Pennant Energy Boasts Solid Performance, Considers New Prospects

Investors looking for Alberta energy stocks would do well to notice Pennant Energy Inc. [TSXV: PEN] a promising oil and gas firm that trades on the TSX Venture Exchange. This company enjoys good cash flow from 15- 45 % interest in eight oil wells in Manitoba’s Daly Field, producing medium grade crude from the Lodgepole and Bakken formations. These wells come on strong and then plateau for decades – all are in the plateau stage now and only 4 years old. Pennant’s Manitoba Properties provide the cash fuel that helps propel this company’s Alberta explorations, and that’s a good business model in any oil patch.

On paper, Pennant Energy is a solid performer. The company has no debt and approx $1,500,000 in the bank. The $0.40 cent share price seems compacted – with only 16,164,809 shares outstanding and only 21,255,938 fully diluted, it’s a tightly packed structure. This firm has $900,000 in flow through funds to spend before the end of the year, and they need to spend that money in the ground.

When I spoke to President Thomas Yingling on the phone recently, he confirmed that both his team and his land positions are growing. Pennant is looking to acquire more oil production in Alberta, and is presently considering which of three large-scale drilling it will commence in the short term. Yingling categorized all three of these options as, “drill-ready, farm-in opportunities for us to drill before year end. Each of these projects is between one and half and three million dollars which we consider to be low risk, high-return, drill-ready projects. So we’re about to move on one of them.’

Another encouraging aspect about Pennant Energy is the strong share position held by management. Yingling, for example, personally holds 1.3 million shares of the company and can therefore be expected to energetically pursue growth. These include “increasing shareholder wealth by targeting opportunities that offer the promise of accelerated oil production with a fast payback,” and simultaneously expanding “participation in low-risk developmental drilling projects that provide enough cash flow to mitigate the need to seriously dilute the company’s much-envied share structure.”

A seasoned venture capitalist, Thomas Yingling was appointed President of Pennant Energy on June 25, 2003. Mr. Yingling has also served for over a decade as the President of Brahma Communications Corp., an investment-consulting firm that specializes in corporate finance, investor relations and strategic corporate planning for publicly traded companies. In restructuring Pennant Energy, he brought James Britton, P. Geol. P. Eng. out of a comfortable retirement to serve as the firm’s Senior Geologist / Engineer and sit on the board as one of the Company Directors.

Britton’s wealth of experience spans over forty-five years in the oil and gas exploration and development business. During his notable career, he has been instrumental in successfully commercializing over four hundred and thirty oil and gas wells, some of which are still abundant producers. Jim Britton has a remarkable track record of drilling 86% commercially successful wells. He was the man who engineered Dynamic Oil & Gas, Inc’s growth from 25 barrels of oil equivalent a day (boepd) to over 5,000 boepd.
But drilling for oil is risky business. In the spring of 2007, the company’s share price rose to a record $1.07 in on anticipation of the results of testing on Pennant’s Kaybob S#1 Project. The company’s stock dropped again two months later when Yingling announced “the absence of hydrocarbons in commercial quantities led to the abandonment of this technically challenging $3-million-plus well.”
There was an upside, however. Pennant’s business model works: All of Pennant’s financial risk was absorbed by Austin Developments Corp., which paid 100% of the costs of the drilling in return to earn a 50% interest in the venture. By adhering to a finely balanced risk/reward model, and refueling from their Manitoba wells, Pennant managed to keep its treasury of over $1,500,000 relatively intact and still remains debt free.
Just last month, together with Austin Developments Corp. (TSX: AUL), Pennant Energy expanded its Bronson Property land holdings by successful bidding at a September 19th, 2007 Alberta Crown Land Sale. The Bronson Property is now sub-divided as Bronson East and Bronson West with the east portion being the newly acquired 640 acre contiguous property located south east of the existing Bronson West. Positive results from a Geochem survey and a 3D seismic survey have identified several potential drill targets on the 640 acre Bronson East site.

Yingling says the team has everything in place to potentially drill a company-maker in Alberta this winter. With a $0.40 share price, undiluted share structure and record oil prices, Pennant offers a rare opportunity to participate in a ground-floor opportunity of a well-managed and highly ambitious (producing!) oil & gas junior.

This article is intended for information purposes only, and is not a recommendation to buy or sell the equities of any company mentioned herein. It is based on sources believed to be reliable, but no warranty as to accuracy is expressed or implied. The opinions expressed in the article are those of the author except where statements are attributed to individuals other than the author, in which case the opinions are those of the individual to whom they are attributed.