JMG,
You bring up some very good points and I think I can answer at least some of your questions. First off, CWEI doesn't command the high PE that some of the companies enjoy because in the Austin Chalk they are working an older play, the wells are small producers--not Columbia, Indonesia, or the Gulf--where speculation about geysers runs rampant. Yes, the big boys do have their doubts that the Cotton Valley runs as far south as CWEI's property--they say there isn't any oil shale there (at the Cotton Valley depth)--Clayton Williams, Jr.'s response to that remark was--how do they know--it has never been drilled (to that depth). From the 2-D, CWEI saw encouraging data--enough to have them willing to spend the $4M to have the 3-D done. If at least one of the two wells now being worked 9 miles north, the Rachui, or the Savell, turn out to be good wells, CWEI's potential gains stature. I am happy to see CWEI developing a working relationship with (Broughton/Zackson??--CWEI can't say who the agreements are with) immediately north of their North Giddings Block via the farm-in agreements. Not only does that provide CWEI another 50,000 acres to work for the Austin Chalk, Buda, and Georgetown formations, but (Broughton/Zackson??) are drilling quite a few Pinnacle Reef wells in nearby areas and performing a 3-D seismic survey on that 50,000 acres in search of pinnacle reef wells, so I think it is very much a mutually beneficial situation for both companies. In addition, the geologist that CWEI hired, formerly worked for Marathon in the Cotton Valley and is very familiar with at least some of the property that Broughton/Zackson are presently drilling for Pinnacle Reef wells (Marathon drilled the Rachui #1 well in 1995--it wasn't a good well and was abandoned--the Rachui #2 well is just a very short distance from the first)--I can't help but think that something very good may come out of this situation. We should know something about both wells within a month, or so. Plus if CWEI does decide to drill a pinnacle reef well, or more, Broughton/Zackson has the experience and would make an ideal JV partner--I can't remember if I expounded on the drilling of Pinnacle Reef wells--but there is a considerable amount of expertise required--and a lot of hazards to contend with; I wouldn't want CWEI to go it alone--the risks are too high. CWEI's possible play in Louisiana and Mississippi is to continue to grow.
By the way, the Investors Business Daily raised the annual estimate on CWEI from $1.00, to $1.10--it is a step in the right direction but they have a long way to go.
Thanks,
Buzz |
