With Energy Prices Set to Soar this
Jr. Oil & Gas Start-up could go
From $0.50 to $5.00!

It was a formula for gusher-like profits, particularly in plumb junior oil & gas stocks.  Still I can tell you that after being in this business for 30-years, no stock is better positioned to reap the riches of an energy boon than American Petro-Hunter (OTC BB: AAPH). 

In a moment I will tell you details of this superb company, its incredible properties and the savvy management that runs it. But first let me tell you the fundamentals that are certain to return windfall profits in American Petro-Hunter (OTCBB:AAPH).

Oil – Headed for $200 per barrel!

The graph shows the two oil bonanza’s of the last 40 years.  The first began in 1970 when the Arabs began to flex their muscle in OPEC.  You can see the big run-up in prices and then the big correction eight years later.

Well guess what?  Petroleum had an eight year run this decade, a run that took it all the way to $147 per barrel.  It has undergone a huge correction, but right now is rallying the same way it did in 1979.

From its corrective low of $37 per barrel oil has climbed back to $70 per barrel.  And given the unrest in Iran, the centerpiece of the Middle East, I believe crude will top out at more than $200 per barrel within the next three years!

A Perfect Storm for Junior Oil & Gas

Today Iran is seething on the brink of another revolt.  America is getting ready to pull out of Iraq, a move that could throw the country into chaos.  With violence escalating in both nations – countries that produce 12 million barrels of oil per day, an amount almost equal to what America imports – the ordinance are set for another price explosion. In fact there is a growing potential for terror to boil-over in the Middle East… a nuclear kind of terror.

That according to former Israeli defence minister Shaul Mofaz.

Last June Mofaz told an Israeli radio audience that Iran is a ballistic power close to becoming a nuclear power.

“Iran has undoubtedly passed beyond the point of no return, moving closer to the ultimate nuclear capacity everyday," said Mofaz.

We are talking nuclear missiles in a region that holds two-thirds of the world’s conventional petroleum reserves.  It’s enough to give American strategic planners nightmares.  It also sets up the biggest potential for oil and gas profits ever.  A scenario that I believe will push crude oil past $200 per barrel and natural gas over $10 per Mcf.

Dorothy, it is Kansas!

With so much angst going on in the Persian Gulf, American oil and gas reserves are at a premium.  And that’s where American Petro-Hunter (AAPH.OB) comes into play.

Based in Scottsdale, AZ., American Petro-Hunter is leveraged for riches in both natural gas and petroleum.  This past year it has been buying up ripe reserves in two of the nation’s richest petroleum belts – California and Kansas. Best of all, it is already producing!

That’s right, just three months after it started acquiring assets, American Petro-Hunter is manning the pump-jacks.
Petro-Hunter’s leverage to higher oil prices comes from its 25 percent working interest in the Poston Prospect located in Trego County, Kansas.

In June, just months after its acquisition, Petro-Hunter began commercial production at the #1 Lutters Oil Well at the Poston Prospect.
I’ve seen some good juniors take a year or more to begin production, but Petro-Hunter has done it in months. 

Trego County, Kansas

The first well is already pumping oil at an Initial Production Rate (I.P.R.) of 108 barrels per day or an impressive 4.5 barrels per hour.  Just as noteworthy: not a single drop of water at the wellhead.  

The actual oil volume being sold is over 90 barrels per day as pumping distance to the tank battery is approximately 2,000 feet. The reason the tank battery is so distant is because the company needs to link it with other pump sites.  Full development of the field could produce between 300 and 400 BOPD of light crude.

There is excellent transportation and support infrastructure in the area.

The geologists working the project are so positive about the region that they are installing a site battery that will allow for 600 barrels of oil storage capacity!  That’s a lot of oil for a small company.

Two shipments of oil from the Lutters lease have already been sold to the National Co-op Refinery of McPherson Kansas.  Revenue checks from the Lutters oil production will hit Petro-Hunters mailbox no later than October. And remember, the lease on this deal was signed last winter when oil prices were under $40 per barrel.  Given my expectation of $200 per barrel, that’s a lot of leverage.

After all, even if oil reaches only $100 per barrel, which I consider assured, the Kansas project will rake in revenues of between $10 and $15 million dollars… at just this one site! 

Wait… there is more, a lot more. You see… the REALLY BIG Profits are Natural Gas!

A Big Blast in Natural Gas

You see the really big profits aren’t even in oil, they are in natural gas.  And American Petro-Hunter is not a one trick pony.  I want to tell you about the company’s natural gas play, but first let me share with you what only the insiders are whispering – the really big money is in methane.

I keep my ear to the ground around home and it has served me well.  You see I live in Calgary, Canada, one of North America’s energy capitols.  A lot of my friends are in the oil patch.  A couple of them are CEOs of mid-sized producers, others work the rigs themselves and one studies the geophysics that the computer spits out.  The thing most shocking to all of them is not the correction that happened in oil last winter but rather just how damn cheap natural gas is.

Earlier this spring natural gas was selling for just over $3 per Mcf.  Even now, with the thoughts of another Great Depression all but forgotten, the clean cousin to oil is selling for less than $4 per Mcf.  Compare that to the summer of 2008 when methane was fetching more than $12 per Mcf.  What we have seen in natural gas is like watching the Dow Industrials go from 12,000 to 3,000!

