I’ve been telling you to buy oil companies exploring in Africa ever since I went to Kenya last year and discovered the massive amounts of potential oil in under-explored East Africa…
Vindication!
Today my theories have been vindicated, yet again.
This one tiny company just struck oil on the Ngamia-1 well on Block 10BB, Kenya.
That’s why we play the game.
From the announcement:
The Ngamia-1 exploration well in Kenya has encountered over 20 metres of net oil pay.
The well, located in the Lokichar Basin of Kenya Block 10BB, was drilled to an intermediate depth of 1,041 metres and has been successfully logged and sampled. Movable oil with API gravity in excess of 30 degrees, with similar properties to the light waxy crude discovered in Uganda, has been recovered to surface.
The reservoirs in this section are composed of good quality Tertiary age sandstones. The Lokichar Basin, where the Ngamia discovery has been made, is one of seven basins mapped in the company’s acreage and is similar in size to the 9,000 square kilometre Lake Albert Rift basin in Uganda.
This is huge.
They struck black gold on the first well.
It validates everything I’ve been saying about Kenya for more than a year.
If the oil find in Kenya is anything like Lake Albert’s 2.5 billion barrels of oil, we are looking at a home run here.
Look, oil has value: about $106 a barrel these days. And when something has value, the powerful forces in the world will make sure it comes to market — regardless of wars, ideology, or political climate…
History Repeats
For example, the 2006 discovery of the Tupi field turned Brazil into an emerging global power.
Brazilian President Luiz Inacio Lula da Silva went so far as to dub the Tupi field “a second independence for Brazil.”
Brazil’s largest oil company, Petrobras (NYSE: PBR), went on a rampage, rising 1,400%:
PBR now has a market cap of $178 billion!
And the Tupi field isn’t even that great — not compared to others…
Sure it has a lot of oil, but it lies 7,020 feet under water. And once you get past that, you have to drill through another 6,600 feet of a hardened salt and 16,000 feet of sand and rocks.
A project that won’t be easy — or cheap.
And yet Petrobras says that Tupi “is comparable to the most important [oil fields] in the world.”
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To give another example, Norway — a country that has one of the highest standards of living in the world, based on oil profits — has 8.5 billion barrels of proved reserves.
Two and a half billion barrels is a lot of oil, and if you are a country of 40 million people and have an annual GDP of only $31.41 billion, that amount of oil has the power to change history.
But Kenya doesn’t just have 2.5 billion barrels of oil. Nobody knows for sure how much oil there is in Kenya, but U.S. government geologists estimate the East Africa Rift contains 72 billion barrels of untapped crude.
In ten years — maybe less — Kenya is slated to be the United Arab Emirates of East Africa.
Grossly Undervalued
To put this in perspective, let’s compare it to Anadarko Petroleum Corporation (APC).
According to SEC filings, Anadarko had 2.54 billion barrels of oil equivalent (BBOE) of proved reserves at year-end 2011.
The company has a market capitalization of $39.41 billion. (As you know, a market capitalization is the total market value of a company. You get this number by multiplying the number of shares by the share price.)
At $106 a barrel, Anadarko’s reserves are valued at five times what the stock market values the company.
This African oil company I’m talking about has a market value of just $687 million. It would have to go up by 55.71 times to equal the value of its potential oil reserves — or more than 10 times what the market values Anadarko for its reserves.
The upside on this is so large…
I’m not going to even do the math. The number would seem unbelievable.
And the company has seven more large exploration blocks that it hasn’t even gotten serious about yet!
At this point, you can probably see why it’s my favorite stock — and one you cannot afford to pass up.
We are going to make a lot of money over the next few months…
No one else is covering or has covered East Africa oil like Crisis and Opportunity.
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Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
