Baron Energy (OTCBB:BROE): Sleeping in the Mezzanine Seats

As a writer, making Oil and Gas Production sexy is a trick, and I'm not the only writer who says this. Many won't cover the Drillers or the E&P's because it doesn't have the pizazz that the Technology Sector has with it's subsets like Telcom, Mobile Wireless or Gaming that entice small investors.

In historical cycles the multiples carried within 1990's technology stocks were sexy places where pools of capital gathered and squawked at cocktail parties. But flash forward to Q4 2010 and we now have a candidate for the New New Sexy, and her name is Alice the Oil acquisition.

Alice is beautiful to look at in her Mid Texas sort of way...and much different than her sexy predecessor Ms San Francisco Technology with her stilletto heels and diamond studded iPod, but when you look deeper you realize that Alice has gone back to her Midland Texas Roots and at closer glance is curvaceous and consistent.

The Pernium Basin is a consistent vien in and around Midland and like Alice has done nothing but produce for many years occupying all the worthy gentleman callers ( The Texas Energy bankers) over the years and like all the successful runs you always get a period where banks get over extended (which mimicked the US Mortgage problem) and they lend themselves into trouble and the gears of the machine grind to a halt.

So naturally another player (Mezzanine Lenders) come in and says I know you were borrowing at 10%, but we can only do these risky ( 5years ago they were not risky) deals at 25% plus a kicker because we are in a non-lending period and it makes sense to charge those rates because they can get them, in fact , its the only game in town.

So a pair of long time operators and respected industry people who have not played in the public arena, and they start doing research and conclude (rightly) that if (in fact) we have :

Oil stabilizing
Acquisitions aplenty
Do what we have done in private markets
Leverage the current cycle of availble wells and
Secure a growth startegy that is simple and well thought out and can be done in 3 years.
This has been done before.
Launch Baron Energy in Feb 2010.

I have avoided oil and gas because it was not sexy, and I think investors in general lean to higher multiple sectors that have sexy on it. But times have changed and Alice the acquisition from Midland Texas is the new sexy for the same reasons as before...

This is part of a 5 part piece on opportunities in Oil and Gas by Steve Kanaval Editor for several websites related to Nano and MicroCap Investing cycles