diversification, page-5

TBE,
We might research as much as we like,but the market has the last say...Fact of life.
The oil sector is volatile & inherently risky....Fact.
We might find "a little gem" with billions of $$ of IGV,that the market is paying peanuts for.
I took a position in NSE in July 2011,after the JV.
I came to the conclusion that it is reasonable for NSE to reach an MC of $450m in a couple of years with drilling success.
Conoco did the research for us...We knew how much it is comfortable to risk for what percentage ....I multiplied this figure by a generous 10 to reach a value for NSE in case of success. (considering NSE's other assets as well)
research is fine...maps are fine...Saying that we have "the best shale in the world" is absolutely fine too.
But if we put our head in the sand ...Ignore risk...Put all our capital in a single stock....is not fine.
There are calls on this forum that NSE will be a ten bagger plus ...let me put a few questions to ponder.
1) If we have a multi billion treasure, why did COP offered only $110m for 75%? This is a tiny $10/acre ..I would have been much more bullish if it was 50%.
2) Why did our board accept the offer?...Looks "cheap" on face value.
3) Do we know more than our board or Conoco?..Perhaps our research has more substance.
4) How much premium is the market willing to pay over Conoco's offer?....Knowing that Conoco has a "strangle hold" with its 75%.
5) How long do we expect NSE to be in conrol of its destiny.
These are the sort of market reality that we need to consider if we are to reach a reasonble upside potential for NSE...We are in agreement that we have "the best shale in the world".
I might be more comfortale putting all your capital in a copletely derisked stock that has blue sky "unlimited" potential.
NSE does NOT fit this category because it is unlikely be in control of its destiny with a major holding 75% of its prized asset.
It will be a very nice gainer...But the risk far outweigh the reward.