PetroQuest Energy, Inc (PQUE and T.PQU) Message Board

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Gold/Mining/Energy : PetroQuest Energy, Inc (PQUE and T.PQU)

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To: Ronald J. Clark who wrote (44)	5/8/1997 10:54:00 PM
From: Ed Ajootian	of 686

Ron, The annual report (which just arrived) sheds some more light on the reserve and production declines. It says (in a list of "highlighted corporate events of the year": * succesful weathering of a serious mechanical failure at their Wildhay 5-10 section that resulted in a 7 BCF writedown of reserves and a $1.7 mm cost overrun. * rapid production decline and 6 BCF writedown of gas reserves at Turtle Bayou. Yeah, this thing is just the "Bill & Bob Show", and is destined to remain such until Bill decides to finally really retire, at which point he and Bob will sell out to the highest bidder. Maybe Steve Pratt is right about there being some merger or similar transaction in the near future. I'm still wondering whether they will structure the sale of Wildhay as follows. Sell the shallow rights for cash, based on the SEC PV 10 value of the reserves; but for the deeper rights, just take a carried interest in an exploration & development project where the "buyer" agrees to spend a substantial amount of dough on the project, part of which would inure to the benefit of Optima because they would remain as a revenue interest holder. If they did it this way it would alleviate your (and mine) concerns that trying to sell the deep rights for cash is per se asking to get screwed. This company is trying to apply the same concept to oil & gas that mutual funds have applied to investing in stocks. The idea is, diversify within one investment vehicle into a number of diverse oil & gas plays, which are geographically and geologically different from each other and which have different operators. You will not hit a home run but maybe you'll hit a bunch a singles and still drive a bunch of runs home. This is their novel strategy on how to build shareholder value. As you have painfully seen it has not worked yet. But I feel that the jury is still out and I'm giving them a few more months, with at least a bit of my money. I must say that at this point a lot more of my money is riding on companies like Midland Resources (MRIX) and American Resources of Delaware (GASS) than Optima. You will find threads for those here at SI.

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