successful appraisal of paloma, page-25

Londoner, you're right to question the catch. I won't cover the ground well covered by others, ie bad market and the under promise over deliver philosophy of Neon.

I mentioned a couple of days back that unproven exploration assets tend to be heavily discounted sometimes to zero in tough markets. Its like the market says, Yep you've got great looking exploration plays and your appraisal is going well BUT we won't tick the value box until you've drilled it, flowed it and declared commerciality.

So right now the market is discounting the Paloma news. However we have got to a point in the appraisal programme where the smart parties (ie yourself and others like you) are seeing value and are taking positions. Not enough to set the sp on fire but enough to give it forward momentum.

This will change quickly once a declaration of commerciality is made. With respect to P-3 this could be late this month or early August.

Now P-3 is'nt the main game here so by itself it won't add major value but it will add to the momentum.

A declaration in respect of PD-1 and PD-2 is where the big money will be added. Such a declaration won't be a single event but rather a series of disclosures as the various zones (10 seperate zones now) are proven.

The new McDonald Sand being the bottom reservoir and conventional in nature could be the first zone declared commercial, Lower Stevens may be next (jumping Fruitvale as its unconventional and therefore takes longer to test).

My gut feeling is we could get some commercial declaration for PD-1/PD-2 next month.

Initial statements on commerciality will come from the company itself. These will soon be followed by independent expert declarations that will most likely be close to the company figures. Neon are appraising the resource as they go and are working hand in hand with an independent expert so no time will be lost getting the independent certifier up to speed.

By this time value will be being added on a regular basis. The slowness of the market to realise the Neon potential at Paloma has made for a very good buying opportunity for those picking up shares since the recent low.