Wednesday, April 13, 2011

PetroBakken - Value Trap?

Looks like I'm not the only one with questions about PetroBakken.  I never got into the dividend issue, or the lack of insider and board ownership, but here are some other thoughts on PBN.  Since the company doesn't have the earnings to pay dividends they appear more than willing to borrow money to pay shareholders.  When will the music stop?

I would also be weary of any investors who trumpet the company's vast land holdings and "potential" reserves without backing it up with some results.  This is really nothing but arm waving and hype.  Here is one example:
"So this is what Petrobakken has done. In 2010 they spent about $1.1 billion on raw land in the Cardium and at year end just started drilling it. The result being that they have this enormous (almost 1,000 drilling locations) position in the Cardium and are only allowed to book reserves on locations already drilled and one offsetting location.

So do you think just maybe reserves are going to increase in the coming years as they drill out the property ? Of course they are."

"Reserve growth isn't likely, it is certain."

This guy obviously has no industry experience.  According to him these wells are in the bag... time to start shooting fish in a barrel.  Are investors that easy to fool?  

Best Regards,
Kevin Graham

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