Baron Energy Inc (OTC: BROE) Ready To Produce Some Gains

Before discussing about my today’s new pick, we would like to congratulate our subscribers, which made maximum possible gain of 240% within less than a hour by trading in Westmont Resources, Inc. (PINK:WMNS) , which was alerted Yesterday after market hours. Though the stock cooled off its high and closed 148.45% up, we continue to see much higher levels in the coming days considering strong volume and positive money flow in today’s session.

Now back to my New Pick, Over the past few weeks, we are keeping a close eye on the price movements of Crude Oil, which has jumped all the way from $72 to $83 a barrel within less than a month. With the recovery in the global economy, demand for the Oil is expected to rise and that will take the price of Crude higher going forward. So we were busy in finding a Penny Stock which could provide us returns like WMNS. Luckily, we have found one, which is looking oversold technically and could bounce abck soon.

So, Our pick is Baron Energy Inc. (OTC:BROE)

Baron Energy, Inc serves as an independent oil and gas exploration, exploitation and development company. The Company’s primary core area of operations is the prolific Permian Basin of West Texas and currently has more than 4,000 gross acres in nine West Texas counties with a working interest that ranges from 5% – 100%. This acreage has 29 producing wells, 16 of which are operated by Baron Energy producing approximately 35 Boepd net to Baron.

Additionally Baron has a significant acreage position in South Texas in Starr County, Texas with exposure to the Deep Yegua formation. 

Baron intents to grow to approximately 1,000 Boepd within five years by making accretive producing property acquisitions, low cost, low risk in-fill drilling and production enhancement programs in the core operating area of the Permian Basin. 

Huge Market Opportunity
The International Energy Agency increased its oil demand growth forecast to an average 1.4%, or 1.2 million barrels per day (bpd), annually to 2015 on the back of robust demand from emerging markets, taking the total volume to 91.9 million bpd in 2015.

The Agency also said that Global oil supply will rise by 300,000 bpd a year to 96.5 million bpd by 2015, mainly led by production outside the Organisation of Petroleum Exporting Countries (OPEC).

Non-OPEC oil supply will increase to 52.5 million bpd by 2015 from 51.5 million bpd last year, the IEA said.

Strong Portfolio of Operations
Baylor County, Texas Properties -880 ac. – It was bought by the company in Sept. 2008. The property is situated in the Green lease and consists of two producing wells, two shut in wells and a water disposal well. In the past 48,236 bbls of oil were produced from four wells.
The company reviewed operations and has created intends to raise the productivity of the assets.

Starr County Texas, Yegua prospect: Production from the Deep Yegua trend is predominately from structural traps that can be identified with the use of 3-D seismic. The area of interest to Baron Energy is over 2,500 acres with multiple sands which range from 50 feet to over 150 feet in thickness. These are over-pressured potentially hydrocarbon bearing sands that could contain more than 250 BCF of natural gas.
Permian Basin: The company’s area cover an eight county region in the core of the Permian Basin of West Texas, one of the most prolific oil producing regions in the world.

The company holds working interest from 5-100% in 3,120 acres located in the heart of the Permian Basin. The area covers 217 barrels of oil per day gross, 33 barrels of oil per day net and 120 Mcfpd gross of natural gas, 12 Mcfpd net to Baron.

More than 4,500 oil pools and 1,000 natural gas pools have been discovered with a cumulative production of approximately 30 billion barrels of oil.

Still 10 billion barrels are projected to be to be developed over the next few years.

Favorable Debt Agreement
Baron Energy recently made the Amended agreement which provides the company with a loan of $1,006,000 from Newton. The loan carry an annual interest rate of 13.5% and matures on August 25, 2015. Interest is payable in the amount of $11,317.50 per month, commencing on September 25, 2010. Principal and interest payments in the amount of $27,238.78 per month are due and payable commencing September 25, 2011. 

Updates on Production Enhancement Program
The company last month said that it has completed Phase 2 of its production enhancement program and is planning to start with phase 3 in October. As soon as the Phase 3 complete, the company would be able to increase their production by 20-30% from midyear.

Mr. Steinocher also noted, “In July we initiated a program to identify a few potential bolt-on acquisitions in our core area of operations. That program is now complete and we have added 10 new potential projects to our list. We are currently reviewing technical information on many of these projects. Any new production acquisitions would be operated by Baron. We are targeting bolt-on opportunities that will increase our current production by 25-50%.”

Strong Revenue Growth and Positive cash Flow
For the three months ended April 30, 2010, Baron Energy reported that its oil and gas revenues grew to $141,648 from $122,185, in a year ago quarter. The company said its net loss per share rose to 4 cents from 1 cent year on year largely due to rise in the general and administrative expenses, which soared to $1,534,228 from $69,871, in the corresponding quarter of the last year.


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