In late 2003 Greencastle Resources (VGN, TSX-V) hit a heavy oil zone at its Primate property in west central Saskatchewan. The company subsequently sold the property for a royalty, and since then nearly $9 million has flowed into the Greencastle coffers. Not a bad pay-off for an exploration investment of only about $1 million.
Today, Greencastle President and CEO Tony Roodenburg is searching for Primate Two, but this time the royalty option is off the table and the target is medium gravity oil in the upper Shaunavon and Mannville formations of southwestern Saskatchewan near Cabri (a potential land package for Greencastle that is 12 times the size of the discovery area at Primate). Roodenburg has had a good taste of what an oil discovery can do for a company. He’s more experienced, more confident, and a bit more aggressive.
“This time we won’t be selling the property for a royalty,” Roodenburg told us at the recent Vancouver Resource Investment Conference. “We think we’ve learned a little bit and we’ve got a better Rolodex of people to work with that can operate. We have good partners.”
Greencastle reported this morning that it has completed a two well drill program at the Cabri and Boggy Lake projects in southwestern Saskatchewan with its partners Centaur Resources, 611890 Alberta Inc., and Bellport Resources. Both wells have been cased for testing and evaluation of potential horizons. The release was short on detail which is not surprising – in the early stages of this kind of grass roots exploration, it’s smart to keep your cards close to your chest for competitive reasons as additional lands may need to be tied up. With the completion of the testing on these first two wells, Greencastle will earn a 50% working interest in a six-section land package (3800 acres). It has an option to earn 50% in another six sections by drilling two additional test wells which Roodenburg told us in Vancouver he plans to do. He’s cautiously optimistic and pleased with the group he’s working with.
“The play was brought to us by a couple of guys who have an impressive amount of project experience,” said Roodenburg. “They did a lot of regional work on what sands are productive. They studied a lot of old drill holes that are in the government data base. I know their team spent a lot of time assembling the package – they bid on a lot of land, some they got, some they didn’t. We’re lucky we happened to be in the right place at the right time with cash and cash flow.”
Trading at just a small premium to its cash value, Greencastle is extremely attractive from a risk-reward ratio and has huge upside potential if its southwestern Saskatchewan oil play succeeds as Primate did six years ago. Greencastle also has some highly prospective gold properties on the Battle Mountain trend in Nevada, a coal property in Manitoba near a discovery last year by Westcore, and shale gas interests in Quebec. At BullMarketRun.com, we believe there’s a strong chance Greencastle will spin off its gold properties in the near future to unlock their true value and give shareholders, in effect, a dividend. Greencastle is a core holding in the BullMarketRun.com portfolio and it’s one we believe will generate superior returns in the weeks and months ahead.
