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Deep Assets For An Oil And Gas Play


Inside Wall Street

DEEP ASSETS FOR AN OIL AND GAS PLAY

Few investors have been giving Patrick Petroleum a second look, and with good reason. This small independent oil and gas company has been in the red since 1990, so its Big Board stock has been locked between 2 and 21 2 a share all year. But wait. Why is some of the smart money now buying shares?

Ever hear of Detroit Diesel? It's a hot offering that popped from 20 to 25 in one day at its initial offering on heavy volume. No, Patrick has no direct ties with Diesel, which makes engines for heavy trucks and buses. But of importance to Patrick is this: Roger Penske, who owns the transportation company Penske Co., owned 80% before the Diesel IPO. And Patrick owns 9.5% of Penske.

Patrick shares have become an asset play, explains Chuck Strain of Strain Consultants in Houston. He estimates that Patrick's stake in Penske--whose value has been enhanced by Diesel's hot stock--to be worth $2.78 a share in Patrick shares, exceeding Patrick's current stock price of $2.50.

Patrick owns and operates oil and gas properties in several states, including Louisiana, Michigan, Mississippi, Oklahoma, and Texas. Its oil and gas reserves, figures Strain, are worth $78 million, or $4 a share, including its 36% stake in Marcum Natural Gas Service. So Strain values Patrick's oil and gas reserves and its stake in Pen-ske at $6.78 a share. Deducting its debt of $2.22 a share, Patrick is worth $4.55 a share, figures Strain.GENE G. MARCIAL


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