Industry analysts have been predicting a world wide energy shortage for years and the bubble finally burst in 2000. Oil more than doubled during the year causing serious financial pain at the gas pump. Natural gas, the fuel of choice for power plants, exploded off the charts with a 500% move from $2 mcf (1,000 cubic feet) to $10 mcf, causing electricity black outs in California. Natural gas has pulled back considerably from last winter's highs, but analysts believe geopolitical forces will push prices higher again.

Reserves of natural gas are at an all time low. For the first time in many years small oil and gas companies all over North America are reving up and profit potential is exciting. Canada, our massive neighbor to the North, is rich in natural resources and the energy behemoths are hunting for elephant sized reserves. Many small companies will profit tremendously from joint ventures and exploitation of their own properties. 

President George W. Bush, former oil company executive, has a clearly stated agenda to reduce U.S. dependence on overseas sources of oil. According to a New York Times article, Canada is already the 2nd largest supplier of oil to the USA, next to Saudi Arabia, and Canada is the number one supplier of natural gas to America. 

As conflict grows between the U.S. and the Middle East, the Bush administration is also pushing for a North American Perimeter of Protection which further recognizes the importance of reducing U.S. dependence on overseas oil and increasing the supply from Canada. The Bush Administration has publicly stated its intention to be proactive in developing Canadian natural resources. Canada calls this policy the "Bush Push".

Strong evidence suggests the Bush Push into Canada is already well underway. Hungry US based oil and gas companies have been on an acquisition binge this year. Takeover activity in Canada's oil patch was approximately $1.2 billion in 1999, $3.9 billion in 2000 and now in the first 9 and one half months of 2001 U.S takeovers are a staggering $24.0 billion. 

These 3 massive acquisitions totaling $11.4 billion have been announced in the last six weeks alone.

In this setting, we have uncovered a micro cap company that is perfectly positioned to benefit from the renewed interest in Canadian natural resources. Investors, governments and industry are increasingly looking at oil and gas as an integral part of a financial plan. Furthermore, money managers are investing in oil and gas service companies that profit from building and maintaining the large-scale infrastructure projects required to produce oil and gas as a hedge against fluctuating commodity prices. Energy Power Systems Limited (OTC BB: EYPSF; Frankfurt: EPW) is our recommendation as it has both elements- an Oil and Gas Division and an Engineering and Offshore Division. The stock has minimal downside risk and exciting upside potential.

October 19, 2001
 

OTC Journal Profile: Energy Power Systems LTD (OTC BB: EYPSF; Frankfurt Exchange: EPW)

• Stock Listing: OTC BB: EYPSF; Frankfurt Stock Exchange: EPW; WKN 919384
• Estimated Shares Issued and Outstanding: 7.3 million
• Estimated Public Float: 3.1 Million
• Closing Price and Volume: $3.67 on 156,400 shares
• Market Capitalization: $27 Million
• Fiscal 2001 Revenue: $19.5 million est (CDN)
• 52 High and Low: $5.37/$1.79
• Average Daily Volume: 262,700 (last five days)
• Average Closing Price: $4.08 (last five days)

Energy Power (OTC BB: EYPSF, Frankfurt: WKN 919384) is a vertically integrated Oil & Gas Exploration and Development Company and a Contractor of Infrastructure Projects operating as an OIL & GAS DIVISION and an ENGINEERING & OFFSHORE DIVISION. One division generates cash flow the other drives revenues and builds hard assets - both have exciting upside potential in this new era.
 

Engineering and Offshore Division

The Engineering and Offshore Division (M&M Engineering & Offshore) of Energy Power has been in business since 1968, and generates about $20 million in annual Revenues. M&M Engineering & Offshore is an industrial, mechanical and electrical contractor and its Offshore subsidiary produces steel components for structures and heavy industry; manufactures pressurized vessels and tanks; and provides in-plant fabrication, welding and assembly services for the offshore oil industry at its 40,000 square foot and 15 acre production yard in St. John’s, Newfoundland.

Energy Power also owns a 147,000 square feet fully enclosed fabrication facility on 40 acres of land adjacent to a deep sea quay at Port aux Basques, Newfoundland along one of the major sea lanes of the world. The complex is ideal for both offshore and onshore work.  Through this facility the company can offer large offshore infrastructure projects a variety of multi-metal fabrication, marine refurbishment and outfitting capabilities.

There are a substantial number of new exploration projects being launched in M&M’s backyard by major oil companies. Joint ventures and outsourcing to local companies is the norm. M&M has been in business for over 30 years, and we expect them to capitalize on these new opportunities.

The Newfoundland Transshipment Terminal pictured here, is one example of Energy Power’s M&M Engineering & Offshore Division work. Having successfully participated in constructing Phase One and Phase Two earlier this year, M&M received a contract to complete the mechanical installation of Phase III of the Newfoundland Transshipment Terminal.

The tank capacity at this terminal is 2.5 million barrels of oil. Another storage tank is being added which will bring the capacity to 3 million barrels of storage. The Hibernia field alone is estimated to contain 850 million barrels of oil.

