Dear OGIB reader,

Don’t believe everything you read—the Asian invasion is still happening in the Canadian oilpatch.

Early in December the Canadian government allowed two Asian SOEs (State Owned Enterprises) to buy out two Canadian producers—but warned that any future purchases would be looked at with a squinty eye.

And yet there was rumour of another purchase just this week.

Only—it was for a tract of land, not a company. And it was notable for two reasons (and one of them could make investors a lot of money):

1. The purchase was a natural gas land package in western Canada... where Canada’s Progress Energy was operating when it was bought out by Malaysia’s Petronas earlier this year.

What was Petronas' master plan?

To build an LNG (Liquid Natural Gas) plant on Canada’s west coast so it could ship cheap North American gas to Asia. This was its way of securing supply.

2. They paid a HUGE price per acre—intimating a land value way above the price point at which the surrounding players were trading.

Now here's what we investors can take from that.

The Street is thinking that Sinopec Daylight (the Chinese SOE which bought Daylight in October 2011 for CDN$2.2 billion) is most likely the company that paid for the land package... at a cost of nearly $4,000 an acre.

Why the hefty price tag? Simple. For access to develop gas which has high amounts of NGLs—Natural Gas Liquids. Keep in mind that NGLs have a much higher value in today's market than regular dry gas (products like butane, propane, and condensate).

This is fantastic news for Canadian juniors. If foreign companies are still willing and able to come in and pay huge premiums for Canadian energy real estate, that will lift valuations for the whole sector—but especially for those who have the strategic land packages.

One junior company, in particular...

You see, this recent land transaction has raised the valuation for one junior producer more than any other—in fact, my math suggests well over a double from current prices.

What I mean to say is—and this is fact, not my opinion—that if this junior was bought out for the same metrics that Sinopec Daylight paid for nearby acreage in the same play...

That valuation would be more than 2x what the stock is trading for now.

Investors should understand that is NOT what the stock will trade at in the market. But it is what the stock could trade at in a buyout scenario.

I thought this junior company was a great investment even before this nearby transaction. Now I’m convinced it will be one of my biggest winners in 2013.

As I said, a very profitable conclusion is likely. But I urge you not to wait out this one... its share price is already moving.

You can learn how to capitalize on it here in my new research report .

Regards,

Keith Schaefer
Publisher, the Oil and Gas Investments Bulletin

P.S. I don’t know for sure it was Sinopec Daylight buying that land; and to a large degree I don’t care. Somebody paid a high price, and set a new bar for M&A activity in western Canada—at a time when gas prices are very low. Gas in Canada is trading around $3.30/mcf. Imagine what prices people might pay if gas gets a bid? I explain that in full detail in my new report .

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