Petro One Energy

Getting to know the Junior Oil Game – Petro One Energy (TSX:V – POP) Case Study:

Behind the Headlines –Saskatchewan’s Chinese Connection

Making a good bet in the junior oil market isn’t easy. It does take work. As some of you have seen, I like to pick through my favorite companies’ press releases with a fine-tooth comb and put them together with min files, maps, charts, other companies’ press releases, and powerpoint presentations before I weigh in on any stock. I don’t always have winners, but I am pleased with the fundamentals of any stock I get involved in. All the information you need to make money is out there, you just need to know where to find it!

Something jumped off the page last night with this deal and it is big news:

A "significant" energy deal is in the works between China and the Saskatchewan province of Canada, the managing director of Saskatchewan's trade and investment representative office in Shanghai said Wednesday.

The deal could be finalized by May, Richard Choi told Dow Jones Newswires, without specifying whether the deal involves the governments or companies of the two countries.

In a separate agreement, the state-owned China National Petroleum Corp. and the Ministry of Energy and Resources of Saskatchewan have agreed to extend a memorandum of understanding on cooperation in energy exploration technology, he said.

Saskatchewan Energy and Resources Minister Bill Boyd and a small delegation will be in Shanghai, Beijing and Tokyo from Jan. 16-28 to promote investment opportunities in mineral exploration, oil and oil sands projects in the province, as well as to investigate potential areas of collaboration in value-added energy research, according to the provincial government website.

Chinese energy companies have in recent years been investing in Canadian energy resources such as oil sands and uranium in a bid to secure the supplies needed to meet robust domestic energy demand.

Chinese companies have also been increasing investments in the oil sands industry in Canada, which has 176 billion barrels of oil reserves, second only to Saudi Arabia. Of the total, about 170 billion barrels of those reserves are in oil sands.

In 2010 alone, the state-owned China Petrochemical Corp. bought a 9% stake in Syncrude, Canada's largest oil sands project, for $4.65 billion, and China Investment Corp., a sovereign wealth fund, bought a 45% stake in an oil sands project owned by Penn West Energy Trust for C$817 million.

So let’s recap what’s been announced in the last few weeks:

• China is preparing to step up its investments in Canada with the opening of a Toronto office for its deep-pocketed sovereign wealth fund, representing the first permanent foreign location for the state-backed institution.

• China Investment Corp. (CIC), has plowed billions of dollars into the Alberta oil sands and Canadian resource companies.

• By choosing Toronto over other financial centers such as London and New York for its first corporate location outside of China, the $300-billion (U.S.) fund is signaling it plans to ramp up its Canadian holdings, particularly in the resource sector.

• China Petrochemical Corp. (CPC) and China Investment Corp. (CIC) are joined at the hip.

So obviously, the Chinese are setting up their first ever foreign investment office in Canada, and quite clearly both governments and organizations are announcing massive, long-lasting and mutually beneficial trade deals between Saskatchewan and China, and in fact the Chinese are on the hunt for oil exploration, development, and reserve projects. This is abundantly evidenced by the actions of China Petrochemical Corp. and China Investment Corp.

Now, here’s how we put this all together to make money. Pay close attention to this name, you will want to remember it:

Dr. Hairou Quing.

Dr. Quing is the Geology Department Head at the University of Regina. He is by all accounts, a genius, and he is the world’s leading expert on Ordovician Red River dolomite reservoirs, Middle Devonian Winnipegosis mounds, and Mississippian carbonate reservoirs in southeast Saskatchewan. For the layperson, these are the types of deposits that often yield excellent, economic, light sweet crude in Southeast Saskatchewan and Southwest Manitoba. He is a Chinese national, and his bio is out there for the world to see:

http://www.uregina.ca/geology/People/Qing/qing.htm

Dr. Quing advises only two companies. Aside from being the world’s foremost academic when it comes to light, sweet crude in and around the Williston Basin, Dr. Quing is an embedded insider with only one public company: Petro One Energy (TSX-V : POP). The only other company he advises is none other than China Petrochemical Corp (!)

http://aapgbull.geoscienceworld.org/cgi/content/abstract/91/8/1167

Petro One Energy (TSX:V–POP) is a 5 month old company that almost no one has heard of, but everyone soon will. They have:

• 46 Million shares @ .32 cents current market cap = 14 million
• 9.3 Million Warrants with an avg. price of .32 cents
• 1 Million options with an avg. price of .31 cents
• $6.5M Cash in the bank
• $7K monthly burn rate—unheard of low!
• Manitoba and Saskatchewan are ranked 1st and 2nd overall in North America for oil exploration by the Fraser Institute
• Targeted production of 1200 BOE / day within 24 months
• 100% interest in 13 properties with surface to basement right
• 51-101 most conservative estimate of immediately producible oil value to the bottom line is 14 million dollars value
• They have looked at less than about 1% of the geological potential of their lands
• Petro One ground bordered by: Penn West (remember the Chinese?), EOG, Halliburton, Crescent Point, Petro Bakken, Canadian Natural Resources.

The most conservative intrinsic value of this company’s cash and assets, according to my calculations, is .75 cents, and they are trading around .33 cents. That’s just the way it is when new companies come along. It takes some time for the market to recognize value.

The world’s leading expert in light, sweet crude exploration in Saskatchewan and Manitoba is the common thread between these two companies. There is no way a gentleman of Dr. Quing’s caliber would lend his name, expertise, and investment exposure to just one company if he didn’t feel had the potential to go all the way.

Who do you think is doing advance scouting for China Petrochemical Corp. and China Investment Corp. in Saskatchewan and Manitoba’s emerging, multibillion-barrel oilpatch? Why are the Chinese opening up shop in Toronto and shopping in Saskatchewan all around Petro One Energy? Who do you think they will look at next?

For anyone who digs into the data—Petro One Energy is a total no brainer!