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Blue Parrot's Formula For Success Promises To Significantly Accelerate The Company's Production By
Marc Davis, Managing Editor Blue Parrot Energy Inc. (TSX.V - BPA, Berlin - BPX:BE) is an emerging Canadian oil & gas junior exploration and production company that is poised for significantly positive near-term developments. Specifically, this shrewdly managed, Calgary-based company is pursuing an exploitation-driven acquisition strategy of underdeveloped past-producing hydrocarbon wells. To date, this formula for success is paying off and is helping to finance the upcoming drilling of other new, highly prospective targets in both Canada and the U.S.A. On this note, Blue Parrot is embarking on two drill programs within the next 90 days that promise to build considerable value into Blue Parrot's share price. One project involves a relatively low-risk in-fill drill program that is expected to more than double the company's existing oil & gas production from its Bonnie Glen oil wells near Edmonton, Alberta. Another more risk-oriented drill program that offers considerable "blue sky" potential involves the drilling of four shallow natural gas targets in the gas-rich Whatcom County area of Washington State near the Canadian border. Accordingly, SmallCapMedia believes that Blue Parrot is employing a company-building strategy that offers investors a good balance of risk and reward. To date, the fundamental underpinning of the company's share value comes in the form of a production rate of 190 barrels of oil or oil equivalent (boepd) from its 13 active oil wells in the Bonnie Glen area of Alberta. The company's Bonnie Glen Cardium "A" Unit consists of fifteen contiguous quarter sections that overly the largely untapped Bonnie Glen oil field. This relatively shallow pool hosts an estimated reserve base of 25 million barrels of oil, according to the Alberta Energy Utilities Board (EUB). During the last four decades, small-scale production has yielded approximately 1.5 million barrels of oil. By way of background, this highly prospective oil pool was originally drilled in the 1950s by Texaco in its quest to tap into a much deeper oil formation. But the failure to strike a major pay zone prompted Texaco to lose interest in this discovery. It then lay dormant for many years until a small private company decided to reactivate the three most cost-efficient wells with a view to generating low capitalized cash flow. However, this company's lack of developmental expertise prevented the project from advancing any further until the leases were acquired by Blue Parrot in 1998. Since then, Blue Parrot has implemented an aggressive developmental strategy of re-stimulating the three producing wells -- which were only generating 18 boepd at the time. Significantly, Blue Parrot also successfully re-activated the remaining 10 suspended wells. To date, the rework program has increased production more than ten-fold to the 190 boepd level from the 13 wells as of June 2003. The company is now moving ahead with an ambitious infill-drilling program that is expected to bring up to 17 additional wells on-stream. Scheduled for implementation in four phases over a 12-month timeline, this initiative stands to bolster production to as much as approximately 700 boepd. Phase One, which will target four new wells, is expected to more than double the current rate of production to about 400 boepd. Based on this forecast model (which management deems to be very conservative), payout for the first four wells is estimated at 12-14 months. Furthermore, due to the advent of new production techniques and the shallowness of the drill targets, the continued depletion of the Cardium reservoir is expected to be very cost efficient, while also making the prospect of recovering up to three million barrels of oil a viable long-term prospect. Meanwhile, Blue Parrot's wholly-owned US subsidiary, Rival Resources, has over the past 12 years identified a number of highly prospective, shallow natural gas targets in the hydrocarbon-rich Bellingham Basin in western Washington's Whatcom County. The company benefits from a large exploration database consisting of over 300 miles of seismic surveys and five test wells. Notably, this former coal mining district, which is known for its "gassy" coal, has a long history of associated shallow gas well discoveries. Indeed, some of the numerous old natural gas wells dating back to the 1920s have produced up to 1,000,000 million cubic feet (mcf) per day in the Ferndale gas field, alone (one of several key areas of interest in the Bellingham Basin). This prolific gas field has historically produced over one billion cubic feet of gas to date and holds the prospect of an estimated additional 10 billion cubic feet in reserves. Now Rival Resources has four exploration licenses in place covering about 6,500 acres. Three of the drill permits are for shallow gas wells of only 500-600 feet in depth while a fourth allows the company to probe for a potentially lucrative coal-bed methane prospect at 2,000 feet. Due to the excellent potential of this underdeveloped hydrocarbon basin, the company is also continuing to acquire additional land. Meanwhile, the first phase of drilling is expected to commence within the next 90 days. If successful, the company's management believes that each well stands to produce between 100-200 mcf per day at very low capitalization costs. This would also give the company a good understanding of the economic viability of other prospective wells on the company's rapidly growing lease holdings in Whatcom County. Blue Parrot's prospects for continued success are also underscored by a strong, highly accomplished management team. The company is presided over by William Elligson, who is the former chairman of an Alberta Economic Development Commission and also served as President of an Alberta Chamber of Commerce. A former senior executive with such major financial institutions as CIBC and Canada Trust, he has also achieved considerable success as an entrepreneur. Among his credits, he served as President of Red Raven Resources, a publicly-listed natural resources company, as well as serving as Vice President of Kiseki Technology Inc., a private international, integrated technology firm. On the exploration and development front, the company benefits from the hands-on involvement of three other directors who have a combined 70 years of experience in the oil & gas business. They include Paul Patton, P. Geol., who has held the position of Senior Geologist and Vice President of Exploration with a number of well-regarded oil & gas companies for whom he has worked all over the world. Another key director is Curtis Hartzler P.Eng., who brings to Blue Parrot thirty years of experience in the oil & gas industry. He is also currently President of Goose River Resources Ltd., a publicly-listed oil and gas company. Among his other accomplishments, he has previously served as President of Penn West Petroleum Ltd., a high-flying, publicly-listed oil & gas company that produces over 100,000 boepd and reported a net income of Cdn. $190 million for Q2 of 2003. Rounding out Blue Parrot's management team is fellow director Douglas Fenton B.Sc., who has previously served as Chief Executive Officer for Alberta Natural Gas Ltd. and was also a former CEO for Alberta Southern Gas Ltd. Additionally, he has held many other executive positions within the oil & gas business. On a technical note, the company is a relatively tightly-held stock with only about 20.2 million shares outstanding (21.8 million fully diluted), much of which are held by insiders. Such a situation, matched with positive news flow, typically acts as a catalyst to higher share price valuations. With regards to Blue Parrot's near-term prospects, SmallCapMedia believes that the company's stock is currently undervalued. Even though the company has been "treading water" in an approximate Cdn. $0.25 to $0.40 price band since coming to trade in April of this year, SmallCapMedia believes the stock is poised for a significant news-driven breakout. Such a scenario will likely unfold within the next six months as the likelihood of a flow of positive drill results should establish a clear upward trajectory for Blue Parrot's share price.
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