If they do All of that and actually become an O&G producer it will require massive amounts of capital or debt that KAR currently do not have. I fully expect that KAR will upwardly prove resources and increase company value with similar future capital and debt expenditure that they have to date. But it is improbable that they will have capital anytime soon go go producer. However if COP decide to piggyback them into production they may just possibly be able to manage the transition from explorer to producer, but this is far from certain.
IMO this is only a seductive wealth bonanza proposal at this point in time. Their actual business model does not support this story and there is a glut on the world O&G scene caused by the USA moving to unconventional production so becoming a net energy exporter. China now has a set of rather nasty debt issues that can cause them problems and unless their growth levels can be maintained when they switch to a consumer society their demand for resources will moderate.
Even as an explorer I agree that KAR do appear to be under valued atm given their proven resources. However this seems to be true across the board for nearly all risky assets and the resource sector in general. I suspect this is due to subdued demand partly caused by the USA situation and other economic issues around the world. It is certain that given time this too shall pass :)
KAR Price at posting:
$5.10 Sentiment: Hold Disclosure: Held
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