declines, page-10

Nursery you write
"The declines are acceptable in my view. As I have already stated, TXN has a big percentage interest in these wells so they dont have to be high producers to be a valuable contribution to income. The company is upfront with its information so no problems there. As time goes by the company will get the flows managed for maximum possible production. They already have a good cash flow with current results.
"

But that deosnt make sense. ITs all about ROI. If wells cost $8M and you put in 100% and get back $24M in the life of the well you get an ROI of 300% over say 5 years. If on the other hand you have a 10% interest you only pay $800,000 towards well costs and you recieve $2.4M over the same 5 years which is still a 300% ROI over five years.

So this banter about having high interest is very strange to me. No matter whether you have 10% or 100% WI you want the highest flows possible to make the wells economic. You want and need profitable ROI.

Imagine if declines are really high on the same well as above. And over 5 years it only returns $6M. Well a 100% WI has achieved a 25% Loss equivelent to $2M. Similarly the 10%WI would achieve a 25%loss of $200K. A Loss is a loss and its the % that counts.

So using the high interest argument is a strange argument as i dont see its relevance. Whether your high or low working interest and NRI, you want as high a ROI as possible.

Its only relevance i think is that if you get some really good economic flows it will boost your cash flow to admin cost ratio far quicker , but by the same token if they are uneconomic it will smash your cash flow to admin cost ratio far quicker. If they are economic it will allow for rapid development, but if they arent TXN will eb in the poo far quicker.