Wanna catch more rain? That's simple - get a bigger bucket. The same basic principle applies to oil exploration and development - if you want to give yourself a chance to strike more oil, get some more high-quality prospects. That's exactly what American Liberty Petroleum Corp. (OTC:OREO) has done, per this morning's announcement. OREO has inked a deal that brings another exploration lease into the fold in the Gabbs Valley (Nevada) area. For those of you keeping score at home, that's the third site in Gabbs Valley alone, and brings the total number of prospects up to four - the fourth one is the Kibby Flat prospect.
The decision to hammer out another co-op deal with the property's owners and developers may have a lot to do with the fact that preliminary drilling and testing at the Paradise 2-12 well - also part of the Gabbs Valley property - was very promising. American Liberty Petroleum unearthed a couple hundred gallons of an oil/water mix there, and found evidence of major hydrocarbon deposits in the area; it all bodes well.
The terms of the lease are pretty favorable for OREO too. The company's going to pocket a little more than half of any net revenues generated by the newly-leased prospect, and it owns 60% of the working interest in that particular property.
There's more to the story than just what this morning's press release from American Liberty Petroleum stated though. To full appreciate just how big of a deal this could be, investors have to take a step back and understand where and what the Gabbs Valley area is.
As was noted in our initial November 11th comments regarding OREO, Gabbs Valley is located on the Cobble Cuesta structure in western Nevada. This anticline could be holding more than 4 billion barrels of oil and natural gas, making it the biggest domestic oil find in years.... bigger than the 1 billion barrel find in nearby California that had Occidental Petroleum (NYSE:OXY) jumping for joy back in 2009. At today's prices, that makes Gabbs Valley a $400 billion opportunity for the oil industry. Even a small fraction of that would be a windfall for American Liberty Petroleum Corp., and the company now has four very good shots at tapping into that massive oil field.
In other words, OREO offers a very compelling risk/reward ratio right now. Oil exploration speculators should be quite interested.