business & sp disconnect, page-6

Rexsh,

I was just reading my post again and need to make a quick clarification which is obvious for anyone who has followed the story but just want to be specific.

"The pilot is forecast to run 5mcf/day. Once the pilot is up and running it is expected that a major will then farm in and begin expanding the number of horizontal wells and move to full scale production (end of quarter 4)."

The timeline "(end of quarter 4)" is in reference to the completion of the pilot well which would then put them in a position to bring on a farm in partner for the purpose of moving to full scale production. It does not mean that they will move to full scale production in quarter 4. Like I said, it is obvious for those following the story but it could be misread and I should have placed "(end of quarter 4)" immediately after "Once the pilot is up and running".

By memory, I believe BPT have previously stated that full production target will occur over the next few years. Obviously, there is considerable scope to move this forward once the pilot is in place.

With regard to your specific questions ..........

1.When did you speak to management - how long ago ?

Last couple of days

2. How long will fracking take ?

Give or take about 3 weeks, although I cannot remember now if this was in total or for each of Holdfast and Encounter (I was on the train when my call was returned and didn't take my typical notes but jotted down some afterwards LOL)

3. Did they say anything more about the economics of the project (ie) gas production costs v's gas sale prices and naysayers views on this ?

We didn't discuss specific numbers re. full scale economics but we did generally discuss commerciality/viability. I can tell you that if they are worried about it then they hide it well LOL.

They even talked about the potential scale being so large that it allows for on site production if the farm in major chose to go down that path. Personally doubt that would happen but it goes to viability.

Obviously it is far too early to model something like that given that fracking hasn't been undertaken, but I would be very surprised if they hadn't undertaken their own sensitivity analysis on this using some *base assumptions*.

IMO, decisions will be made based on economies of scale, but we need a bit more water under the bridge before we can discuss that in detail.

4. Obviously the gas pipeline proximity is very bullish Were they particularly excited by this ?

Excited, no. Bullish, yes! Discussed this in some detail and the infrastructure benefits are a huge plus. Think about it in the sense that:

a) There is no water present above or below the REM so contamination is negligible (I didn't post this in my OP but we did discuss it and they were very bullish on this as well).

b) We are in the middle of nowhere so any impact is negligible, BUT ..........

c) We have direct access to Moomba with a pipe that runs right through 218.

I keep harping on about best case scenario, but really, can you imagine a better place to be?

5. Did they have any specifics on a farmin partner (i am guessing not).

No. Even if they did they couldn't and wouldn't tell me as this would be market sensitive.

I came away with the impression that there is strong interest in the development of this project. It is not a matter of finish the pilot, then the farm in partner just comes on board. The pilot well is obviously the final step and the catalyst which, along with the other work to date, proves the GIP, flow, commercially. etc. plus it will give them an initial income stream (albeit not a huge one at first with only one pilot).

So, IMO, they will complete the pilot, *then* undertake more detailed discussions with various majors. Logically this is the only viable way to move forward. In saying that I would be very surprised if preliminary discussions haven't already occurred. I cannot confirm it either way but I did get that impression without them specifically saying so.

6. Should we expect any news from either company about the shale project before the 20th may fracking date?

Didn't specifically ask this but I cannot see any earth shattering news coming before then that we don't already know. All previous boxes are ticked so we simply wait for things to kick off.

7. (In reply to a question from 6ULDV8). Did not discuss liquids/gas ratio.

In summary BPT seem very confident on this project and even went as far to say that the market is brain dead.

We are sitting on an asset that could make Jed Clampett jealous. Mr M is asleep at the wheel right now but I'm sure the sound of fracking will wake him from his drunken state.

Hope this helps!