Risk/Reward Scenario
Howdy again Grayhairs!
I appreciate your taking the time to share your thoughts and knowledge. I am relatively comfortable at this time with the definitions of ELH (a large, yet undefined deposit) and EKHO (more of a wildcat deal) that you have provided.
I have been looking at the info at EJ and the charts of the partners, trying to figure out the risk/reward scenario. Could you help me out with this? Here are my thoughts:
***Upside
Based on the EJ Word chart (May 27, 1999), the asset increases for HTP & KOB caused by various gas deposit sizes are as follows.
1tcf: HTP = up 200%, KOB = up 180%
4tcf: HTP = up 800%, KOB = up 750%
8tcf: HTP = up 1,600%, KOB = up 1,500%
Q1. In percentage terms, how likely is it that we will have 0tcf, 1tcf, 4tcf, 8tcf, & 16tcf?
Q2. What is the basis for your response to Q1?
In any case, based on the above numbers we have a potential upside range of 2X to 16X on these stocks.
***Downside
Ifm sure that a number of things could go wrong between now and proving up several tcf. Instead of guessing at what might happen (anything could happen), Ifd rather think about what could be a worst case scenario for the stocks.
Looking at a 2 year KOB chart, it appears that the stock was trading down to about $0.05 to $0.10 prior to the start of the project. It then moved up to a $0.40 range, followed by a jump to $2.50. Now itfs at about $1.25 or so.
In other words, the stock appears to have already moved up nearly 20X. Was the ELH the only reason for the move in KOB stock? If so, if we remove the ELH potential, is another dive down to pennies possible?
Is it possible that the other leveraged plays (HTP, TMK) are nearly as dependent on the success of ELH?
**IF** the downside is –90% (reverse 10-bagger) and the upside is 1000% (10-bagger), then I am inclined to say that at current prices perhaps the risk/reward situation is only gfair.h Perhaps it would be best to wait for the inevitable gsetbackh of one kind or another to load up at a level where the risk/reward scenario is better?
Looking forward to your thoughts,
THC |
