feedback from road show, page-8

I was replying to wise_one's post were he said that "prior to Yeager only RBS covered the stock". While analysts at other brokers may have moved on I'm sure the continuously poor results had some impact on the decision of all except RBS to drop coverage.

It really shouldn't take more than a month to audit the reserves for fields such as these, there is so much well control(note I was talking about Reserves Auditors not financial auditors).

As per the request here is a re-post of my analysis (I am no longer short), in hindsight 9MMbbl was quite generous:
"I have run my own discounted cash flow analysis by analysing publicly reported production data. In the evaluation I have analysed the producing reserves from existing wells and assigned undeveloped reserves to locations up to and including two drilling locations away from existing wells. In my forecast I expect each successful drilling location to have gross reserves of 54Mbbl/well location (determined by analysing how the most recent wells have performed).

As per all reserves evaluation this is constrained by data I have access to and is my interpretation and therefore influenced by experience of evaluating reserves elsewhere and has been performed entirely on the basis of data reported to the Texas RRC.

I estimate total Net MAD 1P reserves of ~9 MMbbl.

Assuming:
MAD drill 1 well per week - easily achievable with their current equipment
Total royalty burden of 25%
Current Texas sales taxes
Operating costs of $2500 per well per month
$100/bbl flat with no discount
Failure rate of 1 in 4 wells (with 50% of MAD's stated capex for a failure well to account for the wells not being completed)

NPV is highly sensitive to opex assumption, particularly if water disposal costs result in higher monthly costs.

The NPV I calculate for the above reserves is $143MM.

Cutting down the failure rate could add ~$6-8MM NPV

To meet the NPV in this forecast they would have average quarter four 2012 NET production rate of 800bbl/d

On the failure rate in MAD's new well program: mechanical failures are an unfortunate hazard of the industry and happen to all operators. However drilling dry PUD wells normally instigates some soul searching in subsurface teams as to how well the field is understood, given that the definition of Proved reserves is that there should be a 90% chance the actual result meets or exceeds the forecast result....a dry hole is clearly a long way short of that.

Clearly my evaluation is vastly different to MADs. There is always scope for different interpretations of reserves data, I did this because I am unfamiliar with the evaluator who looked at MAD. I don't expect MAD to release all the data required for a full evaluation and will happily eat humble pie if they put out a report supporting their current position that has been performed by one of the well known reserves evaluation companies.

Based on the aboveI have gone short MAD. I will likely add further to this position if they do not at least meet the NET 800bbl/d average production for Q4 2012."