Micro-Cap Oil: Is it time again?

When I first talked about Basic Earth Sciences - BSIC.ob - oil had "run up to" $40, and BSIC was trading around 50 cents a share. A year or so later Basic hit $3.00 and I was feeling pretty good about myself because of a great call.

Today Basic Earth is a much stronger company - with a market cap of $18 million and cash on the books close to $5 million - and it is trading around $1.06.  The most recent earnings announcement should show a trend for the year to come: Earnings increased 102% over the corresponding quarter of the previous year.  While micro-caps have been beaten down, and junior oil explorers particularly hit hard, I believe that the time for the base and turnaround is now.  While the main reasoning behind this call would obviously be the fact that oil will probably be trading above $80 for 2008, the company is also working on increasing production by aggressively drilling at various sites, most notably their Colorado Project. This should be the catalyst that the market needs for the next big leg up: Production gains.   

On a side note, when you start some research on this stock, you will find that this is a very conservative company with a solid, easy to read balance sheet, and almost no share dilution (which is unusual of smaller companies).   This is not your typical penny stock.

By the way, the current P/E ratio is only 9 and the stock is trading just above book value.

Update*** - 5/08/2008 - We are now up about 50% since this most recent call a month or so ago.  The momentum is starting to move into micro-cap oil and gas explorers and I feel BSIC is the best bet in the sector.  I have added more shares around $1.55.

Full Disclosure: I have my money where my mouth is.  I am long at an average of $1.07.  I may buy more or sell at any time.


Update 2 - 8/2/2008 -  The momentum has come and gone from oil & gas stocks (with the decline in oil from it's high).  BSIC ran as high as $3/sh and now is just under $1.50.  I will wait for earnings before adding more at this point.