So who wants to be a Tekoil analyst? Certainly not me!, but while in the process of closing our Galveston Bay acquisition, ENI, a major Italian oil and gas player announced a very large deal with Dominion Resources, which as reported by Raymond James & Associates Equity Research Department, has potentially placed a premium on oil and gas assets throughout the Gulf of Mexico.

In what is the largest E&P deal year-to-date in North America, Dominion announced that it was selling its Gulf of Mexico properties to Italian oil major ENI for $4.76 billion. This transaction was part of Dominion’s ongoing E&P divestiture program. Proved reserves being sold were estimated at 967 Bcfe (billion cubic feet equivalent), implying a reserve valuation of $4.92 per Mcfe (1,000 cubic feet equivalent). This price is notably high relative to current valuation multiples of publicly traded Gulf of Mexico-focused producers, which are generally between $3.00 and $4.00 per Mcfe. For example:

In addition to the sheer size and bullish valuation of the ENI deal, we also see the possibility of a broader strategic significance to this transaction for Tekoil. To further expand on that thought and in an effort to put things in perspective, the $50 million purchase price that Tekoil paid for its circa 80 Bcfe of privately held Gulf of Mexico proved oil and gas reserves, represents just $0.625 per Mcfe compared to ENI’s $4.93 per Mcfe, and the cash portion of Tekoil’s deal only represents $0.375 per Mcfe, less than 1/12th of the ENI deal?

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Albert Einstein once said that “Vision without execution is hallucination.” And Remember Sir Winston Churchill’s famous saying; “We will never, never surrender.” Well we executed the vision because we refused to quit, and I have a lot of non-hallucinating people that helped us to get there.

I must thank our dedicated legal team at Baker and Hostetler, in both the Orlando and Houston offices, the executive team at the sellers, Masters Resources, and of course the team at Goldman Sachs that helped us create the “win win” structure that made the deal possible. All parties were extremely patient and creative, which finally got the deal done. I must also thank the entire Tekoil team who at times thought I had lost my mind, but stayed the course through what seemed impossible at times. Many thanks to all of you.

We have a tremendous amount of hard work ahead with creating and integrating our own systems and getting our Houston office up and running, but that is a good challenge to have. We will update the web site to give you a better overview of the Galveston acquisition and the assets, together with posting progress on further developing the assets to increase our yields and firm up the reserve numbers.

On the field development side we are purchasing existing 3D seismic data for reinterpretation, which will be utilized to create more detailed geological maps for drilling the proved undeveloped reserves, and identifying potential deep well targets that remain unexplored. This is not going to happen overnight, but we have made it a priority to keep our shareholders better informed, so please make regular visits to our website for updates.

We will definitely be using this blog as a more informative instrument to report our work in progress. I apologize for lack of postings recently, but my quill was in brain freeze whilst getting this acquisition to the finish line.

And finally, I would like to thank all of our shareholders for your support and patience during our first acquisition. We trust and hope this will be the first of many as we build our foundation of reserves and revenue.

My little angel Emma turned three on April 14th, and yes she managed to follow tradition by blowing out all three candles. A great time was had by all and I was thankful that the storms in Texas did not delay my getting back home in time. The weather has continued to beat up Texas with twisters and golf ball sized hail, but thankfully the massive fires in Georgia appear to be under control.

The biggest media storm was the firing of “shock jock” Don Imus over his totally offensive remarks about the girl’s college basketball team. This guy would appear to have been caught in a time warp, asleep in the saddle. Personally I hope the media attention will encourage networks to ban many of all the vulgarities that foul the airways in some rap and hip hop music.

The next week was followed by the tragic shootings of the students at Virginia Tec. I hope there will be lessons learned from this tragedy to prevent similar occurrences, given the killers state of mind and his easy access to weapons. The right to bear arms was written in a time when guns were limited to shooting one bullet before reloading. It’s time to wake and smell the coffee America. Automatic weapons lead me to believe that the gun laws must change if we are to prevent these tragic events in the future.

On a different note, here’s some news from around the globe:

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First of all I would like to apologize for having writer’s cramp again, but we have been buried in legal work getting our first acquisition closed. And we just attended our quarterly management retreat, with Gerry Goodman and Richard Creitzman migrating from their cold climates to sunny Florida. Much was accomplished in moving us towards our goal, so stay tuned!

Now, if you are traveling to San Francisco any time soon, be sure to take some extra cash, because the price at the pump is a whopping $4.00! The National average is currently $2.66, but is definitely heading north. A barrel of oil is resting at $66, but the hostage crisis in Iran is making the oil pundits very nervous. There are more kidnappings in Nigeria, and the US refineries are in maintenance mode, re-tooling to convert from winter to summer gas. With tourists getting ready to hit the summer gas pedals, I wonder if we have an $80 barrel looming?

Of course affecting all of this in the background is China, so here are some of the latest factoids:

1. Exxon Mobil has just inked its largest investment deal in China. They are investing $5 billion in a joint venture to run 750 gas stations and a petrochemical refinery.
2. There are 461 million cell phone users in China versus 219 million in the US.
3. There are139 million cables subscribers in China versus 110 million subscribers in the US.
4. There are 11.5 million private car owners in China versus 136.4 million car owners in the US.
5. China has a balance of trade surplus of $117.5 billion versus the US having a deficit of $225 billion.
6. The US Commerce Department has just tabled a motion to impose tariffs on imported goods from China as they claim that China is not playing by the rules and their currency is under-valued to support their exports.

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It took thirteen years of negotiations for Russia to ink a deal with Bulgaria and Greece to build a 178 mile overland pipeline, and President Putin was obviously pleased that it fell under his watch, using the presidential quill to kick start this three year project. The pipeline will feed Europe’s thirst for oil, negating the bottle necking problems that Russian tankers experience navigating the narrow and very busy Bosphorous Straits.

And the Chinese government is starting to free up property rights for its civilians, which will quell some of the discontent being voiced by their rural population, who are being left behind in their booming economy. In the town of Zhushan, near the city of Yongzhou, twenty thousand rioters went on the rampage, burning cars and buses and damaging government buildings? It turns out that a local company had taken over the town’s bus routes and increased the bus fare from $0.50 to $1. Well their voices were heard and the price has been reverted back to $0.50.

Meanwhile the Angolan government is flexing its oil muscles: They expect to produce 585 million barrels of oil this year generating about $30 billion. They turned down China’s $3 billion finance package and have told the IMF to take a hike. They claim they do not need China’s help, nor do they need them looking into Swiss bank accounts where most of the money will end up!!

Still in Africa, Zimbabwe would appear to be close to a melt down with continued riots and inflation at 1,700%. President Mugabe is attempting to change the constitution to stay in power until 2010, and his police force arrested fifty people last weekend, torturing them whilst in detention. The leader of the opposition party, Morgan Tsvangarai was beaten so badly that he suffered a fractured skull and remains in intensive care. Mr. Mugabe has said that his critics can “Go Hang”, whatever that means?

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