To OTC Journal Members: 
 

The Thrill of the Drill

Want to make money in small oil and gas exploration companies? First and foremost, you must be in a favorable market for those kinds of stocks. Historically, these stocks are red hot when oil prices spike. Oil today: over $100 and holding- $106 today for crude, Brent North Sea Crude $116 today. In this environment, you need to look at small oil and gas exploration companies and alternative energy companies. This is where you will find the big movers in the small stock arena.

The key is timing and understanding the "Thrill of the Drill" and what it means to the stock price. Sure, we all want to find a small, unknown O&G exploration company, make our bet, and watch the stock run up 2500% in two years as the company finds resources and harvests them. A little research- maybe some of you can confirm this- Nextraction Energy from $.35 to $1.08- June '09 to Jan '10- here's my favorite- TN-K Energy- 1 cent to $.70 (7200%) - July '09 to Jan '10.

For the OTC Journal- I went over them in yesterday's edition. Eagleford Energy (EFRDF) was featured in the August 26th edition. $1.25 on that date. $2 in November for a 60% gain in 15 weeks. FieldPoint Petroleum (AMEX: FPP)- November 18th edition. $3.25. Getting ready to drill. $5.50 in early March for a 70% gain in 9 weeks. Click on the links for the past editions, then go look at a chart. See for yourself.

For you really long term OTC Journal followers- remember HyperDynamics (AMEX: HDY)? I covered that one for a couple of years on the hope they would start drilling in the waters off West Africa controlled by Guinea. HDY has never stuck a drill bit in the ocean floor, yet the stock trades anywhere from 2 to 25 million shares a day, and has ranged between $3 and $8 in the last year. I covered that one for a few years before giving up.

What is to be learned from these examples? In all cases, the stocks traded very well when the company's story featured the "Thrill of the Drill". Here's what I mean- these stocks trade up when the company is gettig ready to drill test wells. Once results are announced, the stocks might trade up higher or they might pull back. In either case, if you position yourself ahead of the test drilling, you are likely to make money. 

Today's new idea is about to enter that phase, and no one is watching. I'm going to follow this one for the next year and report all their developments. If the company has any measure of success, tomorrow is likely the cheapest you will ever find this stock. Read on........
 

The Eagle Ford Shale

I'm not going to spend a lot of time on the Eagle Ford Shale. I've covered in past editions, and if you know this sector at all, you've heard the name. Here's just a brief overview.

The Eagle Ford Shale formation is located in South East Texas.

New detection technologies have improved the oil industry's ability to identify reserves, but it's the new drilling technologies that have opened up these vast shale reserves in the US. It all has to do with the ability to drill sideways, and frack. I'm not sure how it all works, I just know it's big and could be a major factor in reducing our dependence on foreign oil.

North Dakota's Bakken Shale formation, which is becoming fully developed, is estimated to have 4.7 billion barrels of recoverable oil. Early estimates on the Eagle Ford Shale are double the Bakken Shale- about 9 billion barrels, which would make it larger than Alaska. The Eagle Ford development is just getting up to full steam.

Anadarko, Apache, and Cheapeake are all extremely active in the area, acquiring vast drilling sites. Anadarko is the most active major with 2,000 drill sites. Anadarko is deploying 10 rigs in Q1 '11 alone, and believe it has 450 million barrels of recoverable oil.

The smaller, more nimble oil and gas exploration companies tend to acquire their properties, get their seismic data, and drill a test well or two. The test wells aren't that expensive. Once drilled, the test well results show if the site has profitable, recoverable resources. Once proved out, the smaller guys will either do a joint venture with a big infrastructure company like an Anadarko, or simply be sell out at a big premium.

You don't have to buy into an idea like today's at $1 and change, and wait a couple of years for full production to make money. You just have to be out in front of the "Thrill of the Drill".
 

Enter Bering Exploration (OTC BB: BERX)

This little known and under followed company has been getting really busy of late. Taking advantage of their geographical proximity to the Eagle Ford Shale from Houston, BERX just acquired the rights to drill 1200 acres smack dab in the middle of all the fun.

The company disclosed the target zone has "potential gross reserves" of 3 million barrels of oil at 120 potential well sites.  3 million barrels of oil equates to $330 million in revenues at today's oil prices.

I started taking note of this stock about a month ago, and have been buying shares for my own account. As you can see, in anticipation of a much higher level of activity, the stock has trended up nicely in 2011.

However, it has yet to trade really big volume, but I believe volume surges are coming soon - perhaps in the next two weeks.

The management at BERX has the advantage of one abandoned well bore which will give them some good data. I believe they were preparing for this for some time, and I expect the guys at BERX will waste no time getting the first test wells identified and drilled.

Very Important- Remember, we don't wait for the company to drill a hole and announce a major find. It's the "Thrill of the Drill" that will bring new shareholders to the stock. If they are successful, all the better. Sometimes in these situations, it's best to take partial profits on the thrill, and wait to see how it comes out after the drill.

I've accumulated about 75,000 shares for my own account ranging in price from $.81 at the absolute lowest to about $1.10. If you decide to get started tomorrow, I can assure you - you won't be buying my shares. 

However, if you decide to pick up this stock in the $2 to $2.50 range, you might just be buying it from me, because that's what I'm looking for near term.

I plan to follow this story for the next year. The management team here is very aggressive and has great contacts in this area. The company has its roots with a bunch of South Texas oil guys who have done really well in the past.

The only thing that might derail my interest would be falling oil prices, and that seems unlikely to me. I'm willing to bet BERX has three runs and three pull back periods between now and the end of the year, and I'll make money on all three. That's my bet. Any takers out there? Send me an email, and you're on.

This is the OTC Journal "First Look" at BERX. Lots more to come.

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