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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (39052)	9/1/2010 5:19:45 PM
From: Mattyice	3 Recommendations Read Replies (2) \| Respond to of 78669

Its honestly probably not a good reason, but i just have to many questions about (1)reserves (proven and proved undeveloped) and (2) what management actually plans doing with these reserves ( and maybe that is not a good way to put it.. the honesty of management about these reserves) Maybe it is because i have worked at two different E&P companies as a production accountant for a company in plano right out of high school and then as a financial analyst and intern for 2 years at a E&P company in dallas, and especially when doing finance the first question in my mind was always wow this is alot to pay for acreage, and every time we went and gave presentations on our "proved" reserves it was my least favorite day because i would just sit there and think how on earth are people believing this..... but they do! And the same thing goes for these other smallerish E&P companies, they overstate there reserves by a LARGE amount IMHO. Though i am well versed in math I am not an engineer, so i am unsure on the calculations of PV of future exploration and the dependency on acreage and drilling prospects in its acreage ruling out NAV calculations completely for me. That being said when i was doing the project finance work for individual wells etc. the numbers never added up consider what we held as our "proved" reserves(would always think yeah.. maybe if we multiplied .6 or so to "proved"??). ESPECIALLY when it came to new fields and shale plays. But what we were essentially doing was pumping up our reserve figures(and even independent engineers are in on this btw), keeping drilling on a slow to moderate pace and waiting for one of the big boys to come buy our assets. And the companies i worked for are not the only ones doing this. That is why i have been really interested in to what you all are looking at because i feel my judgement is somewhat shaded by what i saw on the front line, and find myself especially agreeing with alot of what spekulatius has been saying on MLP and EP side. That being said i have ignored most E&P companies except on the short side and just looked for old fields that can be acquired at a huge discounts for either secondary or tertiary recovery because i feel somewhat comfortable with this and it has worked for me. Sorry for the essay, i feel this is just part of the reason besides the financing with debt or drilling without replacing cash reserves and other reasons that spekulatius, etc have mentioned but IMO its complicated, that's why there is probably plenty of money to be made and i want to keep trying. MM