Message #6 From:
smallcapspy Date: May 3, 2007 01:57:28 PM
On Radial Energy
Full disclosure. I am long this stock.
It seems to me that most investors and players have given up on reng. Although it's obviously risky, there are compelling reasons to own RENG, especially at these prices. (today 0.32).
1) the upcoming acquisition of Rancho Hermoso in Columbia this June will not only give the company an operating company in that country, it will provide instant revenue. Radial is a start up that has no revenues, hence the low price. However, Rancho Hermoso is producing oil right now. This will bring in millions of dollars in revenue this year alone.
2) the drilling in Peru continues. the results of the huaya 100-2X are expected to further confirm the size of the oil reserve that has ALREADY been discovered. Production testing will follow. News of this is due any day. The Peruvian wells are are expected to produce over 3 million barrels of oil for Radial. You can do the math at the current price of oil.
3) a) the company is acting very bullish. it has cancelled the final tranche of financing with cornell capital, because of the rancho hermoso deal. it can now move from start up to more traditional financing(because Rancho Hermoso has a revenue stream.)
b) the third well, the 100-2X in Peru is going according to schedule and should produce even more revenue for the company. They actually paid up to increase their share of this oil find from 20 to 23 percent. I think that is very bullish. They are putting more of the company's money in this project, obviously they think that the wells will produce as or better than expected.
c) The company is sticking to it's game plan and seems to be executing almost flawlessly. With the exception of the problems drilling the first well in Peru that caused delays, they have stayed on their stated time tables. That mechanical problem with the first well was solved quickly, but it also caused a buying opportunity to pick up the stock cheaper. More importantly, the company seems to have learned from that experience, and they have recovered quickly and it seems they have applied that knowledge to the other wells, which have been drilled much more quickly. Management seems confident and has even negotiated a deal to buy back it's debt from the cornell partners. Management seems skilled at attracting institutional money.
This company will soon go from no revenue to millions of dollars in revenues. When I say soon we are talking a couple of months for the first revenue stream. at .32 per share, i see plenty of upside, even accounting for a dillution of shares from further financing.
NO investment is without risk!
The risk factors at this point as i see it are
1) failure to close the rancho hermoso deal.
2) dissappointing results from the drilling in peru
3) failure to obtain advantageous financing.
4) Natural disasters such as flooding.
Of all these the natural disaster concerns me the most. Management seems dilligent and executing according to plan. So while risk is still there for 1, 2, and 3, natural disaster is something management can not control.
All in all, this seems like a great risk to reward investment. I encourage everyone to do further research on this company and crunch the numbers yourself. To be able to buy a company at .32 a share BEFORE they realize millions in revenue seems like an investors dream. I look forward to any comments or insights anyone may have about radial. Thanks for reading.
