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62strat, thanks for your comments and the opportunity to sharpen a few of my thoughts. I reckon we’re on the same page here thinking that the company is fundamentally strong and that the recent sell off is likely due to intuitional selling. The current share price and imminent production are a bargain and offer substantial value to anyone with the cash available to pick some up.

I accept your numbers supporting institutions holding 55%. This further supports the point that the selling we’ve seen is likely driven by institutions. We’ve seen the share price capped for several months now between 28-30 cents. I’m assuming that the same institutions have been selling to lighten their load over this time to cover their corporate losses and exposure in a way not to spook the share price down… until this week that is

Merrill Lynch is highly exposed to the company. They can’t reduce their exposure through the convertible note but, as you point out, they can reduce their holdings of shares through their holdings through ML Australia. As they are not a substantial shareholder through this entity we will not know until the next top 20 is published in the quarterly due next week.

I agree that the sell off has been slight in terms of volume. I’m speculating that the share price drop has been caused by a combination of the long term selling we’ve seen and the automatic selling due to institutional policy and not due to anything directly related to Nido. If this is indeed the case I reckon we will see a bit more selling in the days to come. I point out that those of us unconstrained by policy and fortunate enough to have some spare cash (I wish!) can buy a bargain here.

Regarding the P/E, I failed to point out that I’m projecting into the production phase and assuming US$ 90/bbl and a share price of 26. No doubt that you will have your own numbers but I’m sure we will agree that there is no Australian producing company trading at a P/E in this range.

I have full confidence in Galoc. This is a proven producing field and not some risky exploration venture. The technology and expertise employed are vastly superior to that available when the field was first tested in the 80’s. The operator has used up to date seismic and chosen the expensive option of coring the reservoir to get the best information available for locating and designing the second well. This information will be used to more accurately predict future production and to reassess reserves upwards within the next 12 months. Some of the earlier presentations suggested that each well alone could produce more than the planned field rate of 17.5 MMbbl/d. The field has redundancy and excess capacity.

All this is pure speculation of course. I do not purport to know what moves the price of a small independent oil company. I offer this for discussion and as an alternative to the speculation that there has been something untoward happening to the company or that the selloff is insider driven.

Regards,

OPT