Grayhairs, me dear old friend, I will attempt to answer your questions more clearly such that there is no misunderstanding.
A) Can I prove that the well is uneconomic? No. I cannot prove that the well has undeveloped reserves, in the same way that you cannot prove that it does. As such, we are both guessing or should I say, "speculating", as to the wells viability. Can you prove that the well is economic?
B) Hibernia vs. Strachan well? Interesting analogy. Perhaps another analogy could be the much touted Hunt Oil well near Nfld. which turned out to be a dud. In any event, the Hibernia field was, in my opinion, speculative upon the first hole. The field needed to be proven up with additional drills and was developed by investments from large corporations such as Mobil, PetroCan, the Gov't, etc... and it took YEARS to evaluate the play.... not weeks or months. So, until all the data was reviewed, it was questionable as to development and was, in my opinion, speculative.
To give another analogy, why was the Beaufort Sea never developed by Dome Petroleum. Dome found gas reserves! What happened here? It was not economic unless a huge shareholder base was established to help develop the field, and damn the economics. At the end of the day, the project has to put money in the till.
C) Why must it remain "Speculative"? Because you have not shown it to be otherwise. I cannot prove that it will not produce earnings, and you cannot prove that it will. Let me ask you this. If the well is capable of 30 mmscfd production, but contains 70% H2S, would you produce it?
Just like I mentioned in my Beaufort example, it is not a commercial discovery until it starts to put cash in the bank and generating returns to the shareholder. Shareholder returns are established through EPS and Dividends and share appreciation. You and I both know how share appreciation can be achieved. Until it is proved up, it remains speculative.
D) How will I feel if the well is placed on production @25 MMSCFD? Great! I am always happy to see successful wells and development. It makes our industry thrive and last. The well is speculative... it is a great story. You pay your money, and take your chances. Ever since I have started to take money off the table on speculative investments, usually on the run up in a stock price prior to drill or assay results, I have been making money, as opposed to hanging on to the big Kahuna. It may be prudent to take money off the table and let your "free money" ride. Anyone on this thread has probably had that experience... all you have to do is go back and look at the charts of hundreds of oil,gas, mining, etc.. companies.
As for your other comments:
I did not state that casing uneconomic wells is a widespread practice. I said "some" which by default, means less rather than more. I am simply stating that it can happen for reasons that you have also provided.
I would not, as you put it, "judge our company as a collection of absolute and total idiots for having abandoned that well." I try not to use hindsight to judge decisions... that would be irresponsible and not mature. One must understand that sound decisions are based on the best information AVAILABLE AT THE TIME. When gas prices were low and everyone was chasing oil, many gas wells were capped and left, standing cased, for 20 years, only to be put on production today. Many things changed. For example, 20 years ago in the area there were no pipelines or facilities.... but today there may be. So, today, the gas well is economic and you tie it in. Also, gas prices are very strong.
Re: your comment about manipulation. When you state that my comments may make you or another investor "...paranoid and concerned that you might be trying to influence and 'accumulate' stock at these levels. Why else would you say some of the things that you have?"
That, I inferred, is you hinting that I may be trying to manipulate investors because I have a hidden agenda.
The truth is I hold no stock as I mentioned previously. If, however, the right information is released to indicate that this may be a great discovery, I may be into the stock. I have not seen that information yet. For a well worded, well informed release, please see a recent one put out by NEN.
"Why would I say the things that I have?" Simply because you and I have an in-depth knowledge of the business and sharing knowledge and information is what these threads are all about. I will continue to strive to keep that my focus, and not get personal about any issues.
RE: "age is irrelevant here.... knowledge is not" That was intended, in part, as a compliment because everyone has something to offer and we could all benefit from the wisdom of our experiences.
To once again put things into a big picture perspective: average success rate of a rank exploration well in Ab? About 10%
I guess we should focus on definition of the word "successful". What does it mean to you, Grayhairs?
Regards,
mike |
