Dow Jones 10330.99 +78.70 1:04 pm PST, May 17, 2005  NASDAQ 2004.15 +9.72 For info, visit access.smallcapnetwork.com S & P 500 1173.77 +8.08 Change your subscription status here Russell 2000 595.59 +3.88 VOLUME 05: ISSUE 38  Feature: Eden Energy - Got Oil? If Not, Best Get Some. Now. I simply do not believe that there is currently enough oil to meet future global demand--at least not at these prices. No matter how many talking heads and 'industry analysts' espouse that the supply situation isn't critical, it is. Our national myopia tends to fixate on merely assuring supply for US use. The irony is that we really should really be worrying about everyone else. As we mentioned on April 26th  --please read for background--Eden Energy (OTCBB: EDNE) looks extremely well positioned to potentially discover a massive amount of desperately needed oil from its large Noah Project in eastern Nevada--at levels perhaps in the billions of barrel category.  For the reasons noted here and in our previous article, we suggest accumulation of Eden Energy shares for risk-oriented investors--especially those who have a keen interest in potential elephant-type oil/gas exploration plays. Andrew Gould chairman of oil services giant Schlumberger (NYSE: SLB) pointed out in April's Economist magazine; "that 25 years ago only one sixth of all exploration wells were successful; now the figure is two thirds."  Why? Because the science has become sophisticated enough to raise the exploration success rate--from around 1 well out of ten, 25 years ago, to approximately 2 wells out of 3 today.  As well, Eden Chairman Don Sharpe's last oil exploration company farmed into six wildcat exploration wells. How many were successful? All six. Location, location, location. If roughly two out of three is the average success rate according to the chairman of the world's second largest oil services company and Eden's chairman's last at bat was six out of six, the odds that Eden will make a discovery (and its shares move substantially higher) look very good.  As well, now that there has been an oil discovery just to the south of Eden and of course the giant Wolverine find to the east, with other majors now in the area. If another major discovery is made we can likely forget about buying Eden at these prices. The oil statistics are simple and compelling. Globally, 80 million barrels are currently used daily. In 20 years, projections are that 120 million barrels will be needed daily. If production continues at current rates, there will only be 60-ish million barrels produced by 2015. The US has already passed its peak production levels. Do the math. There is a massive supply/demand problem: or opportunity if you view this crisis from an investors' perspective. While the oil price will be volatile, we believe that a secular trend is unfolding that will take prices significantly higher. As if that's not enough, accept the fact that volatile Russia is the world's second largest producer of oil. China will have 100 million cars--now 20 million--by 2020. India's metrics look similar. Even with all the environmental/conservation initiatives, demand will remain inelastic. Put simply, no matter what, we'll always want and need more oil. I would not depend on Asia or India to initiate any conservation initiatives to address this growth; not going to happen. What now? While conservation and alternative energy sources will play a critical part in moderating demand over the next 20 years, oil production still has to rise to meet global needs and the disparity will force prices higher. As mentioned in our previous article, in real terms, oil already hit $100 in the 1970's. Anybody who thinks that can't happen again is kidding themselves. Let's look at crude oil. The price has recently consolidated around $50 a barrel. Even though there is a media-manufactured psychological level of $50 as support/resistance, the price is going higher in our opinion. We see the oil price due for a good bounce, soon. Stock markets used to react to moves above and below $50. Now they don't. We feel the market has factored in prices around these levels. It is difficult to know what new price level will roil the market again but over the long-term oil prices are going higher. If you're not part of the solution... The shares are sitting on their .382 retracement of their move up since November. While this technically represents a good entry point, a tight stop should be employed in case the chart decides to move to the .618 point and fill the gap. Share price at this point is largely irrelevant as we run up to development of the property in the fall. Buy a little at these levels and more on dips should they occur is, in our opinion, the intelligent strategy. The Nevada/Utah overthrust belt area is gaining momentum. Articles are beginning to appear quantifying the potential of this previously ignored play. Wolverine Gas and Oil, as we mentioned on April 26th, has apparently found a mammoth field in Western Utah. For more detail, here are two articles discussing the area and its potential for your perusal: http://www.sltrib.com/business/ci_2714390 and http://www.aapg.org/explorer/2005/04apr/covenant.cfm . As well, FX Energy (NASDAQ: FXEN) announced a find on April 6th 40 miles to the south of Eden's Noah Project--for competitive reasons FX hasn't released details-- near the Railway Property which had previously been categorized as the one of the largest onshore wells in America. There is also scuttlebutt that two majors are quietly drilling in the area. The one fact that investors must understand is that discoveries are always held very close to the vest as announcements can raise land prices quickly. Wolverine's find took almost a year to be delineated. Such will be the case with all exploration/discoveries in the area. What we do know is that Eden's Noah Project is one of the largest areas with compelling structural potential. The company will continue with seismic this summer to further define targets and the plan is to begin drilling in the fall. With the Wolverine project to the east already showing amazing promise--potentially a billion barrels-- and oil finds to the south of Eden's 211,000 acre holding, the evidence is mounting to validate the potential of the Noah project. While news from the property should pick up in the fall, it is already apparent that interest in the area is heating up. For the macro oil sector reasons noted above and the rising interest and exploration success around Eden's property, risk-oriented investors should accumulate shares prior to both the fall drilling and the possibility of more large finds by competitors in the area.     We Value Your Feedback Got comments, questions or suggestions? 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