The Pink Sheets is not just an exchange for risky penny stocks. Actually, it is the annex exchange used by many companies which trade on stock exchanges in other countries like makers of the Android, Samsung Electronics Ltd. (SSNLF.PK), Chocolate Giant Nestle S.A (NSRGY.PK) and Russian Oil Giant Gazprom (OGZPY.PK).
Speaking of Oil Giants, three junior oil companies are starting to become very attractive to their larger counterparts. The aggressive management of these three small oil companies, Second Wave Petroleum, Inc. (OTC PINK: SCSZF.PK), Arcan Resources Ltd. (OTC PINK: ARNBF.PK) and Spartan Oil Corp. (OTC PINK: SRTNF.PK) have reinvented the oil drilling business in North America through the revolutionary application of horizontal drilling and multi-stage fracturing to previously uneconomic shale and tight oil resources.
These types of small, aggressive oil drilling companies have led the oil industry and put together enormous amounts of acreage in these once, unconventional shale and tight oil plays. Now the big guns in the oil industry who are late to get in the new drilling applications are starting to buy up the juniors. Midway Energy recently got bought out which poses the question: Who’s next?
It is impossible to know for sure, but here are three possible suitors that shouldn’t last much longer as independents.
Second Wave Petroleum, Inc. (OTC PINK: SCSZF.PK); $3.69 www.secondwavepetroleum.com
Second Wave Petroleum closed Friday at a new 52-Week high of $3.69. Although the shares are thinly traded on the pink sheets, SCSZF is one of the few remaining oil juniors that a bigger oil company is going to be able take over and gain entrance into the prolific and emerging Beaverhill Lake light oil play.
The company estimates that its drilling inventory is 130 Beaverhill Lake oil wells coupled with an additional 650 wells in the Pekisko. SCSZF reported $27.81 Million in revenues last quarter, a quarterly revenue growth (yoy) of 29.50%.
- Market Cap: 306.52M
- Price/Sales (ttm): 10.89 Price/Book (mrq): 2.81
- 50-Day Moving Average: 3.06 200-Day Moving Average: 2.60
- Avg Vol (3 month): 29,766 Avg Vol (10 day): 75,775
- Shares Outstanding: 83.01M Float: 81.29M
Watch out for Penn West Petroleum Ltd. (NYSE: PWE), Penngrowth Energy Corp. (NYSE: PGH) or Crescent Point Energy Corp. (OTC PINK: CSCTF.PK), all of which operate in the same area, to be one of the big energy companies that takes over this one.
Arcan Resources Ltd. (OTC PINK: ARNBF.PK); $6.08 www.arcanres.com
Similar to SCSZF, Arcan Resources has even more exposure to Beaverhill Lake where ARNBF estimates that it has 400 drilling locations. Both Arcan Resources and Second Wave, the only two remaining publicly traded companies in the area, offer pure exposure to the Beaverhill oil play.
Arcan’s focus is in the Swan Hills Beaverhill Lake light oil reef play where estimated Original Oil in Place (OOIP) is up to 700 million barrels of oil equivalent with up to 40% recovery potential under waterflood. ARNBF reported $71.78 Million in revenues last quarter, a quarterly growth (yoy) of 77.50%.
- Market Cap: 594.69M
- Price/Sales (ttm): 8.44 Price/Book (mrq): 2.38
- 50-Day Moving Average: 5.59 200-Day Moving Average: 5.18
- Avg Vol (3 month): 11,557 Avg Vol (10 day): 25,450
- Shares Outstanding: 97.75M Float: 75.12M
Both SCSZF and ARNBF will be acquired in the short term as the Beaverhill oil play appears very attractive. The only thing that will change between now and when the two are taken over is the price of the stock which will undoubtedly be higher.
Spartan Oil Corp. (OTC PINK: SRTNF.PK); $4.68 www.spartanoil.ca
The Alberta Cardium is the primary focus of Spartan Oil. SRTNF has operations in the Pembina area of central Alberta and in southeast Saskatchewan and maintains a multi-year inventory of oil focused horizontal drilling opportunities. Spartan is said to have between 200 and 300 drilling locations in the Cardium as well as significant potential in the Bakken in Saskatchewan.
Spartan’s management team, owning almost 30% of the company’s stock, have a history of creating shareholder value which provides tremendous incentive to grow SRTNF quickly followed by a “value-realizing” event.
SRTNF Snapshot: (amounts in Canadian Dollars)
- Market Cap: 311.50M
- Price/Sales (ttm): N/A Price/Book (mrq): 4.485
- Shares Outstanding: 70.16M
- Click here for detailed quote on Spartan Oil Corp. (TSX: STO)
Bottom Line: Oil prices are over $100 per barrel and the stock market is bulish right now so there shouldn’t be a surge in volume of people buying stock in these 3 oil juniors anytime soon.Share