To OTC Journal Members: 
 

Hostage Released and Handcuffs Off- Markets Can Breathe Again

Since about mid summer, the markets have been held hostage as the drama in Europe unfolded. Today, the European Union actually got it together and came up with a plan the world just might be able to embrace, and the equities handcuffs are coming off.

There are 17 different countries involved- that means 17 countries have to agree on a course of action. That's a rough bit of diplomacy. It's going to be expensive for all of them, and they are not all equally complicit in creating the problems. For example, Germany has been fiscally responsible, but Greece and Italy have not. Nevertheless, the formation of the EU has been profitable for Germany, so they recognize the need to stick with it.

One of the initial challenges needed to be met was how to deal with Greek Sovereign debt. All the major European banks hold it, and the big question is how would it affect them is there were a default. The plan is to take a 50% voluntary haircut on the value of Greek debt, thereby actually dealing with the problem. This will be voluntary, so there won't be a technical default. Once the write down is taken, the banks will need more capital.

Enter the EFSF- created in May of 2010, the European Financial Stability Facility was created to provide a mechanism to stabilize European financial institutions.

Reports state the EU plans to fund the EFSF with $1.4 trillion. Banks will be encouraged to go to private markets first, then use the capital available through the EFSF to stabilize their banking system.

The US markets are headed for their best month since 2002 if our October gains hold. Small stocks are coming back.

So- let's look at the come back kid of the month- one I have believed in and have had egg in my face, but looks like it might get very healthy again. 

Bering Exploration (OTC BB: BERX): The Comeback Kid

Let's not pull any punches: BERX, a stock I've been covering all year, got clobbered this summer. The stock was $1.70 six months ago, and traded as low as $.10 at the September/October low.

I believe I've drilled down to the problem. It related to a financing. Lest you think the financiers made money, think again. I believe we will see BERX has eradicated $1/2 million in debt when we see their year end numbers. However, it came at the expense of the stock price.

We'll likely see a ton of debt gone- it converted into stock at $.30 - or in that area, and the debt holders likely off-loaded their entire positions with or without profits. So, what happens when you have a rout of this type? the stock trades down, hits bottom, then starts a rebound phase.

And, that's exactly what happened here in my view. We're going to see a company generating its first revenues with a much improved balance sheet, and more shares I&O.

Net result? The bar has been reset for upside expectations. The stock is not likely to go to $2 or $3 in the near future, but the rebound could easily continue into the $.50 range- more than a double from today's levels.

Why? Glad you asked- it's simple. Take away all the drama associated with the movement in the stock price, and look at what the company has achieved this year.

BERX was on a oil lease acquisition binge this year, and has managed to acquire 3,700 gross acres with potential gross reserves of 19 million barrels of oil. BERX has 6 major projects in some level of development.

As the company disclosed today, it has:

• The Singer Project: 6 million barrels of reserves on 3,716 acres in Louisiana- BERX has identified 65 potential drilling sites, and retains 35% working interest.
• The Ashland Project: also in Louisiana- 1200 acres with possible reserves of 8 million barrels and 20 potential well locations. BERX owns 10% working interest.
• The Golke Project: 272 acres in South Texas has approximately 3.5 million barrels and 10 possible well sites. BERX owns 50% working interest.
• The Luling Project: In Central Texas, BERX acquired gross reserves of 450k barrels. BERX owns 100% working interest.
• The Chicas Locas Project: In Southeast Texas, this one consists of 640 gross acres with about 12,000 barrels. BERX has 50% working interest.

Taken as a whole, I would say BERX has been very busy this past year. 2012 needs to be all about starting the process of drilling some some of that oil. It's already happened, and the company is generating some revenue, but potentially there's a lot more to come.

There's never a guarantee when drilling for oil, but the more you do, the more chances you have for a home run.

This is speculative, which is why it has all the upside potential of a $.20 stock. If it weren't risky, it wouldn't be $.20, and it wouldn't have the upside it has today.

Bering (BERX) is now on the comeback after a pretty rough several months. The company is better positioned than ever. My chart tells me this stock is positioned to rebound.

If one only traces back to the big September fall off, the stock is entitled to regain 61.8% of it's entire drop from $.54 level.

When this happens, it will put the stock back at a target price of $.36 in the short term- 80% above today's level.

With all the projects they have lined up to develop in 2012, there's no reason why the first stage can't be a rebound to $.36, and then upwards from there.

Europe appears to have a plan. The markets have responded by bidding up equities and commodities. With commodity prices rising again, BERX will be back in favor, and now it's cheap enough to make some real money in my view.  

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