Brownstone Ventures (TSXv:BWN) – A Most Unique Energy Investment Alternative

Malcolm Bucholtz B.Sc, MBA Analyst

Trading Note

A Well Diversified Global Exposure

Ask yourself this question. Would you consider investing your entire portfolio into one single energy stock that was focused on one single project in one part of the world?

Of course not. That would be too risky and not in keeping with the tenets of prudent risk management. Now ask yourself this question. Would you invest a portion of your portfolio into an energy company that has taken steps to wisely diversify itself in many projects in many places around the world? If you are like me, you are saying yes to this question.

Now, what if this energy company in question was trading in the markets for the equivalent of its cash and securities on hand? What if this company had not yet been recognized by investors? Would you leap at the opportunity to buy some shares? If you are like me, you are saying yes.

Welcome to Brownstone Ventures – a well diversified energy investment opportunity. I recently discovered Brownstone Ventures and when I learned it was managed by Sheldon Inwentash I immediately became excited. You see, Mr. Inwentash is no stranger to the concept of assembling a diverse portfolio of projects under a single publicly traded entity. He has done it with a couple other Canadian listed firms already. With Brownstone, he is simply following his tried and true model all over again, except this time the focus is oil and gas.

Here is a quick breakdown of what Brownstone has currently assembled in its portfolio.

Argentina: Ask a typical Canadian investor if there is oil in Argentina and he is sure to whisper the name Petrolifera (TSX:PDP) to you. Several years ago Calgary based Petrolifera was hard pressed to even complete an IPO because nobody thought there was any sense even looking at the so called Neuqeun Basin in the west central province of Rio Negro. Well, Petrolifera has now certainly turned more than a few heads with its dramatic production exploits. A goodly number of Petrolifera's wells are currently flowing up to 1000 barrels a day. Brownstone has entered into an agreement with Petrolifera whereby Brownstone will pay 50% of the cost of drilling 4 wells in order to earn a 25% interest. Drilling is set to commence in early July and from what I have seen of Petrolifera, if these 4 wells to be drilled are anything close to being the same as what Petrolifera has encountered to date, shareholders in Brownstone will be smiling indeed.

Colorado/Utah: Why here you ask? Ask oil and gas people in the know and they will tell you the Piceance Basin and Uinta Basin are two of the USA's premier oil and gas regions. Proven reserves and daily production rates now exceed that of the Gulf of Mexico. Brownstone has partnered with Dejour Enterprises (TSXv: DEJ) to own a 28% interest in 150,000 acres. In addition, it has farmed in with Dejour and one other firm to take a 10% interest in 130,000 acres. A 2006 engineering report on these land packages shows potential for 4 trillion cubic feet of gas and 2 billion barrels of oil. Once drilling starts on these properties, I am expecting some most excellent news flow.

Oregon: Little do folks know, but the Columbia River Basin is currently experiencing significant scrutiny thanks in large measure to Canadian firm Encana and its plans to drill 3 exploratory natural gas wells. Brownstone has partnered with Savant Resources LLC, a private firm, to earn a net 1.5% interest in 366,973 acres in the area.

Brazil: One area of the world that is opening up to oil and gas exploration and development is Brazil. In fact, right now Brazil ranks 6th in the world for proven oil reserves. Brownstone has now partnered with Canadian firm Brazalta (TSXv:BRX) and Brazilian firm W. Washington Empreendimentos Ltda on 5 exploration property blocks in the Tucano Basin of central eastern Brazil. A total of seven wells are planned for 2008. Watch closely for news flow from these wells.

India: Brownstone has partnered with Canoro Resources (TSXv: CNS), French firm Geopetrol and Indian firm NTPC in the Assam region of NE India. This region has been producing oil on a small scale since the late 1800's and to this day remains relatively under-explored. What Brownstone has specifically done is taken a 15% interest in oil and gas block AA-ONN-2003/2 in Arunachal Pradesh in the Assam region. It is expected that drilling should get underway in Q4 of 2008.

Canada: Whoever thought there would be oil and gas in Quebec? Well, as it turns out there is an area along the north shore of the St. Lawrence River that could come to rival the Barnett Shale area of Texas. US based Forest Oil has firmly implanted its footprint in the area and this has spawned one of the most intense land rushes Canada has seen in some time. Brownstone has acquired a 50% interest in 150,000 hectares of land with partner X-Terra (TSXv:XT). Plans for later this year include a seismic program to help identify drill targets. Drilling should commence in early 2009. The land value alone of this highly sought after real estate makes this a very prudent investment in and of itself.

Brownstone – Take a Look at the Numbers

The well rounded portfolio of assets is certainly attractive. But, the icing on the cake is the financial data. As of March 31, 2008 Brownstone was sitting with C$60 million cash and securities on its balance sheet. With only 50.4 million shares outstanding, this means that right now Brownstone is trading for just a little bit above the value of its cash and securities. In other words, Brownstone is undiscovered, under-recognized and generally unheard of. If one takes a look at the shareholders equity portion of the balance sheet it does not take long to realize that Brownstone has a book value of $1.60 which is right around where it is trading at. The financial markets are essentially assigning no value to future success that may arise from drilling any of its property assets.

Once drilling starts and once the markets figure out that Brownstone even exists, price action on Brownstone has one way to go and that is up. Put Brownstone Ventures on your radar screen and give some serious thought to taking a position.