On March 17 there was an interesting article on the front page of the WSJ article, "Keep On Pumping".
The oil industry has changed.
<<What has changed? In a word, technology. In an industry that once required as much luck as skill, computerized gear that pinpoints reservoirs and guides drill bits has simultaneously reduced both costs and risks. Coho spends 40% less to lift out each barrel than in the mid-1980s, and 92% of the wells it drills in the established fields it works are successful now, compared with 75% then.>>
If the above is true it means the emsounder must have better than a 92% success rate to have an impact on oil exploration.
Here are some figures on costs from the same article.
<<A few numbers show why drilling still pays, even with prices so low. For every barrel COHO produces, it spends $1 on administrative costs [NAMX has a thin administrative structure] and $3.90 in operating costs, plus interest expenses of $3 [what is NAMX's financing?], for total costs of $7.90. Anything above that provides the operating cash flow that keeps the company running, Mr. Clarke explains. Add about $4.50 for finding and developing the oil fields -- a historical cost, and one that is declining -- and the company can break even with $12.40-a-barrel oil. It sells its output to middlemen who then resell it to refiners.>>
So NAMX can survive only with extraordinary performance of the emsounder, along with an historically low cost for finding and developing the oil fields. (I'm reminded of Deborah Pepper's statement in the most recent press release -- the emsounder gives "a decided advantage".) The emsounder will add to costs if it is used in conjunction with seismic, unless it is close to 100% accurate. If emsounder is used alone, the cost savings could be substantial, but again only if the emsounder success rate is well over 92% and close to 100%.
M.M. |