Energy Power’s  M&M Engineering and Offshore Division has numerous construction and fabrication projects underway. As recently as October 4th, 2001 it announced a $3.0 million contract from North Atlantic Refining Ltd., (NARL) to rebuild a process heater and associated structural steel fabrication and installation. NARL operates the 105,000 barrels per day refinery in Newfoundland, holds the largest refinery dock in North America and is only 3 sailing days from New York. The Engineering and Offshore Division is a steady operating division with strong growth potential for Energy Power and its shareholders and supports the basis of our strong buy recommendation for Energy Power (OTC BB: EYPSF; Frankfurt Stock Exchange: EPW; WKN 919384).

Oil and Gas Division

The Oil and Gas Division is the wild card which provides the exciting upside in this stock.

In February the company announced they had acquired 25% interest in 1/2 million acres on Prince Edward Island (PEI). This property is located in the heart of Canada's eastern oil and gas country. Click here to read the full text of the press release.

According to an article in The New York Times dated September 7, 2000, Atlantic Canada could prove to be the next generation North Sea. Of the 11 oil fields larger than 100 million barrels discovered worldwide in the last 20 years, 4 have been off the coast of Atlantic Canada. Canada is the largest supplier of natural gas to the United States and America's second largest supplier of oil. Exxon Mobil estimates the potential oil reserves of Eastern Canada to be 40 billion barrels. The natural gas reserves of Newfoundland Labrador alone are estimated at 62 trillion cubic feet, enough to energize more than 700 million homes in North America for a year. The Sable Offshore Energy Project off Nova Scotia is already pumping 500 million cubic feet a day of natural gas and lighting up New England.

In an October 9, 2001 announcement, EOG Resources Inc, (NYSE: EOG) one of the largest independent oil and gas companies in the United States, revealed it would invest $50.0 million in a 12 well expenditure agreement with Corridor Resources to develop its McCully gas discovery. The McCully property is located on the New Brunswick side of the Confederation Bridge connecting Canada’s mainland to PEI and Energy Power's PEI leases.
 

Accomplishments in 2001

In a difficult world market, Energy Power (OTC BB: EYPSF, Frankfurt: WKN 919384) has bucked the trend and appreciated substantially. The OTC Journal launched its original profile on the stock back on February 10th at $2.95. Today the stock is trading at $3.75, up 27% since February. During the same period of time the NASDAQ is down 33.5%, making this performance even more remarkable.

The company has executed it business plan. Here are Energy Power's Accomplishments in 2001:
 

February 9th- Bought 25% interest in natural gas property on Prince Edward Island in Atlantic Canada. March 14th- Engineering and Offshore Division awarded contract on Newfoundland Transshipment Terminal. March 23rd- Company acquired additional interest in natural gas properties in Alberta and Ontario. April 27th- Company acquired interest in three more natural gas properties in Alberta. May 1st- Engineering and Offshore Division announces additional $3.0 million of infrastructure contracts. May 3rd- Company announces filing of application for listing on the American Stock Exchange. June 5th – Energy Power announces 3rd quarter financial – consolidated revenues $15.2 million and consolidated gross profits of $1.5 million. June 18th- Company announces acquiring of additional interest in Alberta  properties. July 18th- Company announces $1.0 million  summer drilling program. August 7th – Energy Power acquires additional interests in producing oil 7 gas property in Western Canada – Stock only acquisition enhances cash flow and strengthens EPS position September 11th- Company announces Ontario oil well going into production. October 4th - Engineering and Offshore Division gets another $3 million in contracts. October 9 – Energy Power announces listing on Frankfurt Stock Exchange (OTC BB: EYPSF, Frankfurt: WKN 919384) October 11 – Energy Power Expands Oil & Gas Exploration With Multi Well Drilling Program

Pictured here is a map of Energy Power's Alberta drilling property highlighted in the October 11th news release.

Conclusion

An article which appeared on CBS Marketwatch earlier this year states the following:
 

Energy Power stands to benefit greatly from the Bush Push to aggressively develop Canada's untapped natural resources. This will help mitigate US dependence on overseas oil, and keep our energy supply under control.

This company is executing its business plan and the stock has developed a prolific following. Any significant discovery by this company should yield much higher prices in the stock, and their Offshore and Engineering Division stands to benefit greatly by new multi-billion dollar offshore projects in Atlantic Canada.

Scott Fraser, The Natural Contrarian and renown financial newsletter writer recommended an investment in shares of Energy Power at this time with a short-term goal of $6.00 and a longer term goal of $10 or higher.

The editors of the OTC Journal also believe the stock is positioned for a short term move to $6 (60% return), with a longer term price target of $10 (166% return). The company is structured with both a production and exploration division along with a highly successful engineering and construction division. This unique combination provides a hedge against fluctuating commodity prices. Therefore, investors enjoy the upside potential of explosive new discoveries along with the downside protection of a steady revenue stream.

In addition, the chart provides a picture of a stock positioned for higher levels. Throughout the year this stock's low's have been getting higher, and its highs are getting higher. Technically, this is a bullish pattern. As an additional bonus for investors, this stock is prone to large volume spikes to the upside, providing traders with exciting performance. Consider Energy Power Systems (OTC BB: EYPSF; Frankfurt Exchange: EPW, WKN 919384) for the risk/reward portion of your portfolio.

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