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Mammoth Energy Group (OTC: MMTE) is Today’s Top Stock to Watch from Beacon Equity Research


Mammoth Energy Group (OTC: MMTE) is Today’s Top Stock to Watch from Beacon Equity Research

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In the report, the analyst writes, “Mammoth Energy Group, Inc. (MMTE) is a US-based energy company involved in exploring, developing and extracting shallow gas resources and oil resources. The Company focuses on identifying and evaluating oil and gas prospects and then furnishes expertise and capital for developing projects that offer strong potential for commercially viable quantities of oil and gas. MMTE contracts with third parties for prospect drilling operations, negotiates production sales contracts, and delivers oil and gas production to the marketplace.”

Investment Highlights

Low-risk exploration and acquisition of oil and gas prospects

MMTE plans to explore and develop natural gas and crude oil resources, mainly in Okalahoma. The Company, through its United Gas OK Inc. subsidiary, has working interests in 17 producing gas wells and a 1,400 acre prospect in Oklahoma that could potentially support 60 shallow gas wells.

MMTE is pursuing low-risk oil and gas projects by acquiring high-quality leases in proven fields surrounded by existing production. The Company’s business plan focuses on methodically building cash flow through proven resources while identifying valuable opportunities offering the best chances for exploration success. This low-risk drilling approach potentially brings the highest reward.

Revenue-generating property supports acquisition and drilling program

Three months ago, MMTE acquired a 15% gross working interest in 17 producing gas wells in a 1,095 acre field in Oklahoma. These wells, already fully operational, will provide MMTE with the cash flow needed to expand the project’s capacity to 42 wells and fund exploration and development program at another Noble and Kay Counties drilling prospect.

Noble and Kay Counties project further expand the Company’s revenue potential

MMTE has a 75% net revenue interest in Noble and Kay County leases that provide exploration and drilling rights to approximately 1,400 acres. The prospect is located on the Herrington Limestone Formation, an area known for producing sweet gas. Initial production rates are estimated at between 50,000 and 100,000 cubic feet per day. Wells in this formation have been known to produce gas for up to 19 years.

The Company plans to drill up to 60 gas wells over the next 12-24 months. MMTE has already contracted with United Producers, Inc. to drill the first three wells. The rigs are available and shallow wells can be drilled quickly due to the nature of the Herrington Limestone Formation. Expenses for developing the first three wells are estimated at $211,000 and include property lease costs, prospect drilling, well completion and pipeline connection costs.

Advanced technologies reduce exploration costs and improve success rates

MMTE plans to use 3D seismic technology and advanced geophysical reprocessing tools to enhance existing seismic data and reduce exploration risk. These advanced technologies, which enable the Company to analyze and model reservoir fractures, provide a more accurate assessment of reservoir characteristics. MMTE is also employing state-of-the-art drilling and completion practices for better results, lower risks and minimizing its drilling and completion costs.

In addition, the Company intends to use a compressor to boost gas flow from its wells and achieve a production rate higher than that which occurs under natural pressure. This method will increase the flow rates from the wells to an estimated 65,000 cubic feet per day.

Strong oil and gas demand and rising prices

World energy demand is expected to remain strong over the next few years. Population and economic growth, as well as technology improvements, are key determinants of oil and gas consumption. Given the current tight domestic oil market and global political instability, we anticipate US-based oil and gas resources will become more valuable, resulting in premium valuations for companies with significant US reserves.

In 2007, global oil demand is expected to increase by 1.3 million barrels per day (bbl/d), mainly due to increased demands from China and the US. In addition, EIA projects world oil consumption will increase by 1.4 million bbl/d in 2008.

These same factors will keep crude oil prices high through 2008. Supply/demand imbalances and declining inventories continue to put upward pressure on oil prices. Prices for benchmark West Texas Intermediate (WTI) crude are projected to increase from an average of $66.02 per barrel in 2006 to $71.36 per barrel in 2007 and to nearly $80 per barrel in 2008.

Beacon Equity Research Gainers are Intel (Nasdaq: INTC), Sirius Satellite (Nasdaq: SIRI), Cisco Systems (Nasdaq: CSCO), Level 3 Comm (Nasdaq: LVLT), Oracle Corp. (Nasdaq: ORCL), Research in Motion (Nasdaq: RIMM) and Dell (Nasdaq: DELL).

Beacon Equity Research Decliners are Comcast (Nasdaq: CMCSA), E Trade (Nasdaq: ETFC), Apple Inc. (Nasdaq: AAPL), Broadcom Corp (Nasdaq: BRCM), Yahoo Inc. (Nasdaq: YHOO), and Qualcomm (Nasdaq: QCOM).

Beacon Equity Research Disclosure

The analysts contributing to this report do not hold any shares of Mammoth Energy Group (MMTE) Additionally the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts’ personal views as to the subject securities and issuers. The analyst(s) writing this report recognize and aspire to all of the CFA Institute Guidelines for Independent Research. Beacon Equity Research (“Beacon”) certifies that no part of the analysts’ compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analysts in the report. Beacon Equity Research and its affiliates have been compensated one million shares from Star Consulting for enrollment in this research program and to coordinate a marketing program. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. As such, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change.


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