Energyplay, Talking about options, take a look at Remington Oil & Gas (REM). I've bought a bunch of their May $17.50 calls, for about $1.60. They are very close to hitting TD on a well that is targeting a massive gas reservoir under a salt dome in Mississippi (the prospect is called "Tatum Dome"). They say the potential reserves under there could be up to 177 BCF and they have a 77% working interest in the well.
I was surprised to see that they retained such a high interest in what even they admit is a rank wildcat, but it turns out the primary target happens to be stacked underneath other prolific formations, which they have drilled through at this point and now know are productive. So this well is basically a free shot at finding the mother lode, where the worst case is that you just get your money back.
This well they are drilling now is actually a sidetrack to an earlier well that was targeting this deeper formation but encountered such a huge gas kick when it entered the formation that it almost blew out! They ended up having to actually leave behind about 1,000 ft. of drill string in that initial hole, move up hole and then start over. As of the date REM presented at the Louisiana Energy Conference (12/4), this sidetrack had since drilled back through that zone where they got the kick, and encountered the same kick, and was drilling ahead, with an estimated date to get to TD around a week ago.
If they have a discovery here they'd obviously have to put out a release on it. If the deeper zones are unproductive then I don't think a separate release would be required since its still a good well as a result of them finding gas in the shallower zones.
The reason I got the May options instead of the February's is that I want to leave time for getting the 2nd well drilled in this prospect, which would confirm the discovery. If they find gas down there they are planning to keep the rig right there and immediately spud a confirmation well.
As you can see I can't resist these high-risk gambles! I really believe that REM would be at $19 by May even if the deep zones in this well are dry. They have a lot of new production coming on stream this month and they are projected to earn around $4 of cash flow next year based on $3.50 gas and $22 oil.
Maybe I should start going to Gambler's Anonymous meetings. I could just see me going in to the meeting room, sitting down next to another middle-aged guy, and him asking me:
"So, what's your vice, is it craps, poker?"
No
"OK, let me guess, horses, or maybe dogs?
No
"Ahh, it must be sports then?"
No, I like to invest in micro cap oil & gas companies and also stock options in larger companies that are drilling high-risk targets.
(Turning away...) "Sheesh, sorry I asked!" |
