When I met Brian Williamson, the CEO of Jericho Energy Ventures, a little over a year ago, Brian told me point blank that the investment community treated them as lepers. Brian and I had a very transparent and insightful conversation.
Even though it was evident that Brian is a brilliant guy, he was positioning Jericho to weather the storm in the oil and gas industry by transitioning to renewable energy after acquiring a Hydrogen company with a very innovative approach. I knew that it was still far too early in the development stage, and I was concerned about the amount of cash burn and the low price of oil. With oil hovering around fifty dollars a barrel, it would be tough for Jericho to make money or break even. I followed the stock but never took a position.
A lot has changed in a year. With the turmoil between Russia and Ukraine, the world is witnessing a sharp rise in oil prices and gas prices at the pump. I thought about Jericho and puled up the chart to see $JROOF was trading like the other oil companies in the sector were, and it was doing precisely the opposite. I did not dig any deeper because I assumed maybe they no longer had oil assets and were just a pure-play hydrogen company. After looking at their website, there was nothing but Hydrogen news on the site.
As fate would have it, I got a call from Adam Jericho's internal IR representative two days later that I also spoke with over a year prior. Adam let me know he was coming to Vegas for his daughter's Karate competition and asked me if I would have time to get together while he is in town. I said absolutely and then went on to ask if Jericho still has oil assets. He said they own fifty thousand acres of land in Oklahoma, averaging around four hundred barrels of oil a day. Here is the best part, the oil is NOT hedged! After seven years of trading roughly fifty dollars a barrel of oil, which barely provides a profit, the company can sell their oil at right around one hundred dollars a barrel. That is a vast improvement.
The high oil price is likely to stay for quite a while since the current administration treats oil companies as the enemy of the American people. Our politicians fail to admit or recognize that they are a big reason we are in this current situation. The amount of time it takes to get an approved permit is insane.
Here is a little tidbit of information you may find interesting. Oil companies know how poorly China steel is made, and everyone in the industry knows that you can NOT use China-made pipe because of the quality. When you are digging down 2 miles into the earth, you need to have faith that the pipe won't collapse on itself. So, where can oil companies buy a more durable pipe? The biggest supplier besides China is Ukraine! What impact will that have on the oil industry? While you are soaking that in. Think about this. It is no secret that the current administration policies are stifling innovation and reducing the number of barrels the U.S. Can produce per day. Take, for example, the Burrowing Beetle placed on the endangered species list. YES, YOU READ THAT CORRECTLY, A BEETLE!
Brian talks about the challenges we face as a country. The ESG initiative is getting more stringent, the lack of workers available, and other challenges the oil and gas industry faces. Jericho has not mentioned their oil assets because they do not want to taint the image they have built over the last year as a Hydrogen renewable energy company.
The spectacular news is that now, at a critical time in the development and proof of concept stage in their exciting Hydrogen technology, Jericho's oil assets are throwing off a tremendous amount of free cash flow and repricing their oil assets in general. This will fund the Hydrogen portion of their Hydrogen business at precisely the right time. I could point out a lot more positive developments, but you will have to find those things out by watching the interview. After that, you can decide whether or not this is another "Hidden Gem!"
