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Gold/Mining/Energy : PetroQuest Energy, Inc (PQUE and T.PQU)
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To: Ronald J. Clark who wrote (41)5/7/1997 11:06:00 PM
From: Ed Ajootian   of 686
 
Ron,

Rocks that bear hydrocarbons don't know what country they happen to be
located under. Someone that knows somthing about finding oil & gas in
southern Louisiana or Alberta could also be in a position to judge the
potential for finding oil & gas anywhere else in the world.

But of course the geology can be very different in each location, and
for that you line up the geologists that specialize in that area. Thus,
to answer your question, Optima itself has no particular expertise in
understanding the Trinidad geology. But all of these companies that
venture into international exploration align themselves with armies of
consultants and geologists that advise them. It is this expertise that
Optima is utilizing and depending on.

With rare exceptions, most O&G microcap companies do not try to develop
any large scale projects (whether domestic or international) all on their
own, even if they have the cash to do it. This is because the oil & gas
business is just too damn risky and it is better to spread your risks
by farming out part of the project.

With Trinidad, I would not be surprised if the strategy of Optima is to
just get it far enough along to demonstrate the potential for finding
hydrocarbons, and to guesstimate how much may be down there, and then
farm the large bulk of the project out to industry participants. Optima
may end up with no more than a Gross Overriding Royalty Interest.

They want to get out of Wildhay because Canadian gas prices are back in
the shitter, after they looked like they may revive this last winter.
It is very hard for a small company to make money selling gas at $.90
an mcf, even with the low finding costs that exist up there.

The overall strategy of Optima has never been to be an operator. This
company is just a "toy" for Bill Leushner and Bob Hodgkinson to play
with, farming in to deals all over the country and now also dabbling
in South America. Bill is 68 yrs. old and has already hit all the
home runs --- he's got nothing to prove. So this is why it makes sense
to dump Wildhay. If you're sitting on all that highly prospective acreage
you've got to either drill it out or sell it to someone else that has
the wherewithal and desire to do so --- don't just sit on it and drill
a couple of wells a year on it (which is what Optima did in '96).

The SEC PV 10 value of Optima's Canadian reserves was C$13.9 mm at 12/31.
This was based on prices in effect on 12/31, which were much higher
than presently I believe. So it is hard to see the present SEC PV 10
value of the reserves being much better than say $8 mm US. Then the
question is , what value will the get for the probable and possible reserves.
My guess is that they will get little value for those. So I would be
pleasantly surprised to see them get $12 mm for Wildhay.

We should be hearing about Wildhay before the end of this month ---
they had said 30 -- 60 days in the conference call of 4/4/97. Should
at least bring some excitement back into an otherwise boring stock.
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