The hottest oil-exploration area these days is in Colombia, where huge discoveries have been made by the likes of British Petroleum and Triton Energy. To participate in this new oil play, the shares of the oil majors aren't the way to go, says Alan Gaines, president of Gaines, Berland, a New York securities firm that invests in energy companies.
Gaines has been snapping up shares of American International Petroleum, a small company engaged in oil and gas exploration mainly in Colombia. Its major assets include four exploration and production contracts in Colombia covering 1.4 million acres and a 30,000 barrels-per-day refinery in Lake Charles, La. It also explores and produces oil and gas in Kentucky and Louisiana.
AIP stock hasn't been flying, however. It's trading over the counter at 2 5/8 a share, off from 3 5/8 in April. Part of the reason: AIP recently sold 3.5 million shares in Europe and Asia at $3 a share, raising $10.5 million. AIP will use the funds for seismic exploration and drilling in Colombia.
AIP plans to dig 17 wells by the end of this year, mainly in the Toqui-Toqui Field and the Puli Anticline area. Gaines says the company is the fourth-largest holder of exploration acreage in Colombia, after Royal Dutch/Shell, Texaco, and Occidental Petroleum. "The downside risk in owning AIP appears minimal, and the upside is potentially exponential," he says.
Rik Parkhill, research director at Deacon Barclays de Zoete Wedd, a Toronto affiliate of Barclays PLC, is also high on American International. He figures the company's existing oil and gas reserves in Colombia alone are worth $3.40 a share. "Over the next year, its Colombia exploration could double AIP's oil and gas reserves," he says. "The stock is worth twice its current price."