But the chart on natural gas prices shows a break in the downward trend-line, and a clear bottoming pattern. As we enter fall and winter, worries over budding natural gas shortages will move the market up – in an explosive manner.

Every time natural gas prices have been this low they have bounced back with a vengeance.  That is because natural gas is essential and it is clean.  And unlike crude oil which has been drilled dry throughout the U.S., vast reservoirs of natural gas ferment safely inside our border. 
That means in an age where America’s presidents fret about America’s dependency on imported oil at the whim of sheiks or mullahs, the nation has another energy resource – a clean power option that doesn’t depend on uncertain technology or twirling windmill farms or mega-acres of solar panels that stretch beyond the horizon.

Even energy insiders understand that when it comes to the price of natural gas, enough is enough.

According to Aubrey K. McClendon, the CEO of Chesapeake Energy Corp., cheap natural gas is NOT here to stay. 

"This will set the stage for a dramatic reversal of natural gas prices sometime this fall or winter,” said McClendon this past May.

"How high will gas prices go in the recovery and rebound phase in the next cycle? Obviously, we don’t know. But clearly, gas prices were too high one year ago at $12 to $13 per thousand cubic feet, and today they are far too low at $3.50 per thousand cubic feet,” he said. "So my guess is the rebound will overshoot on the high side, just as it has overshot on the low side.”

The only surprise said McClendon, will be just how quickly natural gas prices shift higher.

The graph above is the ratio between the price of crude and that for natural gas. As you can see, crude oil prices have been rallying strongly since spring. The slow summer season has retarded a rally in natural gas, but its price will certainly catch up and with abandon. If oil goes to $100 by the end of this year -- and I think it will – and we see a more normal ratio of 10 to 1, natural gas will be selling for $10 per Mcf.

California Dreamin

That will make for a huge rally for natural gas and American Petro-Hunter is poised to take advantage of it.

Sacramento Gas Project

Just this past April AAPH bought a 25 percent working interest in a potentially profit-rich natural gas project outside of Modesto.

Drilling will start this year and production will shortly follow. As many as four wells can be drilled on the property that may have a $20 million working interest in gas to the company. The bottom-line on all of the above is a short payday for investors as profits begin to be captured alongside the gas as early as this year. A successful well will payout in 3-4 months and the rest is pure profit.

The project is located west of Modesto in the Central Valley of California, near Sacramento. Potential Recoverable Reserves have been calculated to be a whopping 42 BCF at a depth of only 7,400 feet. It is estimated that if the pay-zone is 100 percent gas filled and the well is brought into commercial production that an initial production rate of 5,000 Mcf per day will occur.

Petro-Hunter’s share in the stake would produce annual revenues of more than $20 million with gas prices less than $8 per Mcf.

Similar fields in the area have stable production rates and are long lived. In fact the Central Valley in the Sacramento region of California is called “California’s Gas Country”. 

It is little wonder, nearby fields contain some of the most prolific gas reservoirs in California. In fact they have accounted for over 400 BCF (yes BILLION cubic feet!) of gas production.

Once up and operating the gas will be purchased by PG&E Citygate.  They would supply clean power to Sacramento and the surrounding region. And oh yes, PG&E Citygate prices are some of the highest in the country.

Once established this project and the one in Kansas would generate between $15 and $30 million in revenue.  This is incredible potential for a company with a market cap of less than $11 million. 

And that’s not all.  In late spring Petro-Hunter bought a 25 percent working interest in the Victory Gas Project.

The Victory Gas Project is located approximately 20 miles south of the city of Sacramento and is within the "Eastside Stratigraphic Trend" along the southern edge of the Sacramento Valley. The project is within the same prolific region as its first target.

The prospect encompasses 668 gross acres under lease and based on interpretation, has the potential to contain 8 BCF gas.

With oil & gas properties like this the company’s market cap is going to shoot up as the market wakes up to the recovery in energy prices and investors learn of the amazing potential of American Petro-Hunter.

American Petro-Hunter is just now being discovered.  As you can see from the stock price chart on AAPH.OB, some people have bought in at very low prices. 

This incredible stock, ripe with potential and backed by bedrock fundamentals, could rise as high as $5.00 per share. 

I’ve seen it happen before, with stocks my dad bought and also recommended when I was in college and with stocks I’ve recommended to my subscribers.

Action to take: Buy American Petro-Hunter (AAPH.OB) up to $1.50 per share.  Look continually for higher prices from this stock until the energy bull has run its course.  That is most likely two to three years away.  Call your stockbroker today.  And to learn more about this terrific company at their Web site: http://www.americanpetrohunterinc.com/.

Yours for gusher profits,

John Myers
Energy Writer and Analyst

PS – I urge you to read more on natural gas as an investment and the explosive profit potential of American Petro-Hunter (Symbol: AAPH.OB) by going to our FREE and indepth report at: http://www.energyintelligenceadvisor.com/report.pdf.

John Myers is a resource writer and analyst and is the editor of Myers’ Gold Digest. He is an American citizen
living in Calgary, Canada.

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