Oilsands Quest: Speculation vs. Value (BQI)

Hi commodity prices beget high stock prices of companies that deal in those commodities.  At least speculation isn’t at play in the markets, after all the speculators even say they aren’t responsible.  This notion is arguable either way on too many fronts too poke holes in, but what is for sure is that speculators are hanging out in many smaller oil and gas stocks that they think will have a shot at becoming the next giant.

Oilsands Quest Inc. (AMEX: BQI) is one such company where speculation has led to greater and interest.  Remember that speculation itself isn’t bad, and in fact leads to a more efficient and liquid market.  This company recently raised about $50 million in a private placement.  It has also started the initial drilling of two projects in Northern Saskatchewan in Canada and has bought rights to more nearby properties; Alberta is also listed by the company.  It has also been adding in its top talent to bolster its management and operations.  As of the last data, we have a market cap right under $1.4 Billion, although the recent securities sale may not be included in that.

But there is still so far almost an entirely unknown bet that has yet to be quantified.  Oilsands Quest and its engineering consultants have embarked upon preliminary engineering of the first 30,000 barrels per day commercial project planned for the development of Axe Lake in the specific area where the first series of reservoir tests are being conducted.  If you look at the company’s last internal update it outlines the current plans and shows some preliminary estimates on roll-out dates.

We won’t really go out beyond what the company itself has not been able t.  The opportunity is huge.  Living up to it will be something that takes time.  This stock closed up over 9% on Monday at $6.50 and the yearly range is $2.49 to $6.95. 

Jon C. Ogg
July 1, 2008