strategy, page-9

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All - I've been following the various threads criticising management and offering various alternative ideas, so thought I'd start a new thread dedicated to this topic alone. I have some comments:

1. I think that some posters on this forum have little idea of how difficult it is to run a small company, and how hard it is for little companies to negotiate with big companies (eg. on farmouts). Some people on this forum criticise unduly harshly and personally, and typically look for conspiracies where none exist. Some of them can be tireless analysts and provide a good educative service for other forum readers, but can also be very dismissive of alternative ideas, and are sometimes outright hostile to question or query. Other investors should consider whether those personality characteristics would make a good director, as has been suggested. I think not.
2. NSE's farmout terms with COP were not out of market, at the time they were done. Indeed it is generally similar to what other small cap explorers agreed to, in terms of eventual stake relinquished (eg. Drillsearch/BG, CTP/Santos, CTP/Total, Falcon/Hess, etc). Buru is lucky … they found a partner that doesn't have the desire and/or capacity to operate, and so took only 50% … but the converse is their partner doesn't actually add any value during exploration (offtake should be different). NSE can be criticised for wearing the cost over-runs on drilling, and its unfortunate to have to bear these costs when overruns do in fact occur. But no doubt that was part of the quid pro quo for NSE keeping operatorship of these early wells in what is a frontier and hostile operating environment.
3. Having said that, there are some valid issues which need to be addressed by management. As Anatol has diligently reminded everybody, NSE was listed as a conventional explorer which, according to its prospectus, had done extensive studies and had access to a lot of data to enable it to pursue prioritised conventional targets. So what happened? When did it give up this objective to instead chase shale, and why?
4. Furthermore, when NSE drilled its most recent wells into unconventional targets, did it also drill through conventional targets en route to the shale? If not, why not - especially given NSE's bullish prospectus outlook for conventional targets? If so, why were we not told that these targets were being drilled as well? And what were the results?

Overall, I think NSE's board and management have important questions to answer. And Sam has been there since the start so he should have no difficulty giving answers, if he so chooses. And if he doesn't choose, maybe shareholders can ask them at the AGM (or call an EGM … there should be enough punters on this forum to meet that hurdle).

But, nevertheless, there needs to be some emotion taken out of the equation before the discussion will be productive. And leave the conspiracy theories at home … in my experience, conspiracies about nefarious collusion between management, directors, supermajors, IBs, short sellers, etc, are rarely proven to have occurred. At the end of the day, good results are rewarded in the long term with a higher share price, and bad results (whether caused by bad luck or incompetence) are not. Its no more complicated than that.