STP’s Fortunes Depends On The Price Of Oil.

Jul 29th, 2009 – Comment

Hi Lou , What are your thoughts on Southern Pacific Resource. Thank you in advance for your opinion. Karla Hi Karla, Southern Pacific Resources Corp. ( STP TSXV) is developing its oil sands targets in the Athabasca region of Alberta. The company is focused on its Steam Assisted Gravity Drainage ( SAGD) project on their […]


About the Author

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


Read the author's full profile.


Further Research

Read more about Energy.


southernpac

Hi Lou ,

What are your thoughts on Southern Pacific Resource.
Thank you in advance for your opinion.

Karla

Hi Karla,

Southern Pacific Resources Corp. ( STP TSXV) is developing its oil sands targets in the Athabasca region of Alberta. The company is focused on its Steam Assisted Gravity Drainage ( SAGD) project on their  McKay block. The facility is forecast to produce 12,000 barrels of oil per day and has a 30 year reserve life. The next step in the process for STP is to secure the $394.3M it needs to drill the wells and build the plants.

The company has an 84% working interest in 269 sections of oil sands leases and intends to advance the McKay block project and then use the cash flow from that success to finance 5 other prospect areas. The fundamental story is attractive. It offers the opportunity in an early stage oil sands play with what appears to be substantial upside.

It is not however a slam dunk and please don’t go out and buy this stock based on the preceding sentence! I insist that you conduct your own due diligence to make sure you know the risks and rewards with STP and in fact any stock.

stp

The three year chart shows what is becoming a very typical pattern of a long decline, a recovery, and a retreat.

The question is will STP hold on to support at $0.30 or have to test support on the 200 day moving average?

stp2

The three month chart shows the situation more clearly. STP couldn’t hold on to $0.35 and now looks to be heading towards a test of  $0.30 . If it breaches $0.30 it will test support at $0.24.

When you compare the two charts it is easy to see that the fortunes of STP are driven by the price of oil. At $140/bbl it is a $4.50 stock at $65/bbl it is a penny stock.

If you are looking for an early stage, low cost entry, into the oil sands with risk and upside STP will fill your pistol.

Happy Capitalism!

Categories: Energy
Content © Relentless Economics - Charts courtesy Stockcharts.com - Employees Entrance - Optimization Media