darwin #1 flow test announcement

Yesterday's announcement, was a game changer.

Everyone seems to have only paid attention to the headline 160 bopd number.

Production will actually be 210 boepd.

However the rise in eventual Fusselman Ultimate recovery - EUR from 80,000 boe to 200,000 BO + the nat gas & liquids is the real game changer.

The change in value from that alone is worth $10's of millions going forward, make no mistake.

Having had time to reflect a little on the announcement, I thought it is worth saying this.

It looks to me as if this Darwin #2 well (the old bore hole) is an interesting situation.

I think, that TEX were expecting some water production from the fusselman formation, and were originally intending to turn the Darwin #2 well into a water disposal well, just like they created at BOA. So as to keep costs down etc.

However having found none they have decided to turn it into a vertical wolfberry well instead. This will then give them some idea as to what sort of production they can expect in the future from wolfberry wells on the Darwin lease, which can only add value to the company.

Why, because now that Darwin #1 is going to be producing from the fusselman formation for a number of years, it would be ages before they had any true idea as to the produtivity of the wolfberry formation, so could not book any P1 reserves etc should they wish to sell at a later date.

Having production from both zones will allow them to come to a combined EUR per well location. The basis number from what we know now should be 200,000 + @ 140,000 + gas fusselman gas, so top end say 350,000 boe with at least 75% of it being oil. We should be delighted if the number over the 640 acre lease averages anything over 300,000 boe on 40 acre spacing.

Anyone researching the wolfberry play knows it's really a numbers game. The cost of drilling any vertical well is roughly fixed throughout the play, the highest value leases are those with the highest EUR's as they will ultimately be the most profitable ones. It looks like Darwin will be amongest the best and we have 15 other drilling location on 40 acre spacing and 31 more wells if 20 acre spacing is viable.

The other data we already having including the data from the link I posted yesterday, indicates that in all likelyhood the 3 leases to the east of Darwin will be good as well, that would be another 32+ well locations on 40 acre spacing.

I'm pleased they managed to get another 480 acres, but I'd really like to see them get more leases east of Darwin and north of the glassrock field if at all possible, that to me is where the big opportunity lies.

The 2 big disappoint's of the announcement, the reaction of investors to the news, the decision not to drill one of the leases east of Darwin in this drilling campaign.

Company now looks very undervalued

LOTM