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Gold/Mining/Energy : KOB.TO - East Lost Hills & GSJB joint venture -- Ignore unavailable to you. Want to Upgrade?

To: ForYourEyesOnly who wrote (3192)	7/2/1999 7:43:00 AM
From: Dave E.	Read Replies (2) \| Respond to of 15703

If you are seeking an investment in ELH with added upside if the Cal Canal and other SJ plays come in and relatively little down-side risk if the whole play doesn't pan out, you might look at ELK. ELK has two buy recommendations on it calling for $6 in 12 months without any input from these plays. They ran into trouble with the low oil prices in Q1 and have a similar high debt level to WML but with the recovery in oil and increases in gas they appear to be back on more solid ground (hence a doubling of stock price in 3 months). They have a solid gas business in Alberta and interesting developments in smallish but low-risk oil pools in Wyoming. I originally bought & continue to hold ELK but as the potential of this play sunk in I beefed up on HTP and its affiliated co. TMK, both of which have potential for higher relative rewards than ELK. What is nice about this play is that there are a smorgasbord of partners each offering a different risk/reward ratio to cater to different tastes. (Needless to say I have not looked closely at BKP or POU but can see a more risk averse person looking there, as long as he/she believes that the gas/oil sector is in true recovery mode.) Best of luck with whatever you decide. Dave E

To: ForYourEyesOnly who wrote (3192)	7/2/1999 9:52:00 AM
From: grayhairs	Read Replies (1) \| Respond to of 15703

Good morning THC. <<As you have pointed out, it is not scientifically possible to quantify a deposit of 16 TCF until the pool has actually "produced" 1.5 TCF.>> I have obviously expressed my views quite poorly. While it takes very substantial production (say 10% of the total reserve) to prove a reserve with a very large degree of certainty, large reserve levels can nonetheless be volumetrically estimated and established with a fairly high degree of certainty using only well control information. Therefore, while it would take several years to define a 16 TCF reserve with say a 99.9% confidence level such a gas reserve could be established with say a 75-80% certainty in as little as 12 months if development drilling is aggressive. <<Therefore, for KOB, we may have rather even odds of going either 15-1 or 1-15. ...........but I think that given the risks/rewards, these plays look to be rather "fairly valued............. On ther other hand, should some big (if not temporary) problem arise and KOB go back to the pennies,I personnaly think that would be a good time to scoop up a truckload.>> My rose colored glasses are probably just distorting my vision THC but I do not see anything close to even odds of 1-15 versus 15-1. I do agree that "today" the plays are "fairly valued". But, that will obviously change in just 30 days when there is a well drilling in the Temblor reservoir. The participants will not then be "fairly valued" at today's prices. So, a price change will occur and that change will be very quick and it will be substantial. (Just look at the charts for November 23-30, 1998. At that time just a limited number of people had an idea as to the probable reserve size associated with the ELH discovery. The play is much better "known" today.) It is of course just my opinion, but I do not think that you will be needing that truck (Pennies and KOB are no longer synonymous). <gg> Have a great day and good luck with your investments. Later, grayhairs