To OTC Journal Members: 

Special Note- Some time ago I suggested looking at Bulova Technologies (OTC PK: BLVT) as a crazy penny stock that could get some legs. The company had never filed a financial statement, but a credible source informed me the company was achieving over $70 million in annual revs and making money. An affiliate of the company informed me BLVT would be filing historical financial statements going back some time. By August 15.

Better late than never. Yesterday, BLVT filed its first financial statement showing its historical performance. The statement dates back to Q1 of '09. It shows $12.7 million in revenue for the quarter, and a small loss. This data is 18 months old, but nevertheless shows the company is for real. I'll keep an eye on it as more information comes out. 

Crazy penny stock- I own a bunch everywhere from $.12 to $.21- a bit underwater, but could get interesting.

The Future of US Oil Independence: Oil Shale

Jerry Castellini- the Chief Investment Officer at CastleArk Management ($2.7 billion), loves US oil and gas producing stocks right now. Why? In a phrase: Oil Shale.

The new technologies developed over the past five years has made the extraction of oil and gas from the massive US oil shale formations highly profitable, and Castellini believes there's a lot of money to be made in that sector over the next couple of years.

For me, it's time. It's time to start looking at ideas, and bring out some new ones. We're in a severe climate of fear right now, and small caps are absolutely decimated. Investors are pouring money into bond funds, and the demand is leading to some of the lowest interest rates on record.

The risk averse money flows have led to a beaten down small cap sector, and it's time for KMart shoppers to go hunting for bargain basement deals. The summer doldrums have been particularly ugly this year, but seasonally things should improve between now and the end of the year.

We're near the point where everyone believes a stock can never go up again- another words, the bottom. 

I've been looking at an oil shale idea. It's a small development company, but seems to be in the middle of a fire storm of drilling and potential profits. I'll bring it out tomorrow, but in the meantime, here's some background information on Oil Shale.
 

What Is Oil Shale?

The term Oil Shale refers to any sedimentary rock that contains solid bituminous materials (called kerogen) that are released as petroleum-like liquids when the rock is heated in the chemical process of pyrolysis.

Here's what that means. Over thousands of years organic materials were deposited in in lake beds and sea bottoms. Heat and pressure formed rocks that are loaded with oil.  The oil is found in the shale, and it oozes out when the rock is heated. There are also large pools of oil and natural gas guarded from drilling by layers of oil shale.

The oil found in shale is very high grade. Generally, it will burn without processing. Oil Shale is rock that can actually burn.

Over the past five years, while the price of oil has largely gone up, the technology for extracting oil and natural gas from Oil shale has improved. Strides have been made to reduce the costs associated with a process called "fracking"- short for "hydraulic fracturing".

In the hydraulic fracturing process, thousands of gallons of fluid are forced down a newly drilled well. The forces break apart or "fracture" the shale, which allows either vast quantities of  oil, natural gas, or both to escape and be harvested.

The fracking process is made possible by newly developed horizontal drilling techniques. Once fracked, large reservoirs of oil can be found. Vast quantities of hydrocarbons we couldn't retrieve in the past are now accessible thanks to this relatively new technology.

There are a number of aggressive exploration and drilling programs going on in the US today. The highly touted shale formations include the Macellus shell in the Northeast, the Fayette shale in Arkansas, and Barnett Shale in West Texas.

However, one of the most talked about and now highly sought after geological formations is the Eagle Ford Shale which slashes Southwest to Northeast across the Austin/San Antonio Texas area. Chesapeake Energy (NYSE: CHK) has been very active in the Eagle Ford Shale, having now acquired 550,000 acres and drilled 7 wells. The company plans to add 16 rigs in 2011, and 27 rigs in 2012.

Petrohawk Energy (NYSE: HK) has acquired 369,000 acres in the Eagle Ford Shale, and has identified 2,700 drilling locations. 

It is estimated the Eagle Ford Shale contain several billion barrels of recoverable oil. This kinds of resources could go a long way towards reducing the 11 million barrels of oil the US imports daily, and thereby reduce our dependence on foreign oil.

Tomorrow, sometime about mid trading day, I'm going to share a new idea. It's a highly risky small and completely unknown company. Right up my alley. However, this company is setting up camp and doing business alongside a number of the big boys in the Eagle Ford Shale. If you believe energy prices are more likely to go up over the next several years, and the US will continue to move forward towards energy independence, small companies developing properties in the Eagle Ford Shale are likely to make early investors a lot of money.

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