When American Oil & GAS (AEZ ) reported on Nov. 15 that test drilling at its Krejci well in the Powder River basin in Wyoming produced an average of 165 barrels of oil a day, the stock gushed from 6.35 to 7. By Nov. 30 it was nearly 8. It has since slid to 6.54. But the bulls expect it will bounce back up by yearend when the company updates results from the well, in which it has a 45% interest. David Lavigne of Edgewater Research Partners says AEZ "is progressing quite systematically on all three of its major projects" in Wyoming and North Dakota. But the "potential of the Krejci well, which also produced natural gas, has yet to be fully understood, he adds. Lavigne, who rates AEZ a "buy," with a 12-month target of 10, notes that 165 barrels a day at $60 apiece amounts to $3.6 million a year. Phil Dodge of Stanford Group also rates AEZ a "buy," and expects the stock to hit 10. It assumes a 20% success on more than 1,000 wells on the properties. Money manager BlackRock (BLK ) owns a 6.7% stake.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial