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Black Gold, Texas Tea

Ok- They have Texas Tea in Nevada as well. How many readers are old enough to remember the Beverly Hillbillies TV show starring Buddy Ebsen as Jed Clampett?- the reluctant hillbilly turned Beverly Hills millionaire when they discover oil on his mountain property.

"One Day He Was Shooting At Some Food, and up From the Ground Come A Bubbling Crude".

The Beverly Hillbillies sitcom ran on CBS from 1962 to 1971- coincidentally it was near the end of the show's run when oil prices went berserk for the first time in the modern era.

Not many people know this, but oil actually sold for over $70 a barrel in 1869- when it was first drilled for. Conventional thinking in 1869 believed there was no way you could stick a drill bit in the ground and find oil. Once drilling started as the technology was available, oil spent the next 100 years between $10 and $20 per barrel as it was easily found in the US.

It was the decade of the 70's that saw the first major oil shortage, raging inflation, and out of control pricing. Prices started the 70's decade at about $25 per barrel, and ended at $70 per barrel. By the 70's we had evolved to a dependence on Middle Eastern oil, and when there were shortages and embargoes, oil prices went berserk.

It was the oil shortages of the 70's that caused Brazil to go down a path of long term energy independence. We, in the US, instead chose to buddy up to the Shah of Iran and the King of Saudi Arabia to insure our oil supplies.

The Brazilians were smart enough to develop a sensible approach to Ethanol as a fuel additive. You see- in the US we have government mandated Ethanol production in all of our gasoline. This is a giant scam on the American people costing us billions. Our Ethanol industry uses corn to derive the ethanol, and the yields don't work. It's a flawed model. It takes far too much corn to produce the required ethanol, and we subsidize the ethanol and corn growers with tax dollars.

The demand for ethanol drives up the price of corn, which in turn drives up the price of feeding livestock, which of course drives up the price of food.

The Ethanol scam is left over from the Bush Administration's buddying up to Archer Daniels Midland (NYSE: ADM), one of GW's largest campaign contributors.

Ethanol works in Brazil because it is derived from sugar cane. Ethanol yields from sugar cane are nearly 10 times that of corn, and that model makes economic sense. During 2008 Ford Motor prospered selling its "Flex" vehicle lines in South America while GM was dying. Those vehicles were designed to run on much higher levels of Ethanol.

When the price of oil retreated in the 80's and 90's we lost our focus on energy independence. Brazil did not, and look where it got us.

With oil demand ever growing out of Emerging Economies, we are now refocusing on developing domestic supplies.

Demand from emerging nations has oil over $100 per barrel once again, and there's a lot of rhetoric in the election speak about developing US resources aggressively again. There are 3 states that have very lenient drilling policies- Texas, North Dakota, and Nevada. Looking for work? - I've read there's a need for 2,000 workers today in West North Dakota as the Baaken Shale is expected to eventually add 2 million barrels a day to domestic oil production.

I believe the small oil and gas exploration companies are going to get hot again, and new entrants into the field will be greeted by the market with enthusiasm. So far, on small oil and gas companies I'm 3 out of 4.

I've covered three companies in the sector in the last year. Field Point Petroleum (AMEX: FPP) was a big win- trading from $3.00 about a year ago today to $5.50 by March for a 83% gain in 5 months.

Imperial Resources (OTC BB: IPRC) (4/17) was a big win as well. Introduced last May at $.40, the stock found the $.70 level twice by June- yielding a 75% return.

How about Eagle Ford Energy (OTC BB: EFRDF)? $1 in May to $1.80 in June- another 80% win.

Bering Exploration (OTC BB: BERX) was my one winner and loser. First covered on March 31st, the stock cooperated in the short term running from $.80 to $1.60 by the end of April providing OTC Journal readers with a cool 100% gain in the first month.

I stuck with that one a little too long, and it reversed course on me and became a loser.

The track record in the last year is 4 big wins in the sector, and 1 loss. Hence the need to stick with the SSLs- Suggested Stop Losses- minimize the losses, and you are way ahead.

As I pointed out in yesterday's edition- you have the pole position on this new idea- it's never traded and no one knows about it. When it becomes a "Crowded Trade", you can be a seller for a strong profit.

Black Gold in Nevada: American Liberty (OTC BB: OREO)

OREO is the new kid on the block, and as promised you are getting the absolute first look.

I'm not going to put up a chart because there's nothing to see- this stock has never traded. The stock traded a few shares at $1.25, and that's it. Of course, as I pointed out in yesterday's edition, there was a time when RAYS had traded zero at $1.25- when the volume came in, it traded to $2.40 in a month before crashing. The early entrants on that ride made a lot of money.

Based in Bakersfield, California, OREO has acquired the rights to drill on two large claims in Nevada: The Gabbs Valley prospect, and the Kibby Flat prospect.

Both of these properties were first looked at and evaluated in 2008. Both were found to have extremely high probabilities for profitable drilling, but the economic climate in 2008 caused the discoveries to be temporarily shelved.

Their Kibby Flats prospect is estimated to contain as much as 669 million barrels of recoverable oil spanning 7270 acres of land.

Their Gabbs Valley prospect is estimated to contain 4+ billion barrels of oil over 26,000 acres.

To learn more about the company and their plans, visit their web site at

You want to be positioned ahead of certain events in a stock like this. The "Thrill of the Drill" will drive this stock higher in the near future as the company prepares to do some test drilling. Remember, as we learned in past editions- it's the prospect of doing the test drilling that will push up the price- not the actual event.

You want to be in ahead of the crowd.

Since it's impossible to make any sort of technical call on this one, set your SSL 15% below your entry level. That seems like a reasonable risk to take.

Let's look to own this one in the $1.25 range- but you will have to use your judgement when it begins to trade at the open. A gap much above $1.25 should be avoided. $1.30 to- $1.35 should be the max. Based on past experience, I'm looking for the stock to go to $2, but I'll make adjustments when it begins to trade in earnest, and a chart develops.

Let the fun begin.

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Trading 101
April 28, 2012

Market Summary
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