placing: fools or thieves ?, page-12

mrposhman,

I think the truth as to JKA's responsibility for this mess lies somewhere between what morefish and you are saying.

Generally I agree with you but will make a couple of points.

So essentially, the first time JKA were probably told by the operator (Cooper) of the change to the drilling cost was around the atart of June

This may be true but JKA would be getting daily drilling updates and by comparing the time-depth curve vs the predicted one in the well plan, they would have known much earlier that things were going awry and had a pretty good idea how much it was going to cost. They didn't need Cooper to tell them.

Secondly, just about every well budget I've ever known of blows out, particularly offshore and even moreso in tricky drilling conditions like fractured carbonates. These guys are experienced enough to know that.

It would appear that JKA hasn't allowed a sufficient safety margin in their cash reserves. One could argue that this wasn't their fault as when the SP was 20c they never expected to be raising capital at 8c. But one could also argue that it's their job to manage such risks.

Personally I think they took a calculated gamble and it hasn't come off. Certainly they are doing the right thing to raise the capital after the recent run in SP rather than running the risk of not being able to cover it if the well doesn't come in - it's just a pity they weren't so prudent back when the SP was 20c.

Of course, if the dice had rolled the other way and they got a production test that flowed oil to surface before the cash ran out, we wouldn't be having this conversation. Everybody would be lauding JKA's management for their canny business skills with the SP at 30c-plus.

Hindsight is 20-20.