95% of all increase in production from the wells under their control.
Albpetrol gets 70% of all existing production and a 1% override on all increase in production increasing to 5% override when Bankers Pete has recouped their initial investment.
The deal is working for everyone. Since June, by spending an average of $50,000 per well to optimize production, Bankers Pete has brought 25 wells on line and is netting 1,200 barrels of oil a day. Bankers Pete anticipates production of about 1.25 million barrels per year by the end of 2005.
It's a good time to be in the oil business, especially when someone will hand you dozens of wells and allow you to keep 95% of what you can increase in production. It's a brilliant move by Albpetrol and obviously by Bankers Pete whose shares have rocketed from $.45 in late August to $.65 today. The word is getting out and volume was a blistering 1.2 million shares this past Friday.
Bob Cross was candid with me in our phone call. They came out of the blocks running and their feet have yet to hit the ground. By any measure, oil reserves in the ground should be worth $2-$4 in US dollar terms so the stock is still cheap. The Canadian standard for reporting reserves and resources is called 51-101 and BNK is in the process of upgrading a prior report of 129 million barrels in reserves. The 51-101 should be complete by December.
But one thing Bob Cross told me really rang my bell. Bankers Pete is going to use the Wheaton River model. Remember Wheaton River? Three years ago they were selling for about the money they had in the bank, $30 million. They had no projects but did have some pretty dynamic management in the form of Ian Telfer who believed gold and silver were headed higher. Now Wheaton Rivers has a market cap over $2 billion after a series of brilliant takeovers.
So my ears perked up when Bob mentioned Wheaton River. Since this deal seemed almost too easy, I asked him if it could be duplicated. He laughed and said, "Yes." If it can and if they do as well as they have coming out of the chocks, the price is headed a lot higher.
Naturally we suggest our readers do their own due diligence. It's your money, guard it carefully and invest in any stock after you have looked into them. Don't listen and invest blindly on the basis of what anyone says.
Bankers Pete is not an advertiser. But I don't write about stocks unless I like them and the ones I like the best, I buy as soon as I put the phone down. That's what I did here. So you can safely assume we have a vested interest.
The company has experienced management, I like their business model and it certainly seems a good time to be taking an interest in any energy stocks. Don't get carried away chasing the stock higher, stocks go up and down and pick any entry point carefully. It's only natural that stocks experience a bounce when anyone writes about them.
Another trip. By the time you read this I will be
once again in the Wilds of Beautiful British Columbia, looking
at Eagle Plains Galore Creek/Copper Canyon project, before they
get snowed in.