Sinner man..I don't know if you saw this but it is one off the reasons VGN is on my Top Pick List..Today is an Ideal day to pick some up under .50...

July 5, 2008

Greencastle Resources Alert:

Major Revenue Adjustments, Shale Play

Exploding Revenues

Greencastle is turning into more of a “cash cow” than we even first predicted. Investors need to clearly understand the impact that higher heavy oil prices and production levels are having, and will have, on this company’s bottom line.

Heavy oil prices are now at a record $108 a barrel, a 74% increase since January. That fact, combined with increased production at the Primate section in Saskatchewan, has forced us to make significant revisions to our previous second quarter revenue forecast for Greencastle. And our new Q-3 revenue projection is exciting news for VGN shareholders.

In our June 22 report, we estimated Greencastle’s Q-2 total oil and gas revenue to come in between $650,000 and $700,000. We are now revising that estimate to $900,000. Greencastle’s recently reported $270,000 April royalty check (a 58% increase over January’s income) was derived, we estimate, from an average heavy oil price of approximately $70 per barrel, given the lag from production to collection and sale. Significantly higher heavy oil prices through the spring should easily push Greencastle’s May and June revenues over the $300,000 mark per month, hence our revised estimate of $900,000 for the quarter. Net income for the first six months should be very close to $1,000,000 or two-and-a-half cents per share.

And it gets even better. What’s unfolding here, in fact, is quite dramatic. Greencastle’s average 2007 quarterly royalty income was $405,060. Heavy oil prices averaged about $45 per barrel last year. As we begin the third quarter of 2008, it is safe in our view to assume that Greencastle’s 2007 quarterly royalty income will now become its average monthly income, and that is also probably a conservative forecast given substantially increased production levels at Primate in 2008 (the number of producing wells has doubled since last year, and of course the heavy oil price has now more than doubled). The Primate section currently has 11 producing oil wells and two gas wells. Greencastle’s bank account is exploding, and that gives the company tremendous leverage to maximize shareholder value. We are now projecting Greencastle’s third quarter royalty income to come in at approximately $1.2 million. The third quarter is going to be a blockbuster quarter for Greencastle, and the fourth quarter could be even better. We admit these are “rough” estimates as we do not have all the information we would like at hand, especially in terms of precise production levels and details on the royalty equation, but we believe strongly that our numbers are very much “in the ball park”.

Greencastle - A “Value Play”

It was interesting to see Greencastle weaken last week in tandem with other stocks in the Saskatchewan/Manitoba coal play. Interesting, we say, because while there has been considerable interest in Greencastle’s pursuit of a position in the coal play (which it officially announced June 19), some investors may have forgotten just how diversified this company really is. Greencastle is not a “coal play”. It is a “value play”, based on very strong financials, growing oil and gas royalty income, positive cash flow and actual net earnings, involvement in the two hottest exploration plays in the country, and exposure to both gold and uranium through property holdings in Nevada, Africa and Wyoming. It is worth repeating this important statement we highlighted regarding Greencastle in our June 22 report:

“A fundamental shift has taken place in the direction and fortunes of Greencastle (historical in the context of this company) as it now leverages its strong balance sheet, buoyed by lucrative and growing oil and gas royalty revenue, to maximize shareholder value through an aggressive pursuit of new opportunities.”

Greencastle’s market capitalization has dropped back down to just under $18 million. Given this company’s impressive balance sheet, its aggressiveness in pursuing new opportunities, its already broad range of current assets, and its sound management, we continue to be of the view that VGN is undervalued and has very significant upside potential from these levels.

Coming Up

We believe the next thing to watch out for with Greencastle is an increased presence and stake in the Quebec shale play in the St. Lawrence Lowlands. Rumors persist regarding “ties” between Greencastle (CEO Anthony Roodenburg) and Altai Resources (ATI), a huge landholder in the area. Greencastle has already announced a permit application covering 6,000 hectares, and we expect more news is on the way. We’re very bullish on the shale play in general. While Altai, Junex (JNX), Gastem (GMR) and others are down quite a bit from their highs (just a “corrective” pullback), we believe things are going to heat up again quickly in that region. And Mr. Roodenburg will ensure that Greencastle is right in the middle of it.

Insider Trading – Don’t Be Fooled

Fear has a tendency to overtake some retail investors, usually the more inexperienced, when they see company insiders selling stock. And this can result in silly and very costly investment decisions. We bring this up because the latest insider trading reports show that Roodenburg and others were selling some significant amounts of Greencastle stock into market strength the week of June 23. Options of course were exercised in conjunction with all of that, adding more cash into the Greencastle treasury, but certainly some insiders decided to take advantage of a sudden and big move in the share price. While the optics admittedly aren’t great, we definitely see no reason to criticize the CEO for selling a portion of his holdings and locking in profits. In part, that’s his reward for moving the company along in a very positive and profitable manner. He doesn’t draw a huge salary. And as far as we’re concerned, the stronger Roodenburg is financially, as an individual, the better off Greencastle is as a company. We also wouldn’t be at all surprised if he used some of his recent profits to buy more Greencastle stock on the open market in the very near future, if indeed he didn’t already start doing so late last week. It’s always dangerous, as an investor, to base buy and sell decisions on what insiders are doing (buying or selling). Just one great case in point (among many) is Cline Mining (CMK). Cline rocketed to nearly $1.70 in early May. Insiders sold into the move which scared the retail market which dumped stock and brought Cline down to 90 cents. Just as quickly, though, the stock reversed course and tripled to a new high of $2.73. Hmmm. Interesting comparison. Last Thursday, Greencastle dropped all the way down to 36 cents from a high of 63, a 43% plunge - similar to Cline’s drop. A triple from 36 cents would mean $1.08 on Greencastle, right around our three-month target! Stay focused on why Greencastle is such a sound investment and ignore the unimportant noise and the little bit of negative chatter that always accompanies a stock that has made such a significant move.

Greencastle’s best days are ahead. Quite simply, VGN is a tremendous “value play” with plenty of sizzle and spice to send it to new highs.