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Gold/Mining/Energy : Canadian Oil & Gas Companies
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To: SofaSpud who wrote (8735)3/21/2002 2:34:09 PM
From: stan_hughes  Read Replies (1) of 24921
 
Sofa - Don't know what you saw, but it's probably just the math. If you don't take into consideration that previous economic reserves have been removed from the reserve base simply because of price declines, it could conceivably look like you spent a lot of money and found very little for your trouble in the period the reserve adjustment takes place.

F&D values that don't back out those writedowns are, at a minimum, flawed, and can look bloody awful if the exploration results were also wishy-washy enough to have not made up much ground for the writedowns. Like with RAX.

FWIW I seem to recall AXL posting some elevated F&D numbers about a year and a half ago that triggered a similar selloff, and look what happened there. (By elevated, I mean they were above $9 - if you are over $10, you should be getting out of the business). I think in AXL's case they had buried a lot of upfront land costs into the mix for some reason that accounted for the blip, but my point is that sometimes O&G stats are not necessarily what they appear to be.

The foregoing doesn't mean that RAX isn't in trouble - it is, since it seems to be one of the few having to take these kinds of hits. But it does mean that maybe some of the stats aren't really as bad as someone might like to portray them.
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