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August 3, 2004
Volume V, Issue 72
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To OTC Journal Members:

Energy Stocks- The NewTech Stocks?

There are many who believe $40 a barrel oil is here to stay (over $44 today- energy stocks were on fire). Certainly, the War with Iraq was the catalyst which sent oil prices skyrocketing, but the surging prices may simply be reflecting the true supply/demand dynamic. OPEC does not want to see oil prices this high. They know it hurts their customers' economies, but there may be nothing they can do about it despite promises to increase production.

I have recently read opinions from several credible sources that energy stocks could become the tech stocks of the '90's. I have noticed a few microcap energy stocks trade extremely well even in this anemic market climate.

In short, the energy exploration and production group cannot be overlooked in a good microcap portfolio. Our one contribution in that arena, Hyperdynamics (OTC BB: HYPD) has done well, and I know many of you like the long term prospects for the company.

There will be significant exploration in North America for new energy resources. New technologies are opening up previously untapped reservoirs. The shortages are eye opening. There were more than 4,000 rigs drilling for energy in North America in the early '80s - today there are 1,200.

There are currently 5 liquefied natural gas (LNG) plants operating in North America. We need 25 LNG plants to keep up with natural gas demand. Canadian oil sands production needs to climb to 2 million barrels a day (currently at about 500,000). Until we achieve these targets, energy prices will continue to trade in bands 50%-100% higher than "normal."

Doing the math, this means highly productive energy exploration companies with 20% more energy resources growth than they extract each year will double in value every two to three years.

Coal Bed Methane: A Relatively New Source Of Natural Gas

The natural gas which can be extracted from Coal Bed Methane is one of the most current technologies which will help alleviate natural gas shortages.

Described as "sweet gas", CBM contains up to 90% methane. This high level of methane makes it directly available for consumption. At the end of the 80’s CBM gas was almost nonexistent. However, by last year the production of CBM has grown to 9% of the total US gas production.

The new technology you see pictured here, which uses water pressure to extract natural gas from ancient coal beds has changed the entire dynamic of CBM exploration.

The new CBM extraction technology has led to an explosion of CBM related exploration and production. Despite being only 9% of the total US Production, the table indicates the number of CBM wells in the lower 48 states has grown for virtually zero in the late '80's to a robust 10,000 plus wells in production by the turn of the century.

The natural gas shortage is a function of the regulatory mandates combined with regulatory restrictions on exploration. The demand side reveals  300 plus new power plants in the US that run only and natural gas, yielding a market environment which leaves us above $6 per MCF for the foreseeable future.

Torrent Energy (OTC BB: TREN) Sets The Table For a Major Development Project

Torrent Energy was formed for the express purpose of developing a CBM (Coal Bed Methane) project in the Coos Bay area in Oregon, along the Oregon/California border. Here's a map of the area. The original with version with the keys was simply too large for today's edition, but this gives you the general idea.

To date, Torrent has acquired the rights to 60,000 CBM rich acres in the Coos Bar area, and intends to acquire 40,000 more acres before year's end. 

Using results from several test wells which were drilled in 1993 and 1994, independent reservoir engineering firm Sproule Associates (one of the largest three in North America) estimates there are approximately 780 bcf (billion cubic feet) of CBM "Natural Gas In Place" contained within Torrent's first 50,000 acre parcel. This is not to be confused with proven reserves. Proven reserves are what Torrent will set out to establish over the next several years.

Most analysts estimate 1 bcf (billion cubic feet) of natural gas has an unextracted value of approximately $1 million. Therefore, if the 780 bcf of natural gas Sproule Associates estimates is in the ground becomes proven reserves over time, this property could have a value ranging upwards of $780 million. This estimate was provided on the first 50,000 acre parcel the company acquired. Since then, they have acquired an additional 10,000 acres, and are looking to acquire another 40,000 acres before year's end.

Enter Geroge Hampton: Bringing Credibility to the Project

Today, just after the market closed, Torrent Energy announced an event which will bring a lot of credibility to this company and its project. Torrent announced George Hampton has joined the management team and become a board member of Torrent.

George Hampton was the chief engineer and geologist of Pennaco Energy. You are looking at a chart of the stock, which was born as a small company on the bulletin board.

Pennaco was a CBM property developed in the Powder River Basin region of Wyoming. As you can see from the weekly chart as measured from 1998 to 2001 when the company was bought out, the stock traded from a low of $3 to a subsequent high of $19.

Early estimates for this region only had the "Total Gas In Place" at 2 to 4 bcf per section. Torrent Energy's Coos Bay property is estimated at 10 bcf per section.

According to his resume, George Hampton served as the Project Manager and Senior Geologist for Coal Bed Methane development of 500,000 acres for Pennaco Energy, including geologic supervision of the drilling of nearly 75 CBM wells, and negotiation with surface owners (Private and BLM) and coal mines in the Powder River Basin, Wyoming.

