Verona Development Corp.: Undiscovered Junior Oil Producer that’s debt free with a tiny market cap

by John Lee
http://www.goldmau.com/vdc.php
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04/22/2008

Symbol: VDC.V, V5D.F
Recent Price: C$0.15
Shares O/S: 31.8M
Market Cap.: C$4.6M
52 Week Range: $0.115 - $0.325

I recently picked up an interesting story: Verona (VDC.v). The company was once a highflying  gas explorer in China in 2006. The exploration didn’t yield results and the Verona eventually sold the interest to Shell in late 2007. Exploration is hit and miss by nature and I was encouraged that the management look out for the shareholder interest and in 2008 transformed the company into an oil producer in Saskatchewan. It’s now a junior oil play that is producing positive cashflow from its net interest of 200 BOE/D. Here are some details:
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North American Oil Production:

In December 2007 Verona entered into a Participation Agreement with
Strand Resources Ltd., a privately owned company, to earn 60% operating
interests (47.25 percent working interests) in two oil and gas exploration
projects in Saskatchewan

The Gainsborough South property comprises a quarter section of Freehold
acreage adjacent to the Gainsborough Frobisher-Alida pool located in
southeast Saskatchewan
Recent Activities

Two wells have been drilled based  on interpretation of 3D seismic
Testing.
 
The first well, 1B2-28-2-30W1M, has been tested and complete
Initial production 204 barrels of oil equivalent per day ("BOE/d")
with a 75% water cut.

The second well, 2D9-21-3A1-21-2-30, produced 226 BOED with a water cut of
70% on its first full 24 hours of production

The operator of the property has completed working to tie in the production through to
Strand's Gainsborough Battery located at 13-31-2-30W1M which will allow for
pumps to be used and daily production rates to increase as a result.

Verona also has option on wells in the surrounding areas and works with Strand to
continue exploration of Gainsborough South.

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What really caught my eye is the valuation, production profile, and cost structure.
Verona’s cost is merely $12.00 per barrel of oil, generating cash of $200,000+ a month from its net interest of 2 wells at 200 BOE/D. 4 additional targets drill ready based on 3D seismic testing. The company could very well on its way to reach threshold target of 1,000 BOE/D.

I recently picked up signal of heavy volume and bought 500,000 shares averaged 16 cents. Technically there isn’t much downside left in the stock. Fundamentally it is debt free and at the market capitalization of merely $5 million with positive cash flow and increasing production, it is a great speculation in my books.

John Lee
johnlee@goldmau.com
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