To All:
Spoke with JC today. Here are my notes:
1. JC feels the sale of EBS was extremely positive for FPX. At almost $5M, they feel they got a premium for the property. They paid off $500K and reduced the credit line to $0.
2. FPX is fully funded for the projects they have planned for the next two years with the cash on hand and a small portion of their credit line. We should see approximately 20 projects during the remainder of 1998. I was relieved to hear they have no plans to attempt another secondary to raise capital, at least not for the next year or more.
3. Drilling at Santo Bay and La Rosa will be based on 3D surveys. He thinks it's possible we may see success rates as high as 70 % at Santo Bay. Probably not as high at La Rosa, more like 50 %. Drilling at both sites should commence around May 1 and continue on for the rest of the year.
4. These shallow wells can be capable of producing decent revenue streams, but for a shorter period of time than the deeper wells at EBS. It's possible that each hit at Santo Bay could produce as much as $8M p/day in revenues and that could continue for a couple of years. Obviously, FPX's share of the revenues and expenses will be based on their 12.5% share in that field. FPX's share of the expenses for each well at Santo Bay will be approx $75K ($600K x 12.5%).
5. Each hit at La Rosa could produce as much as $5M p/day. FPX's share of the revenues and expenses will be based on their 18.5% share in that field. I got the impression that the cost of drilling a well at La Rosa would be similar to that of Santo Bay (approx $600K) so FPX's share of the expenses will be approx $111K ($600K x 18.5%) per well.
6. Turn around time for these shallow wells will be approx 10 days. FPX is working with Fairfield on these projects. I think he said Fairfield is doing all of the technical interpretation at these sites. These projects are based on true 3D analysis, not 2D like EBS was. He says Fairfield's technical staff is very good.
7. I asked about the high volume of stock that traded last week. He said the heavy volume was related to a legal issue that was resolved recently. FPX was not directly involved in the legal issues, but roughly 400K shares of stock were being held in an escrow account until a legal issue was resolved to determine the owner of the shares. When the issue was settled, the 400K shares was split between two people, one of whom immediately sold his 200K shares. After that 200K shares was sold, the stock drifted up fairly quickly to almost $2.00 on low volume. JC expects the owner of the other 200K shares to hold them.
8. We may still see some kind of activity with Zydeco in 1998 but they are being very low-key on that subject.
9. I definitely sensed that the company is just as frustrated as we are. They know the stock has not performed well and they know the time has come to deliver for us.
In summary, it sounds like the drilling plan is set and they have the money to fund the plan. They are planning approx 20 shallow wells over the next several months. The sites will be selected using the latest and greatest 3D survey technology and a team of engineers experienced with 3D interpretations. The fun begins around May 1. The stock price should take care of itself after the first couple of hits. Let's hope they come early.
I'm probably forgetting something important that John told me. If I think of anything else I will post it later.
Talk to you later,
Joe |