It took three years to develop this natural gas project. As the company developed wells and started to generate revenues, they were able to upgrade their listing from the Bulletin Board to the American Stock Exchange.

On December 22, 2000, Pennaco Energy was bought out by US Marathon (NYSE: MRO) for $19 per share, netting 1998 shareholders about a 500% return on investment over the three year period.


Energy stocks are a must for your microcap portfolio. Many analysts believe energy stocks will become the tech stocks of the 90's. The supply/demand dynamic is extremely compelling.

Torrent Energy is just getting rolling. Early independent estimates have the potential value of the "Total Gas in Place" at $780 million. Their program to prove out the reserves begins this year. They are scheduled to submit drilling applications to the State of Oregon in September. Currently, they are estimating the first wells will be drilled in November. Sproule also estimates it could take as many as 300 wells to fully develop the area.

They expect to complete the acquisition of an additional 40,000 acres in September.

George Hampton, senior geologist of huge CBM shareholder win Pennaco Energy joined the board today and is expected to become intimately involved in the company. 

At the same time, construction is being completed on a natural gas pipeline originating out of the Coos Bay region, thereby assuring a mechanism for delivery of the natural gas.

There are approximately 15 million shares issued and outstanding, yielding a market cap of about $13.5 million at the closing price of $.90. All in all it seems like a speculation with significant upside as the potential value of the natural gas in the ground equates $780 million according to independent reservoir firm Sproule Associates. 

I'm not sure how much effect the George Hampton announcement will have on the stock. It seems it should at least be able to trade back to its previous high of $1.25. The reasonable market valuation, coupled with the industry group, early reviews of the potential by a highly regarded independent third party, and the credibility of the management team make this one a great speculation in your microcap portfolio.

Here is the complete text of today's press release for your review:

Press Release Source: Torrent Energy Corporation

Torrent Energy Announces Appointment of CBM Executive to the Board of Directors

Tuesday August 3, 4:05 pm ET

VANCOUVER, B.C.--(BUSINESS WIRE)--Aug. 3, 2004--Torrent Energy Corporation ("Torrent" or the "Company") (OTCBB:TREN - News), is pleased to announce that George L. Hampton III has joined the board of directors effective immediately. 

Mr. Hampton is a highly respected professional in the coalbed methane ("CBM") industry. Since 1980, he has been extensively involved with the evaluation and exploration of multiple CBM projects with companies such as Amoco, TEC Resources, Pennaco Energy and JM Huber, primarily in the United States. Since 1986, he has also been active through Hampton & Associates in managing CBM projects, supervising drilling of CBM wells, conducting feasibility studies, and generating CBM prospects. Mr. Hampton is a qualified geologist with a Masters of Science from Brigham Young University. He is also one of the founding members of GeoTrends-Hampton International, LLC ("GHI"), which secured the Coos Bay Basin prospect (see June 23, 2004 press release). 

"The addition of George to the board," said Thomas Mills, President of Torrent, "will complement the engineering skills of our other director, John Carlson. Since our operating subsidiary is being managed by George's colleagues in GHI, Steven P. Pappajohn and Thomas J. Deacon, this appointment brings together a proven team, and should ensure continued development of our CBM project in Oregon on an aggressive schedule." 

Mr. Hampton offered these comments: "I am delighted to join the Torrent board and be actively involved in the Company's exciting future. We have assembled a team of industry veterans to move this project forward and to determine the economic viability of this project." 

About Torrent Energy Corporation 

Torrent Energy Corporation is engaged in the acquisition, exploration and development of natural gas and coalbed methane properties in the United States. Its current focus is on the exploration of the Coos Bay Basin project in Oregon. 

On behalf of the Board of Directors, 


Thomas Mills, President 

Safe Harbor Statement 

This news release includes statements about expected future events and/or results that are forward-looking in nature and subject to risks and uncertainties. Forward-looking statements in this release include, but are not limited to, continued development of the CBM project on an aggressive schedule. It is important to note that actual outcomes and the Company's actual results could differ materially from those in such forward-looking statements. Factors that could cause actual results to differ materially include general factors that affect all companies that explore for coalbed methane gas, such as the uncertainty of the requirements demanded by environmental agencies, the impact of competitive products and pricing, the fact that coalbed methane gas extraction and production is still partly experimental, the price of oil and gas, and specific risks such as the Company's ability to raise financing for acquisitions or operations, inability to hire qualified employees in a timely manner, and the likelihood that no commercial quantities of gas are found or recoverable. Readers should refer to risk disclosure in our 8-K dated June 22, 2004.

     Torrent Energy Corporation
     Thomas Mills, 604-639-3178

Source: Torrent Energy Corporation


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