This is an article I sent out to my subscribers earlier this week. They are in the money now so I am posting it here as well.
Greentree Gas and Oil (GGO.V, GNGOF)
Recent close $0.14
O/S shares 38,684,247
Market cap $5,415,795
Many of you know that I have been a paid consultant to Wavefront Energy and Environmental Services ( WEE.V) for some time now. I am a big believer in their Powerwave technology for enhanced oil recovery. This recently completed video shows how the Powerwave process works. Companies using this process include Halliburton, Encana, ARG Resources, PenGrowth, Energex, and a Top 5 global oil producer.
However, the company that is currently the most leveraged to the application of Powerwave is Greentree Gas and Oil (GGO.V) in Ontario. Greentree's share price spiked to $0.78 the day after they jointly announced a partnership deal with Wavefront on the Rodney South field. Back on February 2, 2006, when the partnership was announced the price of oil closed at US$64.68. The price of oil on Monday's close was $93.98.
The terms of the agreement included a capital commitment of $2.25 million from Wavefront for field development. This work included the drilling of 8 vertical injection wells straddling 2 horizontal producers. The Wavefront "pilot injection phase" will service/pressure approximately 60 acres of the 320 acre mapped extent of the Rodney South pool. Internally generated reserve estimates for the pool include 3.65 MMStb in place with 1.33 MMStb recoverable and 2.0 MMStb potentially recoverable using Powerwave.
The current market cap of ~$5 million might be reasonable for a company with ~115 boe/day of production in a fiscal regime where royalties are 12.5% however management has projected to exit 2007 with 200 boe/day.
3D view of Rodney Units 1,2,3 and Rodney South.
A series of necessary steps to get the Rodney South field back on production included the unitization of the entire field and approval for the waterflood from the Ontario government. These activities took longer than expected and now Greentree shares are languishing near their 52 week low. Impatient investors have sold their shares and all the excitement of the Wavefront partnership has waned. In the meantime the price of oil has increased 45% and Powerwave systems are now installed at Rodney South. It will take some time for injected water to influence the horizontal producers but we would expect to see an announcement about production rates within 60-90 days.
Directors and Officers hold approximately 25% of Greentree’s shares.
Greentree has a solid long-term management team consisting of:
Duncan Hamilton - President
Mr.
